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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, 1996
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[ ] 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
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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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)
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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, 1997
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Class A Stock 5,046,064 (After deducting 16,436 shares of
Treasury Stock)
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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 10, 1997 (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
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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 95% 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
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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.
On January 28, 1997, New Claridge entered into an agreement to subject the new
self-parking garage to the lien of the mortgage; such lien will not be
subordinated to any liens which may be placed on New Claridge's gaming and other
assets to secure any future revolving credit line arrangements. Interest on the
Notes is payable semiannually on February 1 and August 1 of each year.
The net proceeds of the Notes, totalling $82.2 million net of fees and
expenses, were used as follows: (i) to repay in full on January 31, 1994, the
then outstanding debt of the Corporation 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 a first mortgage; (ii)
to expand the casino capacity of the Claridge 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 opened in mid-1996;
and (iv) to acquire the Contingent Payment Option (see Item 1. Business -
"Contingent Payment").
Recent Developments
During 1994 and 1995, the cash provided by operations of the Claridge was
sufficient to meet the Corporation's obligations to pay interest on the Notes,
as well as to make at least some moderate capital improvements. Commencing in
the latter part of 1995, however, competition in the Atlantic City casino market
for bus customers, a principal source of customers for the Claridge at the time,
increased; this competition intensified even more during 1996 as additional
casino square footage was added, principally due to the opening of the Trump
World's Fair casino. During 1996, the average coin incentive issued per bus
patron at the Claridge increased to approximately $19, from approximately $13 in
1995. Total cash incentives issued to Claridge's casino patrons (in the form of
coin to play slot machines and gaming chips to play table games) increased to
approximately $30.5 million in 1996, from approximately $25.2 million in 1995.
While the Corporation's promotional costs increased significantly, total casino
revenues in 1996 actually decreased from 1995 levels. It had been the
expectation of the Corporation that, upon the opening of its new self-parking
garage, the Corporation would be able to reduce its reliance on the bus patron
market; however, the Corporation was forced to close the garage facility on July
10, 1996, only ten days after its opening, following a fatal accident. Because
the facility was not able to reopen until the end of September 1996, the
Corporation lost any possible benefit of the facility during the normally busy
summer season. In addition, severe winter weather in the first quarter of 1996
adversely affected revenues. As a result, the Corporation experienced a net loss
for 1996 of $15.4 million, compared to a net loss of $1.9 million in 1995. (See
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.)
In late July 1996, management of the Corporation determined that due to
the serious deterioration in the Corporation's cash flow, that without a
significant improvement in its operating results, it was unlikely that the
Corporation would be able to meet its obligations to pay interest on the Notes
beyond the August 1996 payment. In addition to taking steps to conserve cash by
reducing various operating expenses, the Corporation engaged a financial
advisor, Dillon, Read & Co., Inc., to assist in formulating a proposal to the
holders of the Notes to restructure the Corporation's obligations under the
Notes. At the same time, the Corporation was working with Dillon, Read & Co.,
Inc. to attempt to find a buyer of the Corporation or an investor that would be
in a position to inject additional capital into the Corporation to enable the
Corporation to meet its ongoing obligations. To date, the Corporation has not
received any acceptable proposals in regards to the possible sale of the
Corporation.
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In November 1996, while the sales efforts were continuing, the Corporation
announced that there was a strong likelihood that the Corporation would be
unable to pay the interest due on the Notes on February 3, 1997. Accordingly,
management, working together with financial and legal advisors, formulated a
plan for restructuring the Corporation's obligations. The terms of the proposed
plan were presented to the noteholders at a meeting held on December 3, 1996, at
which time the noteholders were urged to form a steering committee or other
representative body to conduct negotiations. Although a group of noteholders
formed and met with the management of the Corporation on a few occasions, by the
time the committee formally organized itself on January 7, 1997, it consisted of
six members representing ownership of less than 5% of the total amount of Notes
outstanding. At that time, the Corporation determined that the committee did not
represent a sufficient portion of the noteholders to negotiate on behalf of the
noteholders generally. As a result, the Corporation did not formally recognize
the committee and did not engage in any negotiation with the committee or its
members, although it did encourage the members of the committee to continue to
attempt to obtain broader representation of the noteholders.
On January 12, 1997, management of the Corporation was contacted, through
an agent, by Hilton Hotel Corporation ("Hilton"), regarding a possible sale of
the Corporation to Hilton, and shortly thereafter, the Corporation began
negotiations with Hilton. On January 30, 1997, the Corporation issued a press
release indicating that the Corporation would not make the interest payment due
on the Notes on February 3, 1997, and that the Corporation had entered
negotiations with Hilton regarding acquisition of the Corporation by Hilton
through a prepackaged bankruptcy plan. At that time, a representative of Hilton
indicated that Hilton had acquired approximately 35% to 40% of the Notes. On
February 5, 1997, three holders of the Notes, who were members of the unofficial
committee which they had formed, filed a petition for involuntary bankruptcy
against the Corporation in the bankruptcy court for the District of New Jersey.
Contemporaneously, the same three holders of the Notes filed a related
state court lawsuit against the Corporation, New Claridge, the Partnership,
certain officers and directors of the Corporation, and the general partners of
the Partnership. On March 4, 1997, contrary to earlier expectations, the
Corporation was able to pay the interest that was due on the Notes on February
3, 1997, under the 30-day grace period allowed in accordance with the terms of
the indenture governing the Notes (the "Indenture"). In addition, the
Corporation reached agreement with the unofficial committee of noteholders, as
well as the three holders of the Notes, providing for the joint dismissal of the
involuntary bankruptcy petition and the related state court lawsuit. On March
19, 1997, an order was entered dismissing the involuntary bankruptcy petition;
as part of that order, a settlement agreement was entered whereby the state
court lawsuit was also dismissed. The Corporation expects the negotiations with
Hilton to continue.
The Corporation had sufficient cash to pay the interest on the Notes on
March 4, 1997 due to several events: (i) cash flow from operations for January
and February 1997 improved significantly over what had been expected; (ii)
effective March 1, 1997, the Operating Lease and Expansion Operating Lease
(defined below) were amended to provide for the deferral of basic rent of $1.3
million on March 1, 1997 (see Item 1. Business - "Certain Agreements between the
Corporation, New Claridge and the Partnership"); and (iii) on February 28, 1997,
New Claridge entered into an agreement with Thermal Energy Limited Partnership I
("Atlantic Thermal"), pursuant to which Atlantic Thermal was granted an
exclusive license for a period of twenty years to use, operate and maintain
certain steam and chilled water production facilities at the Claridge. In
consideration for this license agreement, Atlantic Thermal paid New Claridge
$1.5 million.
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Certain Agreements between the Corporation, New Claridge and the Partnership
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. In addition, the new self-parking garage and the land on
which it is located 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 $38,055,000 in 1994,
$39,030,000 in 1995, $39,906,000 in 1996, and will be $41,775,000 in 1997
and $32,531,000 for the nine month period ending September 30, 1998. Basic
rent during the renewal term will be calculated pursuant to a formula,
with such rent not to be more than $29,500,000 nor less than $24,000,000
for the lease year commencing October 1, 1998 through September 30, 1999,
and, subsequently, not to be greater than 10% more than the basic rent for
the immediately preceding lease year in each lease year thereafter.
New Claridge is also required to pay as additional rent amounts including
certain taxes, insurance and other charges relating to the occupancy of
the land and Hotel Assets, certain expenses and debt service relating to
furniture, fixture and equipment replacements and building improvements
(collectively, "FF&E Replacements") and the general and administrative
costs of the Partnership. The Partnership is required during the entire
term of the Operating Lease, and any subsequent renewal terms, to provide
FF&E Replacements to New Claridge and 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 under
the Expandable Wraparound Mortgage in an amount up to $25,000,000.
Thereafter, such advances shall be secured under separate security
agreements.
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 1996 was $4,718,000. 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 is also required under the Expansion Operating Lease to pay
as additional rent amounts
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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, and any subsequent renewal terms, to provide New Claridge
with Expansion FF&E Replacements and 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 in an amount up to
$25,000,000. Thereafter, such advances shall be secured under separate
security agreements.
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 totalling $500,000 became available as a
result of the acquisition of the option to purchase the Contingent
Payment. All available rent abatements were fully utilized in the first
quarter of 1997. Further abatements would become available in the event
that the Contingent Payment option is exercised. (See Item 1. Business -
"Contingent Payment").
The Fifth Amendment to the Operating Lease and the Fourth Amendment to the
Expansion Operating Lease, which were effective on March 1, 1997, provided
for the abatement of $867,953 of basic rent and for the deferral of
$1,300,000 of basic rent on March 1, 1997, and provide for additional
abatements of basic rent, commencing on April 1, 1997, as necessary to
reduce the Partnership's cash flow to an amount necessary only to meet the
Partnership's cash requirements through December 31, 1998. The $1.3
million of basic rent deferred on March 1, 1997 is to be paid to the
Partnership in monthly installments of $25,000 for the period April 1,
1997 through December 31, 1997, and monthly installments of $50,000 for
the year 1998 and thereafter until paid in full. For the years 1999
through 2003, additional abatements of basic rent will be reduced to
provide the Partnership with amounts needed to meet the Partnership's cash
requirements plus an additional amount ($83,333 per month in 1999 and
2000, $125,000 per month in 2001, and $166,667 per month in 2002 and
2003).
In conjunction with the Fifth Amendment to the Operating Lease and the
Fourth Amendment to the Expansion Operating Lease, as discussed above, the
Corporation, New Claridge and the Partnership entered into a restructuring
agreement, effective March 1, 1997, to modify certain terms of the
Expandable Wraparound Mortgage (see below). In addition, under the March
1, 1997 restructuring agreement, New Claridge agreed to exercise the first
of three ten-year renewal options extending the term of the Operating
Lease and Expansion Operating Lease through September 30, 2008.
Under the terms of the Operating Lease, as amended effective March 1,
1997, New Claridge has an option to purchase, on September 30, 1998, the
Hotel Assets and the underlying land for their fair market value at the
time the option is exercised, which in no event may be less than an amount
equal to the amount then outstanding under the Expandable Wraparound
Mortgage (see below) plus $2.5 million, plus any amount of the $1.3
million of rent deferred on March 1, 1997 not then paid. If New Claridge
does not exercise this option on September 30, 1998, it may exercise an
option, on September
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30, 2003, to purchase the Hotel Assets and the underlying land on January
1, 2004, for their fair market value at the time the option is exercised.
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 cancelled upon satisfaction of certain conditions set forth in
an agreement entered into at the time of the 1989 restructuring. In
conjunction with the offering of $85 million of Notes on January 31, 1994,
the outstanding debt under the Loan Agreement, which included a first
mortgage and the revolving credit line, was satisfied in full. By its
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 bears interest at an annual rate equal to 14%, with
certain interest installments that accrued in 1983 through 1988 totalling
$20 million being deferred until maturity. In addition, the Partnership is
required under the Expandable Wraparound Mortgage to make payments of
principal and interest in respect of any 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. On March 17, 1986, the Expandable
Wraparound Mortgage was amended to require that the $127 million aggregate
principal amount secured by it would be repayable in installments during
the years 1988 through 1998 in escalating amounts totalling $80 million,
with a balloon payment of $47 million and the $20 million of deferred
interest due on September 30, 2000.
Effective March 1, 1997, the Corporation, New Claridge, and the
Partnership entered into a restructuring agreement, pursuant to which New
Claridge agreed to use its best efforts to cause a modification of the
Expandable Wraparound Mortgage (the "Wraparound Modification") that is
permitted by, or is in compliance with, the terms of the Indenture. The
Wraparound Modification, if so permitted, will provide for an extension of
the maturity date of the Expandable Wraparound Mortgage from September 30,
2000 to January 1, 2004. If the Wraparound Modification is not
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permitted by or in compliance with the terms of the Indenture, New
Claridge has agreed to effect the Wraparound Modification at such time as
the Notes are no longer outstanding.
In connection with the offering 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
their shareholders or partners, respectively, whether derived from operations or
from sale or refinancing proceeds, until Webb had received the Contingent
Payment.
In connection with the 1989 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 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 New Jersey Casino Control Commission (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, 1996, the
aggregate amount payable in respect of the Contingent Payment was $65.8 million.
Given the recent operating results (see Item 1. Business - "Recent
Developments"), it is unlikely that the Corporation would be able to exercise
this Contingent Payment option using available working capital, or absent a
refinancing or sale transaction.
In the event that the option is exercised, it is anticipated that the
Contingent Payment would be cancelled so that neither the Corporation or the
Partnership would have any obligation to make any payment
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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 would 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 cancelled. 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 up to an amount equal to approximately 72% of the
Contingent Payment if the option is exercised.
Under the terms of the option, upon purchase of the Contingent Payment,
the Corporation and/or the Partnership would be 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 would 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. In 1996, New Claridge constructed a
self-parking garage facility connected to its existing valet-parking garage, at
a cost of approximately $28 million. The combined garage facility provides
parking for approximately 1,200 vehicles.
The Claridge's casino consists of approximately 59,000 square feet of
casino space on three main levels with various adjacent mezzanine levels. The
casino currently contains approximately 1,750 slot machines and sixty-five table
games, including forty-one blackjack tables, ten craps tables, five roulette
tables, three Caribbean stud poker tables, one mini-baccarat table, and five
other specialty games. The hotel with related amenities consists of 502 guest
rooms (including 28 corner suites, 26 specialty suites and five tower penthouse
suites), four restaurants, a buffet area, three lounges, a private players club,
a 600-seat theater, limited meeting rooms, a gift shop, a beauty salon, and a
health club with an indoor swimming pool.
New Claridge experiences a seasonal fluctuation in demand, which is
typical of casino-hotel operations in Atlantic City. Historically, peak demand
has occurred during the summer season. New Claridge's principal market is the
Mid-Atlantic area of the United States. The casino gaming business 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, 1996, the twelve existing casino facilities offered approximately
1,080,000 square feet of gaming space, a 12.5% increase over the casino square
footage as of December 31, 1995 of approximately 960,000 square feet. In May
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<PAGE>
1996, the 49,000 square foot Trump World's Fair casino opened, and minor casino
expansions occurred at several other properties in 1996. For the years ended
December 31, 1996 and 1995, citywide gaming revenues, as reported, increased
1.8% and 9.5%, respectively, over prior year levels.
The Atlantic City gaming market is expected to experience significant
growth over the next several years as Atlantic City transforms itself from a
"day-trip" market to a "destination resort." As a result of current high room
occupancy rates, a more favorable regulatory climate, the reduced threat of
competition from potential new gaming jurisdictions, and significant
infrastructure developments making Atlantic City more accessible, over $4.6
billion of new investment has been announced or recently completed in the
Atlantic City gaming market. As currently scheduled, the planned expansion of
existing casinos alone will increase total Atlantic City casino space by over
34%, and hotel rooms by almost 145%. In addition, several Las Vegas casino
operators have recently announced plans to construct new casinos in Atlantic
City.
In addition to the major casino expansions and the announced new casinos,
major infrastructure improvements have begun. A new $268 million convention
center, scheduled for completion in May 1997, is expected to contain
approximately 500,000 square feet of exhibition space, 45 meeting rooms, food
service facilities, and a 1,600-car underground parking garage. The new
convention center will be the largest exhibition space between Boston and
Atlanta. A 500-room non-casino hotel is currently being constructed, and is
expected to be completed in the fall of 1997; it will be linked to the new
convention center by an elevated walkway. The development of a corridor which
will link the convention center to the boardwalk area is currently underway, and
will feature a wide, landscaped boulevard with a reflecting pool, an expanded
park area, and a 60-foot lighthouse which will be illuminated each night by a
spectacular light show. In February 1997, construction of a new $7.5 million bus
terminal, which is a major component of this corridor, was completed. The State
of New Jersey is also implementing a capital plan of approximately $125 million
to upgrade and expand the Atlantic City International Airport.
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. During
1996, the number of hotel rooms available citywide increased with the opening of
the Trump World's Fair casino (approximately 500 rooms) and the Tropicana's new
600-room hotel tower. Several existing Atlantic City casinos have plans to
increase their hotel space in 1997 and 1998, including Harrah's, Trump Taj
Mahal, Hilton, and Caesars, for a total expected increase of approximately 2,100
hotel rooms. 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
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 1996. During 1996, 9.8 million casino
patrons arrived in Atlantic City by bus, an 11% increase over 1995 levels. The
increased competition took the form of higher coin incentives, which New
Claridge
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matched, thus increasing its per patron average coin cost to approximately $19
in 1996 from approximately $13 in 1995. New Claridge has relied heavily on
attracting patrons who travel to Atlantic City by bus because the Claridge
previously lacked a self-parking facility, and has therefore had to remain
competitive with other casino operators in regards to the incentives offered.
Even with the 1,200-space parking facility, New Claridge 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 the atmosphere of a grand hotel, and on
the Claridge's smaller, more intimate 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 a customer
base whose wagering spans the same market segments serviced by other casino
hotels, but primarily targets the middle, leaving the high-end business to its
competitors. New Claridge believes it is uneconomical to pursue the high-end
market as its core business because of the high maintenance cost and potential
volatility in table games "hold" percentages (the ratio of win to the amount of
gaming chips purchased by patrons). The typical Claridge patron has a lesser
need for credit as well as a lower average complimentary cost. The majority of
the Claridge's casino revenue is generated by slot machine play, the fastest
growing segment of gaming 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 trend has continued in 1996 with 75% of the Claridge's casino
revenue generated from slot play, compared to 69% for all Atlantic City casinos.
The key elements of New Claridge's marketing plan include the use of
complimentaries, promotional activities, entertainment events, player
development hosts, a bus program, and the use of commissioned agents to attract
groups from outside the company's traditional market areas ("junket/splinter
program"). New Claridge also operates a direct marketing program to attract and
retain customers. New Claridge's Compcard Gold program, which allows patrons to
earn various complimentaries, including coins for slot machine play and gaming
chips for table play, based on their levels of gaming activity, provides a
valuable database of information on playing preferences, frequency and
denominations of play, and the amount of gaming revenues produced by gaming
patrons. Because of the expanded facilities and amenities now offered at the
Claridge, the "Because Smaller is Friendlier" positioning statement was changed
to "Smaller, Friendlier and So Much More." This position retains the equity in
the intimacy-seeking patron, but extends it to communicate that the Claridge now
has a facility capable of comfortably servicing a larger customer base, and
offering the same amenities and entertainment found at larger Atlantic City
casino hotels.
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.
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
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<PAGE>
state that already allows similar gaming (for example, if the state allows
charitable gaming for non-profit organizations, then federally-recognized Indian
tribes can run similar operations on their land). Since these events occurred,
the gaming industry rapidly expanded; during 1995 and 1996, however, the
expansion of gaming slowed considerably. In 1996, although voters in Michigan
approved casino gaming for the city of Detroit, gambling measures were defeated
in several other states. In January 1997, the New York State Senate voted to
deny a statewide referendum to legalize casino gaming in that state. Legislation
to put the issue before Pennsylvania voters has been introduced several times in
the past few years, but none has so far succeeded. The current 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. 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 1995, two racetracks in Delaware began offering slot machines
at their facilities, with a third racetrack opening a slot machine facility in
August 1996; total combined revenues for these three facilities in 1996 was
reported to be $184.4 million.
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, 1996, approximately 4,600
slot machines and approximately 300 table games were reported to be operational
at Foxwoods. In October 1996, the Mohegan Sun Resort opened in Uncasville,
Connecticut, near the Foxwoods operation. This facility, owned by the Mohegan
Indians, has 150,000 square feet of gaming space, with over 2,600 slot machines
and 180 table games operational as of December 31, 1996.
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 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
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<PAGE>
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").
b. Licensing Requirements. The Act provides that various categories of
persons or entities must hold casino licenses. The Act also provides that each
officer, director and person who directly or indirectly holds any beneficial
interest or ownership in a casino licensee; or any person who, in the opinion of
the Commission, has the ability to control a casino licensee or elect a majority
of the board of directors; or each principal employee or any other employee of a
casino licensee (and any lender to or underwriter, agent or employee of the
licensee) whom the Commission may consider appropriate for approval or
qualification, be qualified for approval pursuant to the provisions of the Act.
In addition, all contracts and leases entered into by the licensee may, upon
request of the Commission, have to be submitted to the Commission, are subject
to its review, and, if found unacceptable, are voidable. All enterprises which
provide gaming-related services to the licensee must be licensed. All other
enterprises dealing with the licensee must register with the Commission, which
may require that they be licensed if they do $75,000 or more per year in
business with a single licensee, and $225,000 or more per year if with more than
one licensee.
New Claridge holds a casino license because it carries on the casino
business of the Claridge and owns the Casino Assets. As a result, New Claridge's
officers and directors are subject to Commission qualification. The Corporation,
as the sole owner of the stock of New Claridge, is also required to be
qualified. As a part of its determination of the Corporation's qualification,
the Commission will require the qualification of each officer, each director,
and each person who directly or indirectly holds any beneficial interest or
ownership in the Corporation, and who the Commission requires to be qualified,
or any person who, in the opinion of the Commission, has the ability to control
the Corporation or elect a majority of its Board of Directors; or each principal
employee or any other employee whom the Commission may consider appropriate for
approval or qualification. The Commission has determined that no stockholder of
the Corporation owning less than 5% of its stock will be required to be
qualified unless the Commission determines that such stockholder has the ability
to control the Corporation or elect a majority of its Board of Directors. Prior
to June 16, 1989, Webb was the only stockholder in this category. The names and
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
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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
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 adopted from time
to time. 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, 1996, New Claridge employed approximately 2,100
persons, of whom approximately 800 are represented by labor unions.
Approximately 700 of the 800 are represented by the Hotel, Restaurant Employees
and Bartender International Union, AFL-CIO, Local 54. In September 1994, the
Corporation's collective bargaining agreement covering the employees represented
by Local 54 was renewed, together with the collective bargaining agreements of
all Atlantic City casinos with respect to Local 54, for a period of five years.
During the past 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
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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. In 1996, New Claridge completed the construction of a self-parking
garage, located on a parcel of land (29,120 square feet) connected to the
existing valet-parking garage. The combined garage facility provides 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. With the exception of the self-parking
garage, all of the facilities discussed are owned by the Partnership and are
leased to New Claridge under the Operating Lease and the Expansion Operating
Lease. The self-parking garage and the property on which it is located are owned
by New Claridge.
Item 3. LEGAL PROCEEDINGS
On July 10, 1996, ten days after its opening, a fatal accident occurred at
New Claridge's self-parking garage, in which the vehicle of two patrons breached
a cable restraint system, permitting their vehicle to drive through the side
wall of the self-parking garage. The vehicle fell four stories to the sidewalk
and street below, killing both occupants. As a result, New Claridge's
self-parking garage was closed until the end of September 1996, while various
investigations sought to determine the cause of the accident. At the same time,
New Claridge determined to remove the exterior wall cable restraint system and
replace it with a rigid I-beam barrier system.
New Claridge has retained the law firm of Zelle and Larson LLP of
Minneapolis, Minnesota to assist in evaluating the recovery of certain expenses
incurred in reopening the self-parking garage and in evaluating potential lost
profit claims. Management of the Corporation intends to file a claim to recover
these expenses and lost profits; recovery of these claims would have a positive
impact on New Claridge's financial results and liquidity. No formal claims have
been filed to date, and there is no assurance that the Corporation will be
successful in realizing any recovery.
The Corporation and its subsidiaries are not parties to any other 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.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
All issued and outstanding shares of the Corporation have been offered and
sold in reliance on exemptions from the registration requirements of the
Securities Act of 1933 as amended (the "Securities Act"). Therefore, there is no
established trading market for any class of shares of the Corporation. In
October 1983, 562,500 shares of Class A Stock were sold to Oppenheimer Holdings,
Inc., and certain officers and employees of Oppenheimer & Co., Inc., (placement
agent for the Partnership and the Corporation) at their par value, $.001 per
share, and 4,500,000 shares of Class A Stock were privately offered and sold at
$1.2336306 per share. At the same time, 562,500 shares of Class B Stock were
sold to Webb at their par value, $.001 per share. On March 24, 1989, Oppenheimer
Holdings, Inc. returned to the Corporation all of its shares (273,938) of the
Corporation's Class A Stock. On June 16, 1989, all of the outstanding shares of
the Corporation's Class B Stock, all of which was owned by Webb, was returned to
the Corporation and cancelled. As of March 28, 1996, there were approximately
490 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 restricts the declaration or payment of dividends or
distributions or 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").
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<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data for the years ended December 31, 1996, 1995, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands except per share data)
Income Statement Data
<S> <C> <C> <C> <C> <C>
Net revenues $ 193,311 203,348 190,755 189,672 182,204
Net (loss) income $ (15,389) (1,908) (6,901) 5,132 6,048
Net (loss) income per share $ (3.05) (.38) (1.37) 1.02 1.21
Balance Sheet Data at Year End
Total assets $164,163 189,074 190,484 146,338 148,305
Current assets $ 31,753 55,542 59,426 22,736 20,383
Current liabilities $ 39,027 40,420 37,003 34,270 34,298
Long-term debt, net of
note payable and
current installments
of long-term debt $ 85,000 85,000 85,000 35,259 40,301
Stockholders' (deficiency) equity $ (9,834) 5,555 7,463 14,364 9,232
</TABLE>
16
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations for the Year Ended December 31, 1996
The Corporation had a loss of $20,787,000 before an income tax benefit
of $5,398,000 for the year ended December 31, 1996, as compared to a loss of
$2,278,000 before an income tax benefit of $370,000 for the year ended December
31, 1995.
For the year ended December 31, 1996, casino revenue, which is the
difference between amounts wagered by and paid to casino patrons, was
$163,369,000, a decrease of 3.7% from 1995 casino revenue of $169,607,000, and
an increase of 4.6% over 1994 casino revenue. Citywide casino revenues, as
reported for the year ended December 31, 1996, increased 1.8% over 1995
revenues. Citywide casino revenues in the first quarter of 1996 were adversely
affected by several severe winter storms, most notably the January blizzard,
which blanketed the Northeastern United States with a record amount of snow;
this compared to the mild weather conditions experienced in the first quarter of
1995. In the second quarter of 1996, the Trump World's Fair casino commenced
operations, contributing to the 9.1% increase in citywide casino square footage
in 1996. In addition, the number of hotel rooms available citywide increased in
the second quarter of 1996 with the opening of the Trump World's Fair casino
(approximately 500 rooms) and the Tropicana's new 600-room hotel tower, adding
to the already intense competition for casino patrons. On July 10, 1996, the
Claridge's self-parking garage, which had opened on June 28, 1996, was closed
due to a fatal accident, and was not reopened until September 20, 1996, when
certain structural enhancements were completed. As a result of not having the
use of the self- parking garage during the busy summer season, the Claridge was
unable to fully take advantage of certain promotional programs designed to
capture the more profitable drive-in casino patron. In addition, major
infrastructure improvements in Atlantic City related to the construction of the
new convention center and the corridor project linking the center to the
boardwalk have resulted in considerable traffic congestion on roads leading into
and around Atlantic City.
Claridge table games revenue for 1996 was $40,374,000, an increase of
2.9% over table games revenue earned during 1995. Although table games drop (the
amount of gaming chips purchased by patrons) during 1996 increased 6.5% over
1995, the "hold" percentage (the ratio of win to drop) decreased to 14.8% in
1996, from 15.3% in 1995. The increase in table games drop activity in 1996 was
a result of the introduction of several new player development programs,
including a junket/splinter program, and the offering of gaming chip coupons, as
well as the introduction of certain specialty table games, such as "Caribbean
Stud Poker" and "Let It Ride Poker". Citywide table games revenue, as reported
for 1996, increased 1.1% over 1995 revenue.
Slot machine revenue earned by New Claridge in 1996 totalled
$122,995,000, reflecting a 5.6% decrease from 1995 slot machine revenue.
Citywide slot machine revenue as reported for 1996 increased 2.1% over 1995 slot
machine revenue. The decrease experienced by the Claridge, and many of the other
Atlantic City casinos, resulted from the increased competition as a result of,
most notably, the opening of the Trump World's Fair casino in May 1996, as well
as minor expansions of existing casino space at other properties. The average
number of slot machines available citywide in 1996 increased 10.5% over 1995,
while the average number of slot machines available at the Claridge in 1996 was
consistent with 1995.
Beginning in the latter part of 1995, competition for bus customers
began to increase, in the form of increased coin incentives offered to these
customers. Because of its lack of a self-parking garage at that time, and
therefore its dependency on the bus market, New Claridge had to remain
competitive with the incentives offered by other Atlantic City casinos in order
to maintain its share of this market. In 1996, the competition for bus customers
became even more intense, as the average cost of coin incentives issued to
patrons arriving by bus
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<PAGE>
to the Claridge increased to approximately $19 in 1996, from approximately $13
in 1995. In total, during 1996, New Claridge issued $19,495,000 in coin
incentives to 1,015,000 bus patrons, compared to $12,502,000 of coin incentives
issued to 976,000 bus patrons. In addition, New Claridge offers promotional
incentives to its customers, in the form of coin to play slot machines and
gaming chips to play table games based on their levels of gaming activity. In
1995, New Claridge also offered incentives to prospective customers who were
identified based on demographic models; analysis of the results of this program
resulted in a reduction of prospecting efforts, starting in late 1995.
Promotional incentives issued through the direct marketing programs in 1996
totalled $11,031,000, compared to $12,667,000 in 1995.
Hotel revenues earned in 1996 of $9,150,000 were in line with hotel
revenues earned during 1995. Hotel occupancy during 1996 was 91%, with an
average room rate of $56, comparable to the 92% occupancy in 1995, with an
average room rate of $55. For the year ended December 31, 1996, New Claridge
earned food and beverage revenues of $20,602,000, a 4.2% increase over 1995
revenues. The increase in food and beverage revenues was due to an increase in
the average price per cover (meals served) to $8.08 in 1996, from $7.40 in 1995,
primarily in banquet functions. The total number of covers served during 1996
was 1,735,000, a decrease from the 1,775,000 covers in 1995. The decrease in
covers was primarily due to the closing of New Claridge's "fast food" outlet in
September 1996; this outlet was reopened later in the year as a "fast food"
Chinese restaurant, managed by an independent operator. Other revenues earned
during 1996 of $2,671,000 increased over 1995 other revenues of $2,136,000,
primarily due to an increase in showroom revenues resulting from a more
aggressive entertainment policy in 1996. Promotional allowances, which represent
the value of goods and services provided free of charge to casino customers
under various marketing programs, increased to $19,241,000 in 1996, from
$16,326,000 in 1995, due to the increased efforts to maintain casino revenue
market share. As a result, hotel, food and beverage, and other revenues, net of
promotional allowances, for the year ended December 31, 1996 were $13,182,000, a
decrease from those revenues net of promotional allowances for the year ended
December 31, 1995 of $14,774,000.
Total costs and expenses for the year ended December 31, 1996 of
$214,098,000 were 4.1% higher than 1995 expenses of $205,626,000, primarily as a
result of the increase in coin incentives issued through the bus program, which
are included in casino expenses. In addition, the increase in casino expenses
over 1995 was also due to the increase in the cost of providing promotional
allowances to casino patrons; these costs are allocated from the hotel, food and
beverage, and other expenses. General and administrative costs in 1996 increased
6.6% over 1995 costs, primarily as a result of increased advertising
expenditures during the year. Depreciation and amortization expense for 1996
increased over 1995 as a result of the opening of the self-parking garage; the
cost of the garage will be depreciated over 39 years. Interest expense in 1996
was slightly lower than interest expense in 1995 due to the capitalization of
interest during the construction of the self-parking garage.
The Corporation recorded an income tax benefit of $5,398,000 for the
year ended December 31, 1996, which represents the tax benefit likely to be
realized as a result of the carry foward of Federal net operating losses, net of
an increase in the valuation allowance of $2,460,000 and increased deferred tax
credits. For the year ended December 31, 1995, the Corporation recorded an
income tax benefit of $370,000, which represented 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.
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.
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For the year ended December 31, 1995, casino revenue was $169,607,000,
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 earned by all
Atlantic City casinos during the year ended December 31, 1995, as reported,
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
to 15.3% in 1995, from 14.2% in 1994, offset by a 6.8% decline in table games
drop. 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 totalled $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.
Competition for bus patrons began to intensify in the fourth quarter
of 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 approximately $13 in 1995
from approximately $11 in 1994. In total, $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. In addition, for the
year ended December 31, 1995, $12,667,000 in cash incentives were issued to
patrons through New Claridge's direct marketing programs, compared to
$11,595,000 issued during the year ended December 31, 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 1994 was due to a 3.5%
increase in the number of covers, 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. 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.
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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.
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. On January 28, 1997, New Claridge entered
into an agreement to subject the new self-parking garage to the lien of the
mortgage; such lien will not be subordinated to any liens which may be placed on
New Claridge's 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.
The net proceeds of the Notes, totalling $82.2 million, were used as
follows: (i) to repay the then outstanding debt of the Corporation under the
Revolving Credit and Term Loan Agreement of approximately $35 million, including
the outstanding balance of the Corporation's revolving credit line, which was
secured by a first mortgage; (ii) to expand the casino capacity of the Claridge
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, at a
cost of approximately $12.7 million; (iii) to purchase property in 1995 and
construct on that property a self- parking garage, which opened in 1996, at a
cost (excluding capitalized interest of approximately $2.2 million) of
approximately $28 million (of which approximately $7.5 million represents the
cost of acquiring the land and approximately $20.5 million represents costs
attributable to building the garage facility); and (iv) to acquire the
Contingent Payment Option (see Item 1. Business - "Contingent Payment") at a
cost of $1 million. With the completion of the construction of the self-parking
garage, the proceeds of the offering of the Notes had largely been expended.
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, 1996, the Corporation's Excess Cash
was less than $10 million, and therefore the Corporation is not required to make
an Excess Cash Offer in 1997.
At December 31, 1996, the Corporation had working capital deficit of
$7,274,000, as compared to working capital of $15,122,000 at December 31, 1995.
The decrease in working capital is principally attributable to decreases in cash
and cash equivalents of $27,215,000 (primarily due to payments for the
construction of the self-parking garage amounting to approximately $13 million
and interest paid on the Notes of $9,987,500), offset by a decrease in accounts
payable of $883,000 (primarily due to accruals at December 31, 1995 related to
the construction of the self-parking garage), a decrease in other current
liabilities of $510,000 (primarily in accrued
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payroll and related benefits), an increase in receivables of $2,936,000
(principally due to an increase in the current portion of the Expandable
Wraparound Mortgage due from the Partnership), and an increase in prepaid
expenses and other current assets of $491,000. Current liabilities at December
31, 1996 and 1995 included deferred rental payments of $15,078,000, and the $3.6
million loan from the Partnership plus accrued interest thereon of $3,258,000
and $2,826,000 at December 31, 1996 and 1995, 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, 1996 and 1995 would have been
$14,662,000 and $36,626,000, respectively.
For the year ended December 31, 1996, cash flows used in operating
activities were $22,650,000, compared to cash flows provided by operating
activities of $4,892,000 for the year ended December 31, 1995. The increase in
cash used in operating activities was primarily due to the increase in pre-tax
net loss, 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, 1996 and 1995 were $4,565,000 and $6,389,000, respectively. Cash
flows used in investment activities for 1996 for additions to property and
equipment included expenditures for the construction of the self- parking
facility; in 1995, additions to property and equipment included the cost of the
acquisition of the land on which the garage facility was constructed, as well as
construction expenditures. Expenditures for property and equipment in 1996 and
1995 were offset by Expandable Wraparound Mortgage principal payments of
$13,845,000 and $12,014,000, respectively.
For the year ended December 31, 1996, the Corporation's "Adjusted
EBITDA" was $2,222,000, compared to $19,897,000 for the year ended December 31,
1995. "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. For the
year ended December 31, 1996, the ratio of earnings (defined as pre-tax income
(loss) from continuing operations, adjusted to exclude fixed charges consisting
of interest expense, interest capitalized, and such portion of rental expense as
can be demonstrated to be representative of the interest factor) to fixed
charges decreased to .06, from .85 in 1995, and .58 in 1994. The deficiency of
earnings to fixed charges in 1996, 1995 and 1994 was $21,828,000, $3,416,000,
and $9,294,000, respectively.
During 1994 and 1995, the cash provided by operations of the Claridge
was sufficient to meet the Corporation's obligations to pay interest on the
Notes, as well as to make at least some moderate capital improvements.
Commencing in the latter part of 1995, however, competition in the Atlantic City
casino market for bus customers, a principal source of customers for the
Claridge at the time, increased; this competition intensified even more during
1996 as additional casino square footage was added, principally due to the
opening of the Trump World's Fair casino. During 1996, the average coin
incentive issued per bus patron at the Claridge increased to approximately $19,
from approximately $13 in 1995. Total cash incentives issued to Claridge's
casino patrons (in the form of coin to play slot machines and gaming chips to
play table games) increased to approximately $30.5 million in 1996, from
approximately $25.2 million in 1995. While the Corporation's
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promotional costs increased significantly, total casino revenues in 1996
actually decreased from 1995 levels. It had been the expectation of the
Corporation that, upon the opening of its new self-parking garage, the
Corporation would be able to reduce its reliance on the bus patron market;
however, the Corporation was forced to close the garage facility on July 10,
1996, only ten days after its opening, following a fatal accident. Because the
facility was not able to reopen until the end of September 1996, the Corporation
lost any possible benefit of the facility during the normally busy summer
season. In addition, severe winter weather in the first quarter of 1996
adversely affected revenues. As a result, the Corporation experienced a net loss
for 1996 of $15.4 million, compared to a net loss of $1.9 million in 1995.
In late July 1996, management of the Corporation determined that due to
the serious deterioration in the Corporation's cash flow, that without a
significant improvement in its operating results, it was unlikely that the
Corporation would be able to meet its obligations to pay interest on the Notes
beyond the August 1996 payment. In addition to taking steps to conserve cash by
reducing various operating expenses, the Corporation engaged a financial
advisor, Dillon, Read & Co., Inc., to assist in formulating a proposal to the
holders of the Notes to restructure the Corporation's obligations under the
Notes. At the same time, the Corporation was working with Dillon, Read & Co.,
Inc. to attempt to find a buyer of the Corporation, or an investor that would be
in a position to inject additional capital into the Corporation to enable the
Corporation to meet its ongoing obligations. To date, the Corporation has not
received any acceptable proposals in regards to the possible sale of the
Corporation.
In November 1996, while the sales efforts were continuing, the
Corporation announced that there was a strong likelihood that the Corporation
would be unable to pay the interest due on the Notes on February 3, 1997.
Accordingly, management, working together with financial and legal advisors,
formulated a plan for restructuring the Corporation's obligations. The terms of
the proposed plan were presented to the noteholders at a meeting held on
December 3, 1996, at which time the noteholders were urged to form a steering
committee or other representative body to conduct negotiations. Although a group
of noteholders formed and met with the management of the Corporation on a few
occasions, by the time the committee formally organized itself on January 7,
1997, it consisted of six members representing ownership of less than 5% of the
total amount of Notes outstanding. At that time, the Corporation determined that
the committee did not represent a sufficient portion of the noteholders to
negotiate on behalf of the noteholders generally. As a result, the Corporation
did not formally recognize the committee and did not engage in any negotiation
with the committee or its members, although it did encourage the members of the
committee to continue to attempt to obtain broader representation of the
noteholders.
On January 12, 1997, management of the Corporation was contacted,
through an agent, by Hilton Hotel Corporation ("Hilton"), regarding a possible
sale of the Corporation to Hilton, and shortly thereafter, the Corporation began
negotiations with Hilton. On January 30, 1997, the Corporation issued a press
release indicating that the Corporation would not make the interest payment due
on the Notes on February 3, 1997, and that the Corporation had entered
negotiations with Hilton regarding acquisition of the Corporation by Hilton
through a prepackaged bankruptcy plan. At that time, a representative of Hilton
indicated that Hilton had acquired approximately 35% to 40% of the Notes. On
February 5, 1997, three holders of the Notes, who were members of the unofficial
committee which they had formed, filed a petition for involuntary bankruptcy
against the Corporation in the bankruptcy court for the District of New Jersey.
Contemporaneously, the same three holders of the Notes filed a related
state court lawsuit against the Corporation, New Claridge, the Partnership,
certain officers and directors of the Corporation, and the general partners of
the Partnership. On March 4, 1997, contrary to earlier expectations, the
Corporation was able to pay the interest that was due on the Notes on February
3, 1997, under the 30-day grace period allowed in accordance with the terms of
the Indenture. In addition, the Corporation reached agreement with the
unofficial committee
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of noteholders, as well as the three holders of the Notes, providing for the
joint dismissal of the involuntary bankruptcy petition and the related state
court lawsuit. On March 19, 1997, an order was entered dismissing the
involuntary bankruptcy petition; as part of that order, a settlement agreement
was entered whereby the state court lawsuit was also dismissed. The Corporation
expects the negotiations with Hilton to continue.
The Corporation had sufficient cash to pay the interest on the Notes on
March 4, 1997 due to several events: (i) cash flow from operations for January
and February 1997 improved significantly over what had been expected; (ii)
effective March 1, 1997, the Operating Lease and Expansion Operating Lease were
amended to provide for the deferral of basic rent of $1.3 million on March 1,
1997 (see Item 1. Business - "Certain Agreements between the Corporation, New
Claridge and the Partnership"); and (iii) on February 28, 1997, New Claridge
entered into an agreement with Thermal Energy Limited Partnership I ("Atlantic
Thermal"), pursuant to which Atlantic Thermal was granted an exclusive license
for a period of twenty years to use, operate and maintain certain steam and
chilled water production facilities at the Claridge. In consideration for this
license agreement, Atlantic Thermal paid New Claridge $1.5 million.
As discussed, the Corporation experienced recurring losses and serious
deterioration in its cash flow in 1996. Since the Corporation does not have
substantial cash reserves or access to a line of credit, the Corporation will
need to experience a significant improvement in operating results in 1997 over
1996 levels in order to meet its on-going obligations, including the interest
due on the Notes. Operating results in 1997 have improved over 1996 levels, due
primarily to the positive impact of the availability of the self-parking garage.
Although management of the Corporation believes that operating results will
continue to improve over prior year levels, no assurances as to the continuation
of this improvement can be given. Management will continue to conserve cash
through various cost containment measures, including limiting capital
expenditures in 1997 to approximately $1 million. Given the various improvements
made to the property in recent years, including the casino expansion in 1994,
the construction of the self-parking garage, and other projects such as the
refurbishment of all of its guest rooms, the current condition of the property
is such that the above-mentioned level of capital expenditures is deemed
adequate. Management will also continue to work with Dillon, Read & Co., Inc. to
pursue a sale of the Corporation or some other plan for a significant infusion
of capital into the Corporation. In addition, New Claridge has retained the law
firm of Zelle and Larson LLP of Minneapolis, Minnesota to assist in evaluating
the recovery of certain expenses incurred in reopening the self-parking garage
and in evaluating potential lost profit claims as a result of the accident which
occurred in the self-parking garage on July 10, 1996. Management of the
Corporation intends to file a claim to recover these expenses and lost profits;
recovery of these claims would have a positive impact on New Claridge's
financial results and liquidity. No formal claims have been filed to date, and
there is no assurance that the Corporation will be successful in realizing any
recovery.
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.
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The Expandable Wraparound Mortgage requires monthly principal payments
to be made by the Partnership to New Claridge, commencing in the year 1988 and
continuing through the year 1998, in escalating amounts totalling $80 million.
The Expandable Wraparound Mortgage bears interest at an annual rate equal to 14%
with the deferral until maturity of $20 million of certain interest payments
which accrued between 1983 and 1988. In addition, in 1986 the principal amount
secured by the Expandable Wraparound Mortgage was increased to provide the
Partnership with funding for the construction of an expansion improvement, which
resulted in approximately 10,000 square feet of additional casino space and a
3,600 square foot lounge. Effective August 28, 1986, the Partnership commenced
making level monthly payments of principal and interest calculated to provide
for the repayment in full of the principal balance of this increase in the
Expandable Wraparound Mortgage by September 30, 1998. Under the terms of the
Expandable Wraparound Mortgage, New Claridge is not permitted to foreclose on
the Expandable Wraparound Mortgage and take ownership of the Hotel Assets so
long as a senior mortgage is outstanding. The face amount outstanding of the
Expandable Wraparound Mortgage at December 31, 1996 (including the outstanding
FF&E Loans and the $20 million of deferred interest) was $117.5 million.
Effective March 1, 1997, the Corporation, New Claridge, and the
Partnership entered into a restructuring agreement, pursuant to which New
Claridge agreed to use its best efforts to cause a modification of the
Expandable Wraparound Mortgage (the "Wraparound Modification") that is permitted
by, or is in compliance with, the terms of the Indenture. The Wraparound
Modification, if so permitted, will provide for an extension of the maturity
date of the Expandable Wraparound Mortgage from September 30, 2000 to January 1,
2004. If the Wraparound Modification is not permitted by or in compliance with
the terms of the Indenture, New Claridge has agreed to effect the Wraparound
Modification at such time as the Notes are no longer outstanding. In addition to
the modification to the Expandable Wraparound Mortgage, the Corporation, New
Claridge, and the Partnership agreed to modify certain terms of the Operating
Lease and Expansion Operating Lease agreements, as discussed below.
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. During
the third quarter of 1991, 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. As of December 31, 1996, $37.3 million of basic rent had been abated.
The remaining $1.5 million of available abatement was fully utilized in the
first quarter of 1997. Additional abatements of rent totalling $500,000, which
became available as a result of the acquisition of
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the option to purchase the Contingent Payment, were also utilized in the first
quarter of 1997. Further abatements would become available in the event that the
Contingent Payment option is exercised (see Item 1. Business - "Contingent
Payment"). Because the initial term of the Operating Lease continues through
September 30, 1998, rental payments after the abatements are fully utilized
would increase substantially to approximately $39.7 million in 1997, as compared
to approximately $31.5 million (net of abatements of $8.4 million) in 1996.
The Fifth Amendment to the Operating Lease and the Fourth Amendment to
the Expansion Operating Lease, which were effective on March 1, 1997, provided
for the abatement of $867,953 of basic rent and for the deferral of $1,300,000
of basic rent on March 1, 1997, and provide for additional abatements of basic
rent, commencing on April 1, 1997, as necessary to reduce the Partnership's cash
flow to an amount necessary only to meet the Partnership's cash requirements
through December 31, 1998. The $1.3 million of basic rent deferred on March 1,
1997 is to be paid to the Partnership in monthly installments of $25,000 for the
period April 1, 1997 through December 31, 1997, and monthly installments of
$50,000 for the year 1998 and thereafter until paid in full. For the years 1999
through 2003, additional abatements of basic rent will be reduced to provide the
Partnership with amounts needed to meet the Partnership's cash requirements plus
an additional amount ($83,333 per month in 1999 and 2000, $125,000 per month in
2001, and $166,667 per month in 2002 and 2003).
In addition, under the March 1, 1997 restructuring agreement between the
Corporation, New Claridge, and the Partnership, New Claridge agreed to exercise
the first of three ten-year renewal options extending the term of the Operating
Lease and Expansion Operating Lease through September 30, 2008.
Under the terms of the Operating Lease, as amended effective March 1,
1997, New Claridge has an option to purchase, on September 30, 1998, the Hotel
Assets and the underlying land for their fair market value at the time the
option is exercised, which in no event may be less than an amount equal to the
amount then outstanding under the Expandable Wraparound Mortgage plus $2.5
million, plus any amount of the $1.3 million of rent deferred on March 1, 1997
not then paid. If New Claridge does not exercise this option on September 30,
1998, it may exercise an option, on September 30, 2003, to purchase the Hotel
Assets and the underlying land on January 1, 2004, for their fair market value
at the time the option is exercised.
Basic rent during the renewal term of the Operating Lease 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. Basic
rent during the renewal term of the Expansion Operating Lease will also 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. Therefore,
the aggregate basic rent payable during the initial years of the renewal term of
the leases will be significantly below the 1997 level.
If the Partnership should fail to make any payment due under the
Expandable Wraparound Mortgage, New Claridge may exercise a right of offset
against rent or other payments due under the Operating Lease and Expansion
Operating Lease to the extent of any such deficiency.
The effective tax rate was (26%) for the year ended December 31, 1996
compared to (16%) for the year ended December 31, 1995, caused by the ratio of
the increased loss over disallowed deductions and the increase in valuation
allowance as compared to the prior year loss and disallowed deductions. The
components of income tax expense did not change significantly from the prior
year except for an increase in the valuation allowance of $2,460,000 which was
provided against deferred tax assets as of December 31, 1996. There was no
change in the valuation allowance for the year ended December 31, 1995.
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Recently Issued Accounting Pronouncements
During the first quarter of 1996, the Corporation adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121").
SFAS 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. The adoption of SFAS 121
on January 1, 1996 did not require any impairment to be recognized during 1996.
Factors Which May Influence the Corporation's Future Operating Results
The Atlantic City gaming market is expected to experience significant
growth beginning over the next several years, as Atlantic City transforms itself
from a "day-trip" market to a "destination resort." As a result of current high
room occupancy rates, a more favorable regulatory climate, the reduced threat of
competition from potential new gaming jurisdictions, and significant
infrastructure developments making Atlantic City more accessible, significant
new investments are planned, including the expansion of existing casinos and the
construction of several new casinos. As more of these facilities are opened, it
is possible that the increased casino capacity will not be absorbed as quickly
as it is opened, and competition for gaming patrons will heighten.
In addition to the expansion of the Atlantic City gaming market, casino
activity outside of Atlantic City could have an impact on the Corporation's
future operating results. Although the expansion of legalized gaming throughout
the United States slowed somewhat during 1995 and 1996, current operations in
certain markets, most notably Indian gaming in Connecticut and slot machine
facilities at the Delaware racetracks, may have had, and may continue to have,
an impact on the Atlantic City casino industry. In 1996, the three racetracks in
Delaware which offer slot machines (one of which opened in August 1996) reported
revenues of $184.4 million. The Mohegan Sun Resort, which opened in Uncasville,
Connecticut in October 1996, reported an average win per slot machine per day of
$310, compared to the Atlantic City average win per slot machine per day of $228
in 1996. In addition, although New York and Pennsylvania have not, to date, been
successful in legalizing casino gaming, management believes that, should casino
gaming be legalized in the future in those states, the effects on Atlantic City
casinos and on the Claridge would depend on the form and scope of such gaming.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedules are set forth
at pages F-1 to F-31 of the report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THIS REGISTRANT
Name Office Age
---- ------ ---
David W. Brenner Chairman, Director 61
Robert M. Renneisen President, Director 50
Shannon L. Bybee Director 59
A. Bruce Crawley Director 51
Ned P. DeWitt Director 57
James M. Montgomery Director 57
Mark H. Sayers Director 47
Jean I. Abbott Executive Vice President 41
Frank A. Bellis, Jr. Senior Vice President, Secretary 43
Albert T. Britton Executive Vice President 40
Glenn S. Lillie Vice President 48
Raymond A. Spera Executive Vice President, Treasurer 40
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
served as President of New Claridge from January 1991 to January 1996. 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
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
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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 Corporation from December 1986 to April 1989. He also served,
from 1973 through 1982, as President and Chief Executive Officer of Six Flags
Corporation.
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. 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
Operations of New Claridge, a position she has held since September 1996. From
July 1995 to August 1996, she was Executive Vice President of Marketing and
Casino Operations. 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 its corporate predecessor.
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.
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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 its corporate
predecessor.
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.
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 its corporate
predecessor. Prior to joining New Claridge, he spent three years with the
accounting firm of KPMG Peat Marwick LLP.
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 10, 1997.
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 10, 1997 is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On March 24, 1989, Oppenheimer Holdings, Inc. returned to the Corporation
all of its shares (273,938) of the Corporation's Class A Common Stock.
On June 16, 1989, in accordance with the terms of the Restructuring
Agreement, all of the outstanding shares of the Corporation's Class B Stock, all
of which was owned by Webb, was returned to the Corporation and cancelled.
As of December 31, 1996, there were no beneficial owners of more than 5%
of the Corporation's Class A Stock.
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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."
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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.
<TABLE>
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<S> <C> <C>
3(a) Certificate of Incorporation of the Corporation. Incorporated by
reference to Exhibit 3(a) to Form 10-K for the year ended
December 31, 1995.
3(b) By-Laws of the Corporation as amended. Incorporated by reference
to Exhibit 3(b) to Form 10-K for the year ended December 31,
1995.
3(c) Certificate of Amendment of The Certificate of Incorporation of
the Corporation dated June 15, 1989. Incorporated by reference
to Exhibit 3(c) to Form 10-K for the year ended December 31,
1995.
3(d) Certificate of Amendment of The Certificate of Incorporation
dated June 26, 1991. Incorporated by reference to Exhibit 3(d)
to Form 10-K for the year ended December 31, 1995.
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) Operating Lease Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P. Incorporated by reference to Exhibit
10(a) to Form 10-K for the year ended December 31, 1995.
10(b) Expandable Wraparound Mortgage and Security Agreement between
New Claridge and Atlantic City Boardwalk Associates, L.P.
Incorporated by reference to Exhibit 10(b) to Form 10-K for the
year ended December 31, 1995.
</TABLE>
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10(c) Expandable Wraparound Mortgage Loan Agreement between New
Claridge and Atlantic City Boardwalk Associates, L.P.
Incorporated by reference to Exhibit 10(c) to Form 10- K for the
year ended December 31, 1995.
10(h) Expansion Operating Lease Agreement between New Claridge and
Atlantic City Boardwalk Associates, L.P. Incorporated by
reference to Exhibit 10(h) to Form 10-K for the year ended
December 31, 1995.
10(i) First Supplemental Amendment to Expandable Wraparound Mortgage
and Security Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P. Incorporated by reference to Exhibit
10(i) to Form 10-K for the year ended December 31, 1995.
10(j) First Supplemental Amendment to Expandable Wraparound Mortgage
Loan Agreement between New Claridge and Atlantic City Boardwalk
Associates, L.P. Incorporated by reference to Exhibit 10(j) to
Form 10-K for the year ended December 31, 1995.
10(n) Restructuring Agreement, among The Claridge Hotel and Casino
Corporation, The Claridge at Park Place, Incorporated, Del Webb
Corporation, Del E. Webb New Jersey, Inc., Atlantic City
Boardwalk Associates, L.P. and First Fidelity Bank, National
Association, New Jersey, dated October 27, 1988. Incorporated by
reference to Exhibit 10(n) to Form 10-K for the year ended
December 31, 1995.
10(x) Long Term Management Incentive Plan of The Claridge Hotel and
Casino Corporation effective January 1, 1992. Incorporated by
reference to Exhibit 10(x) to Form 10-K for the year ended
December 31, 1995.
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.
</TABLE>
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<S> <C> <C>
10(af) Second Amendment to Expandable Wraparound Mortgage Loan
Agreement between New Claridge and Atlantic City Boardwalk
Associates, L.P., dated June 15, 1989. Incorporated by reference
to Exhibit 10.9 to Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
10(ag) Second Amendment to Expandable Wraparound Mortgage and Security
Agreement between New Claridge and Atlantic City Boardwalk
Associates, L.P., dated June 15, 1989. Incorporated by reference
to Exhibit 10.11 to Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
10(ah) The 1992 Claridge Management Incentive Plan. Incorporated by
reference to Exhibit 10.18 to Form S-1 Registration Statement
(file number 33-71550) dated November 12, 1993.
10(ai) The 1993 Claridge Management Incentive Plan. Incorporated by
reference to Exhibit 10.19 to Form S-1 Registration Statement
(file number 33-71550) dated November 12, 1993.
10(aj) Form of Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement. Incorporated by reference to
Exhibit 4.3 to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated January 18,
1994.
10(ak) Form of Collateral Trust Agreement among the Corporation, New
Claridge, the Partnership and the Collateral Trustee.
Incorporated by reference to Exhibit 4.4 to Pre- Effective
Amendment No. 2 to Form S-1 Registration Statement (file number
33-71550) dated January 18, 1994.
10(al) Form of Corporation Pledge Agreement between the Corporation and
the Collateral Trustee. Incorporated by reference to Exhibit 4.5
to Pre-Effective Amendment No. 2 to Form S-1 Registration
Statement (file number 33-71550) dated January 18, 1994.
10(am) Form of New Claridge Pledge Agreement between New Claridge and
the Collateral Trustee. Incorporated by reference to Exhibit 4.6
to Pre-Effective Amendment No. 2 to Form S-1 Registration
Statement (file number 33-71550) dated January 18, 1994.
10(an) Form of New Claridge Cash Collateral Pledge Agreement between
New Claridge and the Collateral Trustee. Incorporated by
reference to Exhibit 4.7 to Pre-Effective Amendment No. 2 to
Form S-1 Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ao) Form of New Claridge Security Agreement between New Claridge and
the Collateral Trustee. Incorporated by reference to Exhibit 4.8
to Pre-Effective Amendment No. 2 to Form S-1 Registration
Statement (file number 33-71550) dated January 18, 1994.
10(ap) Form of New Claridge Trademark Security Agreement between New
Claridge and the Collateral Trustee. Incorporated by reference
to Exhibit 4.9 to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated January 18,
1994.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
10(aq) Form of Collateral Assignment of Expandable Wraparound Mortgage
and Security Agreement. Incorporated by reference to Exhibit
4.10 to Pre-Effective Amendment No. 2 to Form S-1 Registration
Statement (file number 33-71550) dated January 18, 1994.
10(ar) Form of Collateral Assignment of Lessor's Interest in Operating
Leases. Incorporated by reference to Exhibit 4.13 to
Pre-Effective Amendment No. 2 to Form S-1 Registration Statement
(file number 33-71550) dated January 18, 1994.
10(as) Form of Subordination Agreement among the Partnership, New
Claridge and the Collateral Trustee. Incorporated by reference
to Exhibit 4.14 to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated January 18,
1994.
10(at) Form of Assignment of Leases and Rents and Other Contract
Rights. Incorporated by reference to Exhibit 4.15 to
Pre-Effective Amendment No. 2 to Form S-1 Registration Statement
(file number 33-71550) dated January 18, 1994.
10(bb) Supplemental Executive Retirement Plan of The Claridge at Park
Place, Incorporated effective January 1, 1994. Incorporated by
referenece 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.
Incorporated by reference to Exhibit 10(bc) to Form 10-K for the
year ended December 31, 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. Incorporated by reference to Exhibit
10(bd) to Form 10-K for the year ended December 31, 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. Incorporated by reference to Exhibit 10(be)
to Form 10-K for the year ended December 31, 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. Incorporated by reference to Exhibit 10(bf) to Form 10-K
for the year ended December 31, 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. Incorporated by
reference to Exhibit 10(bg) to Form 10-K for the year ended
December 31, 1995.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
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. Incorporated by reference to Exhibit 10(bh)
to Form 10-K for the year ended December 31, 1995.
10(bj) Amended Employment Agreement between Robert M. Renneisen and The
Claridge at Park Place, Incorporated effective January 1, 1997.
10(bk) Amended Employment Agreement between Albert T. Britton and The
Claridge at Park Place, Incorporated effective January 1, 1997.
10(bl) Amended Employment Agreement between Raymond A. Spera and The
Claridge at Park Place, Incorporated effective January 1, 1997.
10(bm) Amended Employment Agreement between Jean I. Abbott and The
Claridge at Park Place, Incorporated effective November 1, 1996.
10(bn) Employment Agreement between Frank A. Bellis, Jr. and The
Claridge at Park Place, Incorporated effective November 1, 1996.
10(bo) Employment Agreement between Glenn Lillie and The Claridge at
Park Place, Incorporated effective February 1, 1997.
10(bp) Spreader Agreement of a Certain Mortgage, Assignment of Leases
and Rents, Security Agreement and Financing Statement by The
Claridge at Park Place, Incorporated in favor of IBJ Schroder
Bank & Trust Company, as Collateral Trustee, dated January 28,
1997.
10(bq) Spreader Agreement and Modification of Spreader Agreement of a
Certain Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement by The Claridge at Park Place,
Incorporated in favor of IBJ Schroder Bank & Trust Company, as
Collateral Trustee, dated February 18, 1997.
10(br) Fifth Amendment to Operating Lease Agreement and Fourth
Amendment to Expansion Operating Lease Agreement between The
Claridge at Park Place, Incorporated and Atlantic City Boardwalk
Associates, L.P. effective March 1, 1997.
10(bs) Restructuring Agreement between The Claridge Hotel and Casino
Corporation, The Claridge at Park Place, Incorporated and
Atlantic City Boardwalk Associates, L.P. effective March 1,
1997.
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.
12(b) Statement of Computation of Ratio of Earnings to Fixed Charges.
22(a) Subsidiaries of the Corporation. Incorporated by reference to
Exhibit 22(a) to Form 10- K for the year ended December 31,
1995.
</TABLE>
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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
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<CAPTION>
<S> <C> <C>
Dated: March 28, 1997 By:/s/ ROBERT M. RENNEISEN By:/s/ RAYMOND A. SPERA
--------------------------- ---------------------------
Robert M. Renneisen Raymond A. Spera
Chief Executive Officer Chief Financial Officer and
Principal Accounting Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ DAVID W. BRENNER
- ------------------------- Chairman, Director March 28, 1997
David W. Brenner
/s/ ROBERT M. RENNEISEN
- ------------------------ President, Director March 28, 1997
Robert M. Renneisen (Chief Executive Officer)
/s/ SHANNON L. BYBEE
- ------------------------- Director March 28, 1997
Shannon L. Bybee
/s/ A. BRUCE CRAWLEY
- ------------------------- Director March 28, 1997
A. Bruce Crawley
/s/ NED P. DEWITT
- ------------------------- Director March 28, 1997
Ned P. DeWitt
/s/ JAMES M. MONTGOMERY
- ------------------------- Director March 28, 1997-
James M. Montgomery
/s/ MARK H. SAYERS
- ------------------------- Director March 28, 1997
Mark H. Sayers
/s/ RAYMOND A. SPERA
- ------------------------- Executive Vice President March 28, 1997
Raymond A. Spera (Chief Financial Officer/
Treasurer/Principal
Accounting Officer)
</TABLE>
36
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
Reference In
Report on
Form 10-K
------------
<S> <C>
Independent Auditors' Report.................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995....................... F-3
Consolidated Statements of Operations and Accumulated (Deficit) Earnings
for the Years Ended December 31, 1996, 1995 and 1994........................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.............................................. F-5
Notes to Consolidated Financial Statements...................................... F-7
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts........................ F-31
</TABLE>
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, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 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.
The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Corporation will continue as a
going concern. As discussed in Note 2 to the consolidated financial statements,
the Corporation has suffered recurring losses from operations and has
experienced diminishing liquidity as a result of a serious deterioration in its
cash flow and limited availability of working capital sources that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are discussed in Note 2. The consolidated
financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 7, 1997
F-2
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(dollars in thousands)
<TABLE>
<CAPTION>
1995 1995
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,532 35,747
Receivables, net (including $18,392 and $15,391 in 1996
and 1995, respectively, due from Partnership) (note 4) 19,744 16,808
Inventories 278 279
Prepaid expenses and other current assets 3,199 2,708
--------- --------
Total current assets 31,753 55,542
--------- --------
Property and equipment (note 5) 48,818 36,848
Less accumulated depreciation and amortization (13,630) (12,380)
--------- --------
Net property and equipment 35,188 24,468
--------- --------
Long-term receivables due from Partnership (note 4) 92,120 104,207
Deferred charges at cost, less accumulated amortization 2,575 2,930
Other assets (note 6) 2,527 1,927
--------- --------
$164,163 189,074
========= ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 2,997 3,880
Loan from the Partnership (note 7) 3,600 3,600
Other current liabilities (note 8) 32,430 32,940
--------- --------
Total current liabilities 39,027 40,420
--------- --------
Long-term debt (note 9) 85,000 85,000
Deferred rent due to Partnership (note 13) 28,010 30,747
Deferred income taxes (note 12) 2,581 7,123
Other noncurrent liabilities (note 10) 19,379 20,229
Commitments and contingent liabilities (notes 13 and 15)
Stockholders' equity (notes 16 and 17):
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 (deficit) earnings (14,887) 502
Treasury stock, 16,436 Class A shares at
cost in 1996 and 1995, respectively -0- -0-
--------- --------
Total stockholders' (deficiency) equity (9,834) 5,555
--------- --------
$164,163 189,074
========= ========
</TABLE>
See accompanying notes to consolidated financialstatements.
F-3
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Accumulated (Deficit) Earnings
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
Casino $163,369 169,607 156,159
Hotel 9,150 9,195 10,962
Food and beverage 20,602 19,769 18,346
Interest from the Partnership 16,007 17,195 17,906
Interest, other 753 1,772 1,519
Other 2,671 2,136 2,547
-------- -------- -------
212,552 219,674 207,439
Less promotional allowances (note 11) 19,241 16,326 16,684
-------- -------- -------
Net revenues 193,311 203,348 190,755
-------- -------- -------
Costs and expenses:
Casino 100,220 92,571 89,077
Hotel 2,673 3,224 3,141
Food and beverage 10,938 11,783 10,352
Other 2,967 2,961 3,615
Rent expense to the Partnership (note 13) 38,561 37,638 36,219
Rent expense, other (note 13) 1,484 1,512 1,531
General and administrative 30,539 28,641 28,807
Gaming taxes 13,053 13,583 12,443
Reinvestment obligation expenses (note 6) 836 1,442 1,972
Provision for uncollectible accounts 238 (160) 492
Depreciation and amortization 3,239 2,915 2,444
Interest expense, other 9,350 9,516 9,956
-------- -------- -------
Total costs and expenses 214,098 205,626 200,049
-------- -------- -------
Loss before income taxes (20,787) (2,278) (9,294)
Income tax benefit (note 12) (5,398) (370) (2,393)
-------- -------- -------
Net loss (15,389) (1,908) (6,901)
-------- -------- -------
Accumulated earnings at beginning of period 502 2,410 9,311
-------- -------- -------
Accumulated (deficit) earnings at end of period $(14,887) 502 2,410
======== ======== =======
Net loss per share (note 3(i)) $ (3.05) (.38) (1.37)
======== ======== =======
</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, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(15,389) (1,908) (6,901)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 3,239 2,915 2,444
Deferred rent to the Partnership (2,737) (2,386) (3,209)
Deferred interest receivable and
discount from the Partnership (1,524) (1,326) (1,154)
Reinvestment obligation expenses 836 1,442 1,972
(Gain) loss on disposal of assets (138) (33) 87
Deferred income taxes - noncurrent (4,542) (762) 1,782
Change in assets and liabilities:
Receivables, net, excluding current portion
of long-term receivables 338 (629) 497
Inventories 1 45 99
Prepaid expenses and other current
assets excluding current portion of
reinvestment obligation credit (491) 3,888 (2,815)
Accounts payable (883) 1,098 273
Other current liabilities (510) 2,319 2,460
Other noncurrent liabilities (850) 229 -0-
-------- -------- -------
Net cash flows (used in) provided by
operating activities (22,650) 4,892 (4,465)
-------- -------- -------
</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, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from investment activities:
Increase in deferred charges $ (195) (59) (77)
Additions to property and equipment, net (13,455) (17,493) (7,116)
Additions to other assets (1,436) 1,557 (3,666)
Proceeds from disposition of property 184 75 75
Increase in long-term receivables (3,508) (2,483) (9,610)
Receipt of long-term receivables 13,845 12,014 10,509
-------- -------- -------
Net cash flows used in investment activities (4,565) (6,389) (9,885)
-------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -0- -0- 85,000
Payment of long-term debt -0- -0- (33,559)
Increase in deferred charges related to issuance
of long term debt -0- -0- (3,340)
Payment of revolving credit line borrowings -0- -0- (9,325)
Increase in revolving credit line borrowings -0- -0- 7,625
-------- -------- -------
Net cash flows provided by financing activities -0- -0- 46,401
-------- -------- -------
(Decrease) increase in cash and cash equivalents (27,215) (1,497) 32,051
Cash and cash equivalents at beginning of period 35,747 37,244 5,193
-------- -------- -------
Cash and cash equivalents at end of period $ 8,532 35,747 37,244
======== ======== =======
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $ 8,918 9,084 5,365
======== ======== =======
Income taxes paid $ -0- 677 181
======== ======== =======
</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. On January 28, 1997, New
Claridge entered into an agreement to subject the new self-parking
garage to the lien of the mortgage; such lien will not be subordinated
to any lien which may be placed on New Claridge's 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. (See Note 9, "Long-Term Debt".)
The net proceeds of the Notes, totalling $82.2 million net of fees and
expenses, were 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
a 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 opened in mid-1996; and (iv) to
acquire the Contingent Payment option in 1996 (see Note 10, "Other
Noncurrent Liabilities").
F-7
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
2. RECENT DEVELOPMENTS
During 1994 and 1995, the cash provided by operations of the Claridge
was sufficient to meet the Corporation's obligations to pay interest on
the Notes, as well as to make at least some moderate capital
improvements. Commencing in the latter part of 1995, however,
competition in the Atlantic City casino market for bus customers, a
principal source of customers for the Claridge at the time, increased;
this competition intensified even more during 1996 as additional casino
square footage was added, principally due to the opening of the Trump
World's Fair casino. During 1996, the average coin incentive issued per
bus patron at the Claridge increased to approximately $19, from
approximately $13 in 1995. Total cash incentives issued to Claridge's
casino patrons (in the form of coin to play slot machines and gaming
chips to play table games) increased to approximately $30.5 million in
1996, from approximately $25.2 million in 1995. While the Corporation's
promotional costs increased significantly, total casino revenues in 1996
actually decreased from 1995 levels. It had been the expectation of the
Corporation that, upon opening of its new self-parking garage, the
Corporation would be able to reduce its reliance on the bus patron
market; however, the Corporation was forced to close the garage facility
on July 10, 1996, only ten days after its opening, following a fatal
accident. Because the facility was not able to reopen until the end of
September 1996, the Corporation lost any possible benefit of the
facility during the normally busy summer season. In addition, severe
winter weather in the first quarter of 1996 adversely affected revenues.
As a result, the Corporation experienced a net loss for 1996 of $15.4
million, compared to a net loss of $1.9 million in 1995.
In late July 1996, management of the Corporation determined that due to
the serious deterioration in the Corporation's cash flow, that without a
significant improvement in its operating results, it was unlikely that
the Corporation would be able to meet its obligations to pay interest on
the Notes beyond the August 1996 payment. In addition to taking steps to
conserve cash by reducing various operating expenses, the Corporation
engaged a financial advisor, Dillon, Read & Co., Inc., to assist in
formulating a proposal to the holders of the Notes to restructure the
Corporation's obligations under the Notes. At the same time, the
Corporation was working with Dillon, Read & Co., Inc. to attempt to find
a buyer of the Corporation, or an investor that would be in a position
to inject additional capital into the Corporation to enable the
Corporation to meet its ongoing obligations. To date, the Corporation
has not received any acceptable proposals in regards to the possible
sale of the Corporation.
In November 1996, while the sales efforts were continuing, the
Corporation announced that there was a strong likelihood that the
Corporation would be unable to pay the interest due on the Notes on
February 3, 1997. Accordingly, management, working together with
financial and legal advisors, formulated a plan for restructuring the
Corporation's obligations. The terms of the proposed plan were presented
to the noteholders at a meeting held on December 3, 1996, at which time
the noteholders were urged to form a steering committee or some other
representative body to conduct negotiations. Although a group of
noteholders formed and met with the management of the Corporation on a
few occasions, by the time the committee formally organized itself on
January 7, 1997, it consisted of six members representing ownership of
less than 5% of the total amount of Notes outstanding. At that time, the
Corporation determined that the committee did not represent a sufficient
portion of the noteholders to negotiate on behalf of
F-8
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
2. RECENT DEVELOPMENTS (cont'd.)
the noteholders generally. As a result, the Corporation did not formally
recognize the committee and did not engage in any negotiation with the
committee or its members, although it did encourage the members of the
committee to continue to attempt to obtain broader representation of the
noteholders.
On January 12, 1997, management of the Corporation was contacted,
through an agent, by Hilton Hotel Corporation ("Hilton"), regarding a
possible sale of the Corporation to Hilton, and shortly thereafter, the
Corporation began negotiations with Hilton. On January 30, 1997, the
Corporation issued a press release indicating that the Corporation would
not make the interest payment due on the Notes on February 3, 1997, and
that the Corporation had entered negotiations with Hilton regarding
acquisition of the Corporation by Hilton through a prepackaged
bankruptcy plan. At that time, a representative of Hilton indicated that
Hilton had acquired approximately 35% to 40% of the Notes. On February
5, 1997, three holders of the Notes, who were members of the unofficial
committee which they had formed, filed a petition for involuntary
bankruptcy against the Corporation in the bankruptcy court for the
District of New Jersey.
Contemporaneously, the same three holders of the Notes filed a related
state court lawsuit against the Corporation, New Claridge, the
Partnership, certain officers and directors of the Corporation, and the
general partners of the Partnership. On March 4, 1997, contrary to
earlier expectations, the Corporation was able to pay the interest that
was due on the Notes on February 3, 1997, under the 30-day grace period
allowed in accordance with the terms of the indenture governing the
Notes (the "Indenture"). In addition, the Corporation reached agreement
with the unofficial committee of noteholders, as well as the three
holders of the Notes, providing for the joint dismissal of the
involuntary bankruptcy petition and the related state court lawsuit. On
March 19, 1997, an order was entered dismissing the involuntary
bankruptcy petition; as part of that order, a settlement agreement was
entered whereby the state court lawsuit was also dismissed.
The Corporation expects the negotiations with Hilton to continue.
The Corporation had sufficient cash to pay the interest on the Notes on
March 4, 1997 due to several events: (i) cash flow from operations for
January and February 1997 improved significantly over what had been
expected; (ii) effective March 1, 1997, the Operating Lease and
Expansion Operating Lease were amended to provide for the deferral of
basic rent of $1.3 million on March 1, 1997 (see Note 13, "Operating
Lease"); and (iii) on February 28, 1997, New Claridge entered into an
agreement with Thermal Energy Limited Partnership I ("Atlantic
Thermal"), pursuant to which Atlantic Thermal was granted an exclusive
license for a period of twenty years to use, operate and maintain
certain steam and chilled water production facilities at the Claridge.
In consideration for this license agreement, Atlantic Thermal paid New
Claridge $1.5 million.
As discussed, the Corporation experienced recurring losses and serious
deterioration in its cash flow in 1996. Since the Corporation does not
have substantial cash reserves or access to a line of credit, the
Corporation will need to experience a significant improvement in
operating results
F-9
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
2. RECENT DEVELOPMENTS (cont'd.)
in 1997 over 1996 levels in order to meet its on-going obligations,
including the interest due on the Notes. Operating results in early 1997
have improved over 1996 levels, due primarily to the positive impact of
the availability of the self-parking garage. Although management of the
Corporation believes that operating results will continue to improve
over prior year levels, no assurances as to the continuation of this
improvement can be given. Management will continue to conserve cash
through various cost containment measures, and will continue to work
with Dillon, Read & Co., Inc. to pursue a sale of the Corporation or
some other plan for a significant infusion of capital into the
Corporation. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be
necessary should the Corporation be unable to continue in its existence.
3. 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 1995 and 1994
consolidated financial statements to conform to the 1996
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.
F-10
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
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.
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
Other equipment 7 years
Interest costs related to the construction of the garage facility
were capitalized, and are being amortized over the estimated
useful life of the garage.
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, 1996
and 1995 was $1,364,000 and $896,000, respectively.
F-11
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
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 (5,046,064 for the year ended December 31,
1996, 5,050,792 for the year ended December 31, 1995, and
5,035,819 for the year ended December 31, 1994).
F-12
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
4. RECEIVABLES
Receivables at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Current Receivables 1996 1995
---- ----
(in thousands)
Casino, less allowance for uncollectible accounts
of $846,000 and $932,000 at
December 31, 1996 and 1995, respectively $ 1,097 821
Hotel, less allowance for uncollectible accounts
of $39,000 and $41,000 at December 31,
1996 and 1995, respectively 133 81
Interest receivable due from the Partnership 1,212 1,337
Current portion Expandable Wraparound
Mortgage due from the Partnership 12,000 10,000
Current portion of FF&E Promissory notes 2,791 1,819
Current portion of Expansion/Construction
promissory note 2,329 2,026
Other, less allowance for uncollectible accounts
of $14,000 at December 31, 1996 and 1995 182 724
-------- -------
$ 19,744 16,808
======== =======
Long-Term Receivables
$127,000,000 Expandable Wraparound Mortgage 14%, maturities
through September 30, 2000 (net of $8,291,000 discount and
$9,815,000 discount at
December 31, 1996 and 1995, respectively) $ 52,709 63,185
Deferred interest receivable, due
September 30, 2000 20,000 20,000
FF&E promissory notes, 14% 17,244 16,527
Expansion/Construction promissory note, 14% 2,167 4,495
-------- -------
$ 92,120 104,207
======== =======
</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-13
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
4. 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, 1997,
$2,791,000 of principal payments will become due. In connection with
the offering of $85 million of Notes on January 31, 1994, the
Corporation agreed to use not less than $8 million from the net
proceeds of the offering to finance certain internal improvements to
the Claridge which were funded through additional FF&E Loans. In
connection therewith, the Expandable Wraparound Mortgage Loan agreement
as well as the Operating Lease, and the Expansion Operating Lease were
amended to provide that the principal on these additional FF&E Loans
will be payable at final maturity of the Expandable Wraparound
Mortgage.
In 1986, the Expandable Wraparound Mortgage was increased up to $17
million to provide the Partnership with funding for the construction of
an expansion. Effective on the date that the expansion opened to the
public (August 28, 1986), the Partnership commenced making level
monthly payments of principal and interest so as to repay on September
30, 1998, in full, the principal balance of this increase in the
Expandable Wraparound Mortgage. The Expandable Wraparound Mortgage was
amended to require, in addition to the above, principal payments (in
equal monthly installments) due during the years 1988 through 1998 in
escalating amounts totalling $80 million and on September 30, 2000 a
balloon payment of $67 million which includes $20 million of deferred
interest.
Effective March 1, 1997, the Corporation, New Claridge, and the
Partnership entered into a restructuring agreement pursuant to which
New Claridge agreed to use its best efforts to cause a modification of
the Expandable Wraparound Mortgage (the "Wraparound Modification") that
is permitted by, or is in compliance with, the terms of the Indenture.
The Wraparound Modification, if so permitted, will provide for an
extension of the maturity date of the Expandable Wraparound Mortgage
from September 30, 2000 to January 1, 2004. If the Wraparound
Modification is not permitted by or in compliance with the terms of the
Indenture, New Claridge has agreed to effect the Wraparound
Modification at such time as the Notes are no longer outstanding.
F-14
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Gaming equipment $19,153 19,186
Land and land improvements 8,100 8,100
Self-parking garage facility 20,100 -0-
Construction in progress -0- 8,204
Leasehold improvements 745 745
Capital lease asset 613 613
Other equipment 107 -0-
------- -------
48,818 36,848
Less accumulated depreciation and amortization 13,630 12,380
------- -------
Net property and equipment $35,188 24,468
======= =======
</TABLE>
Building and construction in progress represent the costs incurred
associated with the construction of New Claridge's self-parking garage
facility, which initially opened on June 28, 1996. Interest costs
related to the construction of the garage facility were capitalized,
and are being amortized over the estimated useful life of the garage
(39 years). Total interest capitalized as of the opening of the garage
was $2,207,000; as of December 31, 1995, capitalized interest was
$1,138,000.
6. 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, 1996, the Corporation
has deposited $16,494,000 of which $2,532,000 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
F-15
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
6. OTHER ASSETS (cont'd.)
allowance for the full amount of its investment in these bonds,
totalling $1,654,000.
From time to time, New Claridge has made donations to the CRDA of
funds which had previously been deposited with the State Treasurer.
In exchange for these donations, which have totaled $11,974,000
through December 31, 1996, New Claridge received credits towards
future obligations or cash credits, from the CRDA equal to 51% of
the donations. As of December 31, 1996, all of these credits
had been used.
7. 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, 1996, such interest, which is included in
other current liabilities, amounted to $3,258,000.
8. OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1996 and 1995 consist of
the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Deferred rent, current $15,078 15,078
Accrued payroll and related benefits 6,187 7,279
Accrued interest, Notes 4,161 4,161
Auto/General insurance reserves 1,228 1,037
Accrued interest due to Partnership 3,258 2,826
Other current liabilities 2,518 2,559
------- -----
$32,430 32,940
======= ======
</TABLE>
Deferred rent 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-16
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
9. 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. On January 28, 1997, New
Claridge entered into an agreement to subject the new self-parking
garage to the lien of the mortgage; such lien will not be subordinated
to any lien which may be placed on New Claridge's 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. 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 a 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), 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,
1996, the Corporation's Excess Cash was less than $10 million, and
therefore the Corporation is not required to make an Excess Cash Offer
in 1997.
The Indenture restricts the declaration or payment of dividends or
distributions or 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.
10. 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
respect to the Contingent Payment obligation. Interest on the
Contingent Payment has not been recorded
F-17
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
10. OTHER NONCURRENT LIABILITIES (cont'd.)
in the accompanying consolidated financial statements since the
likelihood of paying such amount is not considered probable at this
time. As of December 31, 1996, accrued interest would have amounted to
approximately $45.8 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. The
purchase price of the option of $1 million was recorded as an offset
to the Contingent Payment liability which is included in other
noncurrent liabilities on the Corporation's consolidated balance
sheet. 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. The purchase
price may also increase in an amount not to exceed $10 million if
future distributions to Releasing Investors exceed $20 million.
Given the recent operating results (see Note 2, "Recent Developments"),
it is unlikely that the Corporation would be able to exercise this
Contingent Payment option using available working capital, or absent a
refinancing or sale transaction.
In the event that the option is exercised, it is anticipated that the
Contingent Payment would be cancelled so that neither the Corporation
nor the Partnership would 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 would 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
cancelled. 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 up to an amount equal to
approximately 72% of the Contingent Payment, if the option is
exercised.
Under the terms of the option, upon purchase of the Contingent Payment,
the Corporation and/or the Partnership would be required to make
distributions in excess of $7 million to the Releasing Investors. The
Corporation and the Partnership have agreed to cooperate in the
F-18
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
10. OTHER NONCURRENT LIABILITIES (cont'd.)
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 would
be contributed through additional abatements of basic rent payments
due under the Operating Lease and Expansion Operating Lease.
11. 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,
1996, 1995 and 1994 has been allocated to casino expenses as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Hotel $ 3,339 2,944 2,570
Food and beverage 12,001 9,655 9,864
Entertainment 1,725 784 737
-------- ------ -----
Total $17,065 13,383 13,171
======= ====== ======
</TABLE>
12. INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis.
The benefit for income taxes is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ -0- (285) (4,175)
State -0- -0- -0-
Deferred (5,398) (85) 1,782
--------- ----- ------
$(5,398) (370) (2,393)
======= ==== ======
</TABLE>
F-19
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
12. INCOME TAXES (cont'd.)
The benefit for income taxes differs from the amount computed at the
statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax benefit $(7,068) (775) (3,160)
Increase (reduction) in income taxes
resulting from:
Change in the valuation allowance 2,460 -0- 422
State income tax, net of federal
income tax benefit (1,247) (137) (558)
Meals and entertainment 550 550 579
Other (93) (8) 324
-------- ----- ------
$(5,398) (370) (2,393)
======== ===== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996 and 1995 are presented below (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 9,525 1,444
Rent leveling 11,980 13,074
Accrued expenses 1,413 1,573
Tax credit 940 940
Other 1,323 517
----- ------
Total gross deferred tax assets 25,181 17,548
Less valuation allowance (2,882) (422)
------ -------
Net deferred tax assets 22,299 17,126
====== ======
Deferred tax liabilities:
Gaming equipment, due to differences in
depreciation (1,178) (1,175)
Difference between book and tax basis of
Expandable Wraparound Mortgage receivable (22,832) (21,320)
Difference between book and tax basis of
receivables (868) (1,740)
Other (2) (14)
-------- --------
Total gross deferred tax liabilities (24,880) (24,249)
-------- --------
Net deferred tax liability $ (2,581) (7,123)
========= =======
</TABLE>
The valuation allowance for deferred tax assets as of December 31,
1995 was $422,000. The net change in the total valuation allowance
for the year ended December 31, 1996 was an increase of $2,460,000.
F-20
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
12. INCOME TAXES (cont'd.)
The Corporation recorded an income tax benefit of $5,398,000, $370,000
and $2,393,000 for the years ended December 31, 1996, 1995 and 1994,
respectively, which represents the tax benefit expected from the
carryforward of Federal net operating losses net of increased deferred
tax credits.
At December 31, 1996, the Corporation had net operating loss
carryforwards for federal income tax purposes of $21,700,000, which
are available to offset future federal taxable income, if any, through
2007. The Corporation also has tax credit carryforwards for income tax
purposes of approximately $940,000, which are available to reduce
future federal income taxes, if any, through 2002.
The principal items comprising the deferred tax provision in 1996
included rent leveling tax benefit of ($1,100,000), Expandable
Wraparound Mortgage discount tax expense of $1,500,000, net operating
loss carry forward tax benefit of ($7,100,000), and an increase in the
valuation allowance of $2,460,000.
The principal items comprising the deferred tax provision in 1995
included rent leveling tax benefit of ($350,000), Expandable
Wraparound Mortgage discount expense of $1,300,000, depreciation
expense of $270,000 and net operating loss carry forward tax benefit
of ($360,000).
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.
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. In
October 1996, the IRS sent the Corporation a statutory notice of
deficiency for the Corporation's 1990 and 1991 taxable years. On
January 23, 1997, the Corporation filed a petition with the United
States Tax Court requesting a redetermination of the 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.
F-21
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. 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.
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.
Minimum future basic lease payments under the initial term of the
Operating Lease, as amended, as of December 31, 1996 (net of expected
abatements, as discussed below) are as follows (in thousands):
1997 $ 39,725
1998 (through September 30, 1998) 32,531
---------
Total Minimum $ 72,256
========
Also, additional rent payments are required based upon fixed assets
purchased by the Partnership (the FF&E Replacements, Note 4) and then
leased to New Claridge.
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 1996, 1995 and 1994 amounted to $4,718,000, $4,625,000, and
$4,534,000, respectively. Basic annual rent during the renewal term
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, and any subsequent renewal terms, to provide New
Claridge with Expansion FF&E Replacements and to provide facility
maintenance and engineering services to New Claridge. New Claridge is
obligated to lend the Partnership any amounts necessary to fund the
cost of Expansion FF&E Replacements.
F-22
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. OPERATING LEASE (cont'd.)
Any advances by New Claridge for the foregoing will be secured under
the Expandable Wraparound Mortgage, in an amount up to $25,000,000.
Thereafter, such advances will be secured under separate security
agreements.
For the years ended December 31, 1996, 1995 and 1994, total expense
resulting from the Operating Lease and Expansion Operating Lease
amounted to $38,561,000, $37,638,000, and $36,219,000, respectively,
of which ($2,737,000), ($2,386,000), and ($3,209,000), respectively,
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.
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 Corporation had
accrued the maximum amount of $15.1 million of deferred rent liability
under the lease arrangements. On August 1, 1991, the Operating Lease
Agreement and Expansion Operating Lease Agreement were further amended
to revise the abatement provisions so that, commencing January 1, 1991,
for each calendar year through 1998, the lease abatements may not
exceed $10 million in any one calendar year, and $38,820,000 in the
aggregate. As of December 31, 1996, $37.3 million of basic rent had
been abated. The remaining $1.5 million of available abatements were
fully utilized in the first quarter of 1997. Additional abatements of
rent totalling $500,000, which became available as a result of the
acquisition of the option to purchase the Contingent Payment, were
also utilized in the first quarter of 1997. Further abatements would
become available in the event that the Contingent Payment option is
exercised (see Note 10, "Other Noncurrent Liabilities"). 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.
The Fifth Amendment to the Operating Lease and the Fourth Amendment to
the Expansion Operating Lease, which were effective on March 1, 1997,
provided for the abatement of $867,953 of basic rent and for the
deferral of $1,300,000 of basic rent on March 1, 1997, and provide for
additional abatements of basic rent, commencing on April 1, 1997, as
necessary to reduce the Partnership's cash flow to an amount necessary
only to meet the Partnership's cash requirements through December 31,
1998. The $1.3 million of basic rent deferred on March 1, 1997 is to
be paid to the Partnership in monthly installments of $25,000 for the
period April 1, 1997 through December 31, 1997, and monthly
installments of $50,000 for the year 1998 and thereafter until paid in
full. For the years 1999 through 2003, additional abatements of basic
rent will be reduced to provide the Partnership with amounts needed to
meet the Partnership's cash requirements plus an additional amount
($83,333 per month in 1999 and 2000, $125,000 per month in 2001, and
$166,667 per month in 2002 and 2003).
F-23
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. OPERATING LEASE (cont'd.)
In conjunction with the Fifth Amendment to the Operating Lease and the
Fourth Amendment to the Expansion Operating Lease, as discussed above,
the Corporation, New Claridge and the Partnership entered into a
restructuring agreement, effective March 1, 1997, to modify certain
terms of the Expandable Wraparound Mortgage (see Note 4,
"Receivables"). In addition, under the March 1, 1997 restructuring
agreement, New Claridge agreed to exercise the first of three ten-year
renewal options extending the term of the Operating Lease and
Expansion Operating Lease through September 30, 2008.
Under the terms of the Operating Lease, as amended effective March 1,
1997, New Claridge has an option to purchase, on September 30, 1998,
the Hotel Assets and the underlying land for their fair market value
at the time the option is exercised, which in no event may be less
than an amount equal to the amount then outstanding under the
Expandable Wraparound Mortgage plus $2.5 million, plus any amount of
the $1.3 million of rent deferred on March 1, 1997 not then paid. If
New Claridge does not exercise this option on September 30, 1998, it
may exercise an option, on September 30, 2003, to purchase the Hotel
Assets and the underlying land on January 1, 2004, for their fair
market value at the time the option is exercised.
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, 1996,
1995, and 1994, operating lease expense for these facilities amounted
to $1,484,000, $1,512,000, and $1,531,000, respectively. The minimum
future lease payments due under these leases total $755,000 in 1997,
$735,000 in 1998, $736,000 in 1999, $612,000 in 2000, and $600,000 in
2001.
On March 8, 1991, New Claridge entered into an operating lease
agreement to lease certain computer equipment. For the year ended
December 31, 1994 operating lease expense for the computer equipment
amounted to $77,000. 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.
14. 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 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-24
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)
The carrying amounts and estimated fair values of the Corporation's
financial instruments as of December 31, 1996 and 1995 are as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 8,532 8,532 35,747 35,747
Long-term receivables
due from the Partnership (including
current portion) 109,240 n/a 118,052 n/a
Reinvestment obligation funds 2,263 2,263 1,479 1,479
Financial Liabilities:
Loan from the Partnership 3,600 n/a 3,600 n/a
Long term debt 85,000 68,000 85,000 71,613
Deferred rent due to the Partnership 28,010 n/a 30,747 n/a
Contingent payment 20,000 n/a 20,000 n/a
</TABLE>
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, 1996 and
1995, respectively.
F-25
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)
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
due to and due from the Partnership is not practical as there is no
trading market for these financial instruments. (See Note 4,
"Receivables", Note 7, "Loan from the Partnership" and Note 13,
"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 10, "Other Noncurrent Liabilities" for a description of the
Contingent Payment and the option to purchase the Contingent Payment.)
15. 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
On July 10, 1996, ten days after its opening, a fatal
accident occurred at New Claridge's self-parking garage, in
which the vehicle of two patrons breached a cable restraint
system, permitting their vehicle to drive through the side
wall of the self-parking garage. The vehicle fell four
stories to the sidewalk and street below, killing both
occupants. As a result, New Claridge's self-parking garage
was closed until the end of September 1996, while various
investigations sought to determine the cause of the accident.
At the same time, New Claridge determined to remove the
exterior wall cable restraint system and replace it with a
rigid I-beam barrier system.
New Claridge has retained the law firm of Zelle and Larson
LLP of Minneapolis, Minnesota to assist in evaluating the
recovery of certain expenses incurred in reopening the self-
parking garage and in evaluating potential lost profit claims.
Management of the Corporation intends to file a claim to
recover these expenses and lost profits; recovery of these
claims would have a positive impact on New Claridge's
financial results and liquidity. No formal claims have been
filed to date, and there is no assurance that the Corporation
will be successful in realizing any recovery.
The Corporation and New Claridge are also defendants in
various legal proceedings arising in the normal course of
business. In the opinion of management, it is not
F-26
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
15. CONTINGENCIES (cont'd.)
reasonably likely that any such matters individually or
collectively would result in an outcome having a material
adverse effect on the consolidated financial statements.
16. RELATED PARTY TRANSACTIONS
a. The Restructuring Agreement provided for Webb to retain an
interest, which was assigned to the United Way of Arizona on
April 2, 1990, equal to $20 million plus interest at a rate of
15% per annum, compounded quarterly, commencing December 1,
1988, in any proceeds ultimately recovered from operations
and/or in the sale or refinancing of the Claridge facility in
excess of the first mortgage loan. Webb was also entitled to
retain a seat on the Board of Directors of the Corporation and
New Claridge (a right it subsequently relinquished). Effective
with the closing of the Restructuring on June 16, 1989, all or
substantially all of the financial, contractual, ownership,
guarantee and other relationships of the Corporation and New
Claridge with Webb were terminated.
b. The Partnership has a direct material interest in the
Expandable Wraparound Mortgage Loan Agreement, the Operating
Lease and the Expansion Operating Lease together with the
amendments thereto as described in the preceding notes. The
ownership interests in the Partnership which have a
relationship to the Corporation are currently as follows:
- Approximately 95% of the Corporation's common stock is
owned by persons who also own over 90% of the limited
partnership interests in the Partnership; 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 and business operations of the Claridge
entities are transferred to one or more entities in a merger,
F-27
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
16. RELATED PARTY TRANSACTIONS (cont'd.)
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
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.
17. 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, 1996 and 1995 include
the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Cash $ -0- -0-
Investment in New Claridge 87,206 87,206
Other assets 10,404 8,217
---------- -------
Total assets $ 97,610 95,423
========= ======
Long-term debt $ 85,000 85,000
Other liabilities 10,871 9,729
Stockholders' equity 1,739 694
-------- ------
Total liabilities and stockholders' equity $ 97,610 95,423
========= ======
</TABLE>
F-28
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
17. PARENT COMPANY INFORMATION (cont'd.)
For the years ended December 31, 1996 and 1995, the Corporation
recorded income of $9,987,500 and $15,009,000, respectively,
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 year ended December 31, 1994. The Corporation's
expenses for the years ended December 31, 1996, 1995 and 1994 amounted
to $8,943,000, $6,225,000, and $7,518,000, respectively, including
income tax benefit of $1,868,000, $4,235,000, and $3,908,000,
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, 1996, New Claridge had a
net loss of $6,446,000, as compared to net income of $4,317,000 and
$617,000 for the years ended December 31, 1995 and 1994, respectively.
Changes in the Corporation's financial position for the years ended
December 31, 1996, 1995 and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,045 8,784 (7,518)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Amortization 496 468 428
Change in assets and liabilities:
Other assets (2,683) (1,466) (3,849)
Other liabilities 1,142 (7,788) 11,487
------- ------- ------
Net cash flows provided by (used in)
operating activities -0- (2) 548
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -0- -0- 85,000
Increase in deferred charges related to
issuance of long term debt -0- -0- (3,340)
Equity contribution to New Claridge -0- -0- (82,206)
-------- ------- --------
Net cash flows used in financing activities -0- (2) (546)
-------- ------- --------
Increase (decrease) in cash and cash equivalents -0- (2) 2
Cash and cash equivalents at beginning of period -0- 2 -0-
-------- ------- --------
Cash and cash equivalents at end of period $ -0- -0- 2
======== ======== ========
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $ 8,918 8,850 5,021
======== ======== ========
Income taxes paid $ -0- -0- -0-
========= ======== ========
</TABLE>
F-29
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
18. SUBSEQUENT EVENTS
Effective March 1, 1997, the Corporation, New Claridge, and the
Partnership entered into a restructuring agreement to modify certain
terms of the Expandable Wraparound Mortgage (see Note 4,
"Receivables"). In addition, New Claridge agreed to exercise the first
of three ten-year renewal options extending the term of the Operating
Lease and Expansion Operating Lease through September 30, 2008 (see
Note 13, "Operating Lease"). In conjunction with the March 1, 1997
restructuring agreement, the Operating Lease and Expansion Operating
Lease were also amended (see Note 13, "Operating Lease").
F-30
<PAGE>
SCHEDULE II
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
- ----------- --------- --------- --------- ---------- ---------
Year ended
December 31, 1996
- -----------------
Allowance for
Uncollectible Accounts $ 987 238 -0- 326 (a) 899
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
</TABLE>
(a) Accounts written-off.
F-31
<PAGE>
INDEX TO EXHIBITS
Exhibit
-------
EX10(bj) Amended Employment Agreement between Robert M. Renneisen and The
Claridge at Park Place, Incorporated effective January 1, 1997.
EX10(bk) Amended Employment Agreement between Albert T. Britton and The
Claridge at Park Place, Incorporated effective January 1, 1997.
EX10(bl) Amended Employment Agreement between Raymond A. Spera and The
Claridge at Park Place, Incorporated effective January 1, 1997.
EX10(bm) Amended Employment Agreement between Jean I. Abbott and The
Claridge at Park Place, Incorporated effective November 1, 1996.
EX10(bn) Employment Agreement between Frank A. Bellis, Jr. and The
Claridge at Park Place, Incorporated effective November 1, 1996.
EX10(bo) Employment Agreement between Glenn Lillie and The Claridge at
Park Place, Incorporated effective February 1, 1997.
EX10(bp) Spreader Agreement of a Certain Mortgage, Assignment of Leases
and Rents, Security Agreement and Financing Statement by The
Claridge at Park Place, Incorporated in favor of IBJ Schroder
Bank & Trust Company, as Collateral Trustee, dated January 28,
1997.
EX10(bq) Spreader Agreement and Modification of Spreader Agreement of a
Certain Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement by The Claridge at Park Place,
Incorporated in favor of IBJ Schroder Bank & Trust Company,
as Collateral Trustee, dated February 18, 1997.
EX10(br) Fifth Amendment to Operating Lease Agreement and Fourth Amendment
to Expansion Operating Lease Agreement between The Claridge at
Park Place, Incorporated and Atlantic City Boardwalk Associates,
L.P. effective March 1, 1997.
EX10(bs) Restructuring Agreement between The Claridge Hotel and Casino
Corporation, The Claridge at Park Place, Incorporated, and
Atlantic City Boardwalk Associates, L.P. effective March 1, 1997.
EX12(b) Statement of Computation of Ratio of Earnings to Fixed Charges.
<PAGE>
EXHIBIT 10(bj)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of January 1, 1997 ("Effective Date")
between The Claridge at Park Place, Incorporated, a New Jersey corporation
having its principal place of business at Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 ("Claridge"), and Robert M. Renneisen, an
individual residing at 802 Blue Teal Drive, Absecon, New Jersey, 08201
("Executive").
W I T N E S S E T H
WHEREAS, the Claridge desires to employ the Executive and the Executive
has agreed to accept employment, on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Claridge hereby employs the Executive as its Vice
Chairman/Chief Executive Officer. In this capacity, the Executive shall perform
such executive duties as are typical for this position including but not
limited to, those duties outlined in the Claridge's internal controls, and such
additional duties as may be specified from time to time by the Board of
Directors. In addition, the Executive may be asked to serve as a member of the
Claridge's Board of Directors without additional compensation for these
services.
2. TERM. The term of this Agreement shall commence on the Effective
Date and terminate on December 31, 1998 ("Initial Term") subject to paragraphs
5 or 7. Thereafter, the Board may review and extend the Agreement for
consecutive one (1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base
annual salary of Three Hundred Thirty Thousand Dollars ($330,000), payable in
weekly installments consistent with the Claridge's regular payroll practice.
The Board of Directors may, from time to time, in their sole discretion,
increase the base annual salary.
(b) Until termination of the Agreement, the Executive shall continue to
receive full compensation and be entitled to all the benefits of this Agreement.
Upon termination, the Executive shall not be entitled to receive any
compensation or benefits except as set forth in this Agreement or as otherwise
agreed in writing between the parties.
(c) The Executive shall be entitled to vacation time consistent with
the Claridge's vacation plan, and shall also be entitled to participate in any
bonus plan, incentive compensation plan, qualified pension plan, qualified
profit-sharing plan, medical and/or dental reimbursement plan, group term life
insurance plan, as well as any other employee benefit plan that may be
established by the Claridge or its operating subsidiaries. The participation in
any of these plans shall be consistent with the terms of such plans, and be
available only upon the Claridge or its operating subsidiaries having or
establishing such a plan.
4. CASINO CONTROL COMMISSION. The Executive represents that he
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good
standing during his employment with the Claridge. The Claridge will
pay all attorneys' fees and other costs that the Executive may incur:
(a) in connection with any investigation or proceeding
<PAGE>
against the Executive; or, (b) in which the Executive may be involved (other
than with respect to any act defined as "cause" for termination as noted in
5(a)(ii); or, (c) relating to any criminal charges filed against the Executive,
by the Division of Gaming Enforcement of the New Jersey Attorney General's
Office or by the New Jersey Casino Control Commission.
5. TERMINATION. (a) Notwithstanding anything to the contrary in
this Agreement, the Executive's employment may be terminated upon the
occurrence of any of the following events:
(i) Upon revocation, suspension, or termination of the
Executive's casino key employee license or failure to
comply, within a reasonable time, with any conditions
imposed upon the Executive's casino key employee
license;
(ii) Upon an act committed by the Executive constituting
"cause", defined as a breach of any of the provisions
of this Agreement; the indictment and/or conviction
of any criminal offense; the deliberate refusal by
the Executive (except by reason of disability) to
perform the duties under the terms of this Agreement;
or if the Executive:
(1) Files a petition in bankruptcy court or is
adjudicated a bankrupt;
(2) Institutes or permits to be instituted any
procedure in bankruptcy court for reorganization
or rearrangement of the Executive's financial
affairs;
(3) Appoints a receiver of the Executive's assets or
property due to insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Claridge terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) In the event at the time of hire the Executive is a
non-New Jersey resident and the Executive fails to
establish residency in New Jersey within six (6)
months after a Board Resolution directing the
Executive to do so. Provided that no such resolution
shall be adopted so long as: (i) a sale of the
Claridge is an option being considered by the Board
of Directors; or, (ii) the Claridge's audited
financial statements are expected to contain a "going
concern" qualification in the Independent Auditor's
Report.
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; paragraph 7 (sale of the Claridge);or, if the Claridge
elects not to renew this Agreement pursuant to paragraph 2 above, then the
Claridge shall make a lump sum payment to the Executive equal to one hundred
and twenty-five percent (125%) of the Executive's base annual salary then in
effect. Upon making of such payment, the Claridge shall have no further
liability or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) (voluntary resignation) above, and the Executive
gives notice of the intent to resign at least twelve (12) weeks prior to
terminating employment, then the Claridge shall continue to pay
the Executive weekly compensation for a period of twelve (12) weeeks
<PAGE>
after the resignation date. Upon expiration of this additional twelve (12)
week period, the Claridge shall have no further liability or obligation to
the Executive under this Agreement. If notice of the intent to resign to the
Claridge is given less than twelve weeks before the resignation date,
the Claridge shall have no obligation to pay the Executive beyond the
resignation date.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv)
(termination without cause), if the Claridge has an existing stock option plan,
the Executive shall receive stock options in the Claridge, if any, in an amount
equal to those that could be exercised within one (1) year from the date of
termination. Provided, however, that such stock options must be exercised by
the Executive within 90 days after termination, or the options shall expire.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i) (revocation, suspension or termination of casino key
employee license), (a)(ii) (bankruptcy) or (a)(iii) (death or permanent
disability) above, the Claridge shall have no further liability or obligation
to continue salary payments to the Executive, or the Executive's estate (as the
case may be), after the date the Executive is no longer employed by the
Claridge.
(f) If the Executive's title, responsibilities, duties or status within
the Claridge should materially diminish, the Executive may resign and terminate
this Agreement. In this case, the Executive shall be entitled to a lump sum
payment consistent with subparagraph 5(b). Such a resignation will not be
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE. (a) During the term of this
Agreement, the Executive shall not, without the written consent of the Claridge
, alone or with others, directly or indirectly, participate, engage or become
interested in (as owner, stockholder, partner, lender or other investor,
director, officer, employee, consultant, or otherwise) any business activity
that is in competition with the Claridge's business as then constituted .
(b) Nothing in this Agreement shall prohibit the Executive from
acquiring or owning, without disclosure to the Company, less than one (1%)
percent of the outstanding securities of any class of any corporation listed on
a national securities exchange or traded in the over-the-counter market.
(c) During and after the term of this Agreement, the Executive agrees
that all information which may have been obtained during the course of
employment will be kept strictly confidential with respect to the business
practices, finances, developments, customer's affairs, and trade secrets of the
Claridge not generally known to the public. The Executive will not disclose
such information to any other person, firm or corporation, except solely in the
course of business on behalf of the Claridge pursuant to this Agreement. The
Executive further agrees that upon the termination of employment (irrespective
of the time, manner or cause of termination), all lists, books, written records
and data of every kind relating to or in connection with the Claridge's
customers and business will be delivered and returned to the Claridge.
(d) (i) Subject to the provisions of subparagraph
6(d)(ii) (change of control) below, if this Agreement
is terminated pursuant to subparagraph 5(a)(v)
(voluntary resignation) above, the Executive agrees
that for a period of one (1) year thereafter the
Executive shall not compete with the Claridge, or
engage in the casino business in Atlantic City, New
Jersey, as an officer, director, stockholder,
employee, representative, agent, or consultant.
(ii) In the event the Claridge, its shareholders, or persons
having voting control enter into an agreement to sell
<PAGE>
to sell, acquire, merge or consolidate the assets or
stock of the Claridge with the anticipated result that a
change of control of the Claridge or the Claridge's
business as presently constituted would occur upon the
closing of such agreement, the Executive may terminate
this Agreement pursuant to subparagraph 5(a)(v) (voluntary
resignation) above. In these circumstances, the
Executive shall not be precluded from immediately
competing with the Claridge, or engaging in the
casino business in Atlantic City, New Jersey, as an
officer, director, stockholder, employee,
representative, agent or consultant. In addition, the
Executive shall be entitled to the benefits provided
for in subparagraph 5(c) (voluntary resignation)
above provided proper notice of the intent to resign
is given to the Claridge.
(e) From the date of termination of this Agreement and for a period of
one (1) year thereafter, the Executive shall not, alone or with others,
directly or indirectly:
(i) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment or other services of any employee or
consultant of the Claridge or its subsidiaries as
well as independent companies affiliated or
associated with the Claridge; or
(ii) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment of any employee of any customer of the
Claridge.
(f) As additional consideration for the agreement contained in
subparagraphs 6(d) (non-compete) and (e) (no solicitation), the Executive shall
be entitled to a lump sum payment equal to twenty-five percent (25%) of the sum
of the Executive's then base annual salary. The Executive shall make a request
to receive this lump sum within ten (10) days following termination of
employment by giving notice to the Claridge consistent with paragraph 11.
Within ten (10) days following receipt of this notice, the Claridge shall send
the Executive either: (i) the lump sum payment described in this subparagraph
(f); or (ii) a notice that the Claridge has waived the Executive's obligations
under subparagraph 6(d) (non-compete) and (e) (no solicitation), in which event
the Executive shall be released from the obligations under these subparagraphs.
In this case, the Claridge shall be released from its obligation to pay the
Executive any additional consideration under this subparagraph (f). All
payments made pursuant to this subparagraph (f) shall be in addition to, and
not in lieu of, any payments to which the Executive may be entitled under
paragraph 5 (termination provisions).
7. SALE OF THE CLARIDGE. The Claridge shall make its best efforts to
have any successor corporation or business entity assume the obligations under
this Agreement. If this Agreement is not assumed by a successor corporation or
business entity, the obligations of the Claridge to the Executive hereunder
shall continue in full force and effect, subject to the right of the Claridge,
in its sole discretion, to terminate the Executive pursuant to paragraph 5
(termination provisions). If during the term of this Agreement: (a) the
Claridge, its shareholders, or persons having voting control sell stock or
assets or merge with another entity resulting in a change in control of the
Claridge or the Claridge's business as presently constituted; or, (b) if by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as presently constituted, then the Executive,
in the Executive's sole discretion may terminate this Agreement within six
months after such a change of control or assignment occurs. In this event the
Executive will be entitled to receive the severance benefits provided for in
subparagraph 5(b) (lump sum payment provisions) of this Agreement and shall not
be precluded from immediately competing with the Claridge or any assignee of
this Agreement, or engaging in the casino business in Atlantic City, New Jersey,
as an officer, director, stockholder, employee, representative, agent or
consultant.
<PAGE>
8. PARTICIPATION. The Executive shall devote all of his working time,
attention and best efforts to the business of the Claridge. During the term of
this Agreement the Executive shall not be engaged directly or indirectly in any
other business activity whether or not such business activity is pursued for
gain, profit or other monetary advantage. However, this shall not be construed
to prevent the Executive from investing assets in such a form and manner which
will not require any services on the part of the Executive in the operation of
the companies in which such investments are made. Neither shall the Executive
be precluded from involvement in any civic or charitable organizations.
9. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or breach thereof, shall be settled by arbitration in New Jersey
pursuant to New Jersey law in accordance with the rules of the American
Arbitration Association. Any judgment upon an award rendered pursuant to
arbitration may be entered in any court within the State of New Jersey having
appropriate jurisdiction. In the event of conflict between the rules of the
American Arbitration Association and any statute of the State of New Jersey,
the parties agree to be bound by the laws of New Jersey.
10. INJUNCTIVE RELIEF. The parties acknowledge that in the event of a
breach or a threatened breach by the Executive of any of the obligations under
this Agreement, the Claridge will not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach by the Executive,
the Claridge shall be entitled to such equitable and injunctive relief as may
be available to restrain the Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach or threatened
breach from the violation of the provisions of the Agreement. Nothing in this
Agreement shall be construed as prohibiting the Claridge from pursuing any
other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the immediate termination of the
employment of the Executive under this Agreement.
11. NOTICES. All notices shall be in writing and shall be delivered by
certified or registered mail, return receipt requested, to the parties as
follows:
If to the Claridge : c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
And Compensation Committee
If to the Executive: Robert M. Renneisen
802 Blue Teal Drive
Absecon, New Jersey 08201
Either party may change the address to which notices are to be
transmitted by notice given according to this paragraph.
12. MISCELLANEOUS. (a) The Executive represents to the Claridge that
there are no restrictions or agreements to which the Executive is a party which
would be violated by execution of this Agreement and subsequent employment.
(b) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
<PAGE>
(d) If any provision of this Agreement is held to be invalid or
unenforceable, that provision shall be deemed limited or modified to the extent
necessary to make it valid and enforceable, and in no event shall this
Agreement or any of the provisions of this Agreement be rendered void or
unenforceable.
(e) The headings of the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
(f) No waiver by the Claridge of any breach by the Executive of any
provision or condition of this Agreement by the Executive to be performed shall
be deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time.
(g) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Claridge, but no interest in this Agreement
shall be transferable in any manner by the Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of
the parties. It may not be changed orally but only by an Agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge in sought.
IN WITNESS WHEREOF, this Agreement has been executed by the Claridge's
duly authorized officer. The Executive has also executed this Agreement.
WITNESS: EXECUTIVE
/s/ Frank Bellis BY: /s/ Robert M. Renneisen
- ------------------ ----------------------------
ROBERT M. RENNEISEN
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/Frank Bellis BY: /s/ James M. Montgomery
- ----------------- --------------------------
JAMES M. MONTGOMERY
CHAIR OF HUMAN RESOURCES
AND COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(bk)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of January 1, 1997 ("Effective Date")
between The Claridge at Park Place, Incorporated, a New Jersey corporation
having its principal place of business at Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 ("Claridge"), and Albert T. Britton, an
individual residing at 8 Arcadian Drive, Sicklerville, New Jersey, 08081
("Executive") .
W I T N E S S E T H
WHEREAS, the Claridge desires to employ the Executive and the Executive
has agreed to accept employment, on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Claridge hereby employs the Executive as its
President/Chief Operating Officer. In this capacity, the Executive shall
perform such executive duties as are typical for this position including but
not limited to, those duties outlined in the Claridge's internal controls, and
such additional duties as may be specified from time to time by the Board of
Directors. In addition, the Executive may be asked to serve as a member of the
Claridge's Board of Directors without additional compensation for these
services.
2. TERM. The term of this Agreement shall commence on the Effective
Date and terminate on December 31, 1998 ("Initial Term") subject to paragraphs
5 or 7. Thereafter, the Board may review and extend the Agreement for
consecutive one (1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base
annual salary of Two Hundred Five Thousand Dollars ($205,000), payable in
weekly installments consistent with the Claridge's regular payroll practice.
The Board of Directors may, from time to time, in their sole discretion,
increase the base annual salary.
(b) Until termination of the Agreement, the Executive shall continue to
receive full compensation and be entitled to all the benefits of this Agreement.
Upon termination, the Executive shall not be entitled to receive any
compensation or benefits except as set forth in this Agreement or as otherwise
agreed in writing between the parties.
(c) The Executive shall be entitled to vacation time consistent with
the Claridge's vacation plan, and shall also be entitled to participate in any
bonus plan, incentive compensation plan, qualified pension plan, qualified
profit-sharing plan, medical and/or dental reimbursement plan, group term life
insurance plan, as well as any other employee benefit plan that may be
established by the Claridge or its operating subsidiaries. The participation in
any of these plans shall be consistent with the terms of such plans, and be
available only upon the Claridge or its operating subsidiaries having or
establishing such a plan.
4. CASINO CONTROL COMMISSION. The Executive represents that he
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during his employment with the Claridge. The Claridge will pay all attorneys'
fees and other costs that the Executive may incur: (a) in connection with any
investigation or proceeding against the Executive; or, (b) in which
the Executive may be involved (other than with respect to
<PAGE>
any act defined as "cause" for termination as noted in 5(a)(ii); or, (c)
relating to any criminal charges filed against the Executive, by the Division
of Gaming Enforcement of the New Jersey Attorney General's Office or by the New
Jersey Casino Control Commission.
5. TERMINATION. (a) Notwithstanding anything to the contrary in this
Agreement, the Executive's employment may be terminated upon the occurrence of
any of the following events:
(i) Upon revocation, suspension, or termination of the
Executive's casino key employee license or failure to
comply, within a reasonable time, with any conditions
imposed upon the Executive's casino key employee
license;
(ii) Upon an act committed by the Executive constituting
"cause", defined as a breach of any of the provisions
of this Agreement; the indictment and/or conviction
of any criminal offense; the deliberate refusal by
the Executive (except by reason of disability) to
perform the duties under the terms of this Agreement;
or if the Executive:
(1) Files a petition in bankruptcy court or is adjudicated
a bankrupt;
(2) Institutes or permits to be instituted any procedure
in bankruptcy court for reorganization or rearrangement
of the Executive's financial affairs;
(3) Appoints a receiver of the Executive's assets or
property due to insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Claridge terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) In the event at the time of hire the Executive is a
non-New Jersey resident and the Executive fails to
establish residency in New Jersey within six (6)
months after a Board Resolution directing the
Executive to do so. Provided that no such resolution
shall be adopted so long as: (i) a sale of the
Claridge is an option being considered by the Board
of Directors; or, (ii) the Claridge's audited
financial statements are expected to contain a "going
concern" qualification in the Independent Auditor's
Report.
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; paragraph 7 (sale of the Claridge); or, if the
Claridge elects not to renew this Agreement pursuant to paragraph 2 above, then
the Claridge shall make a lump sum payment to the Executive equal to one
hundred and twenty-five percent (125%) of the Executive's base annual salary
then in effect. Upon making of such payment, the Claridge shall have no further
liability or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) (voluntary resignation) above, and the Executive gives
notice of the intent to resign at least twelve (12) weeks prior to terminating
employment, then the Claridge shall continue to pay the Executive weekly
compensation for a period of twelve (12) weeks after the resignation date.
Upon expiration of this additional twelve (12) week period, the
<PAGE>
Claridge shall have no further liability or obligation to the Executive
under this Agreement. If notice of the intent to resign to the
Claridge is given less than twelve weeks before the resignation date, the
Claridge shall have no obligation to pay the Executive beyond the resignation
date.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv)
(termination without cause), if the Claridge has an existing stock option plan,
the Executive shall receive stock options in the Claridge, if any, in an amount
equal to those that could be exercised within one (1) year from the date of
termination. Provided, however, that such stock options must be exercised by
the Executive within 90 days after termination, or the options shall expire.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i) (revocation, suspension or termination of casino key
employee license), (a)(ii) (bankruptcy) or (a)(iii) (death or permanent
disability) above, the Claridge shall have no further liability or obligation
to continue salary payments to the Executive, or the Executive's estate (as the
case may be), after the date the Executive is no longer employed by the
Claridge.
(f) If the Executive's title, responsibilities, duties or status within
the Claridge should materially diminish, the Executive may resign and terminate
this Agreement. In this case, the Executive shall be entitled to a lump sum
payment consistent with subparagraph 5(b). Such a resignation will not be
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE. (a) During the term of this
Agreement, the Executive shall not, without the written consent of the Claridge
, alone or with others, directly or indirectly, participate, engage or become
interested in (as owner, stockholder, partner, lender or other investor,
director, officer, employee, consultant, or otherwise) any business activity
that is in competition with the Claridge's business as then constituted .
(b) Nothing in this Agreement shall prohibit the Executive from
acquiring or owning, without disclosure to the Company, less than one (1%)
percent of the outstanding securities of any class of any corporation listed on
a national securities exchange or traded in the over-the-counter market.
(c) During and after the term of this Agreement, the Executive agrees
that all information which may have been obtained during the course of
employment will be kept strictly confidential with respect to the business
practices, finances, developments, customer's affairs, and trade secrets of the
Claridge not generally known to the public. The Executive will not disclose
such information to any other person, firm or corporation, except solely in the
course of business on behalf of the Claridge pursuant to this Agreement. The
Executive further agrees that upon the termination of employment (irrespective
of the time, manner or cause of termination), all lists, books, written records
and data of every kind relating to or in connection with the Claridge's
customers and business will be delivered and returned to the Claridge.
(d) (i) Subject to the provisions of subparagraph
6(d)(ii) (change of control) below, if this Agreement
is terminated pursuant to subparagraph 5(a)(v)
(voluntary resignation) above, the Executive agrees
that for a period of one (1) year thereafter the
Executive shall not compete with the Claridge, or
engage in the casino business in Atlantic City, New
Jersey, as an officer, director, stockholder,
employee, representative, agent, or consultant.
(ii) In the event the Claridge, its shareholders, or
persons having voting control enter into an agreement
to sell, acquire, merge or consolidate the assets or
stock of the Claridge with the anticipated
<PAGE>
result that a change of control of the Claridge or
the Claridge's business as presently constituted would
occur upon the closing of such agreement, the Executive
may terminate this Agreement pursuant to subparagraph
5(a)(v) (voluntary resignation) above. In these
circumstances, the Executive shall not be precluded from
immediately competing with the Claridge, or engaging in the
casino business in Atlantic City, New Jersey, as an
officer, director, stockholder, employee, representative,
agent or consultant. In addition, the Executive shall be
entitled to the benefits provided for in subparagraph
5(c) (voluntary resignation) above provided proper notice
of the intent to resign is given to the Claridge.
(e) From the date of termination of this Agreement and for a period of
one (1) year thereafter, the Executive shall not, alone or with others,
directly or indirectly:
(i) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment or other services of any employee or
consultant of the Claridge or its subsidiaries as
well as independent companies affiliated or
associated with the Claridge; or
(ii) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment of any employee of any customer of the
Claridge.
(f) As additional consideration for the agreement contained in
subparagraphs 6(d) (non-compete) and (e) (no solicitation), the Executive shall
be entitled to a lump sum payment equal to twenty-five percent (25%) of the sum
of the Executive's then base annual salary. The Executive shall make a request
to receive this lump sum within ten (10) days following termination of
employment by giving notice to the Claridge consistent with paragraph 11.
Within ten (10) days following receipt of this notice, the Claridge shall send
the Executive either: (i) the lump sum payment described in this subparagraph
(f); or (ii) a notice that the Claridge has waived the Executive's obligations
under subparagraph 6(d) (non-compete) and (e) (no solicitation), in which event
the Executive shall be released from the obligations under these subparagraphs.
In this case, the Claridge shall be released from its obligation to pay the
Executive any additional consideration under this subparagraph (f). All
payments made pursuant to this subparagraph (f) shall be in addition to, and
not in lieu of, any payments to which the Executive may be entitled under
paragraph 5 (termination provisions).
7. SALE OF THE CLARIDGE. The Claridge shall make its best efforts to
have any successor corporation or business entity assume the obligations under
this Agreement. If this Agreement is not assumed by a successor corporation or
business entity, the obligations of the Claridge to the Executive hereunder
shall continue in full force and effect, subject to the right of the Claridge,
in its sole discretion, to terminate the Executive pursuant to paragraph 5
(termination provisions). If during the term of this Agreement: (a) the
Claridge, its shareholders, or persons having voting control sell stock or
assets or merge with another entity resulting in a change in control of the
Claridge or the Claridge's business as presently constituted; or, (b) if by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as presently constituted, then the Executive,
in the Executive's sole discretion may terminate this Agreement within six
months after such a change of control or assignment occurs. In this event the
Executive will be entitled to receive the severance benefits provided for in
subparagraph 5(b) (lump sum payment provisions) of this Agreement and shall not
be precluded from immediately competing with the Claridge or any assignee of
this Agreement, or engaging in the casino business in Atlantic City, New Jersey,
as an officer, director, stockholder, employee, representative, agent or
consultant.
<PAGE>
8. PARTICIPATION. The Executive shall devote all of his working time,
attention and best efforts to the business of the Claridge. During the term of
this Agreement the Executive shall not be engaged directly or indirectly in any
other business activity whether or not such business activity is pursued for
gain, profit or other monetary advantage. However, this shall not be construed
to prevent the Executive from investing assets in such a form and manner which
will not require any services on the part of the Executive in the operation of
the companies in which such investments are made. Neither shall the Executive
be precluded from involvement in any civic or charitable organizations.
9. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or breach thereof, shall be settled by arbitration in New Jersey
pursuant to New Jersey law in accordance with the rules of the American
Arbitration Association. Any judgment upon an award rendered pursuant to
arbitration may be entered in any court within the State of New Jersey having
appropriate jurisdiction. In the event of conflict between the rules of the
American Arbitration Association and any statute of the State of New Jersey,
the parties agree to be bound by the laws of New Jersey.
10. INJUNCTIVE RELIEF. The parties acknowledge that in the event of a
breach or a threatened breach by the Executive of any of the obligations under
this Agreement, the Claridge will not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach by the Executive,
the Claridge shall be entitled to such equitable and injunctive relief as may
be available to restrain the Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach or threatened
breach from the violation of the provisions of the Agreement. Nothing in this
Agreement shall be construed as prohibiting the Claridge from pursuing any
other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the immediate termination of the
employment of the Executive under this Agreement.
11. NOTICES. All notices shall be in writing and shall be delivered by
certified or registered mail, return receipt requested, to the parties as
follows:
If to the Claridge : c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
And Compensation Committee
If to the Executive: Albert T. Britton
8 Arcadian Drive
Sicklerville, New Jersey 08081
Either party may change the address to which notices are to be
transmitted by notice given according to this paragraph.
12. MISCELLANEOUS. (a) The Executive represents to the Claridge that
there are no restrictions or agreements to which the Executive is a party which
would be violated by execution of this Agreement and subsequent employment.
(b) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
<PAGE>
(d) If any provision of this Agreement is held to be invalid or
unenforceable, that provision shall be deemed limited or modified to the extent
necessary to make it valid and enforceable, and in no event shall this
Agreement or any of the provisions of this Agreement be rendered void or
unenforceable.
(e) The headings of the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
(f) No waiver by the Claridge of any breach by the Executive of any
provision or condition of this Agreement by the Executive to be performed shall
be deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time.
(g) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Claridge, but no interest in this Agreement
shall be transferable in any manner by the Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of
the parties. It may not be changed orally but only by an Agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge in sought.
IN WITNESS WHEREOF, this Agreement has been executed by the Claridge's
duly authorized officer. The Executive has also executed this Agreement.
WITNESS: EXECUTIVE
/s/ Dawn A. Martin BY:/s/ Albert T. Britton
- -------------------- ------------------------
ALBERT T. BRITTON
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank Bellis BY:/s/ James M. Montgomery
- -------------------- --------------------------
JAMES M. MONTGOMERY
CHAIR OF HUMAN RESOURCES
AND COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(bl)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of January 1, 1997 ("Effective Date")
between The Claridge at Park Place, Incorporated, a New Jersey corporation
having its principal place of business at Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 ("Claridge"), and Raymond A. Spera, an
individual residing at 101 Flyatt Road, Vincentown, New Jersey, 08088
("Executive").
W I T N E S S E T H
WHEREAS, the Claridge desires to employ the Executive and the Executive
has agreed to accept employment, on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Claridge hereby employs the Executive as its
Executive Vice President of Finance and Corporate Development. In this capacity,
the Executive shall perform such executive duties as are typical for this
position including but not limited to, those duties outlined in the Claridge's
internal controls, and such additional duties as may be specified from time to
time by the Board of Directors. In addition, the Executive may be asked to
serve as a member of the Claridge's Board of Directors without additional
compensation for these services.
2. TERM. The term of this Agreement shall commence on the Effective
Date and terminate on December 31, 1998 ("Initial Term") subject to paragraphs
5 or 7. Thereafter, the Board may review and extend the Agreement for
consecutive one (1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base annual
salary of One Hundred Eighty-Two Thousand Six Hundred Dollars ($182,600),
payable in weekly installments consistent with the Claridge's regular payroll
practice. The Board of Directors may, from time to time, in their sole
discretion, increase the base annual salary.
(b) Until termination of the Agreement, the Executive shall continue to
receive full compensation and be entitled to all the benefits of this Agreement.
Upon termination, the Executive shall not be entitled to receive any
compensation or benefits except as set forth in this Agreement or as otherwise
agreed in writing between the parties.
(c) The Executive shall be entitled to vacation time consistent with
the Claridge's vacation plan, and shall also be entitled to participate in any
bonus plan, incentive compensation plan, qualified pension plan, qualified
profit-sharing plan, medical and/or dental reimbursement plan, group term life
insurance plan, as well as any other employee benefit plan that may be
established by the Claridge or its operating subsidiaries. The participation in
any of these plans shall be consistent with the terms of such plans, and be
available only upon the Claridge or its operating subsidiaries having or
establishing such a plan.
4. CASINO CONTROL COMMISSION. The Executive represents that he
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during his employment with the Claridge. The Claridge will pay all attorneys'
fees and other costs that the Executive may incur: (a) in connection with any
investigation or proceeding against the Executive; or, (b) in which the
Executive may be involved (other than with respect to any act defined
<PAGE>
defined as "cause" for termination as noted in 5(a)(ii); or, (c) relating
to any criminal charges filed against the Executive, by the Division of
Gaming Enforcement of the New Jersey Attorney General's Office or by the New
Jersey Casino Control Commission.
5. TERMINATION. (a) Notwithstanding anything to the contrary in this
Agreement, the Executive's employment may be terminated upon the occurrence of
any of the following events:
(i) Upon revocation, suspension, or termination of the
Executive's casino key employee license or failure to
comply, within a reasonable time, with any conditions
imposed upon the Executive's casino key employee
license;
(ii) Upon an act committed by the Executive constituting
"cause", defined as a breach of any of the provisions
of this Agreement; the indictment and/or conviction
of any criminal offense; the deliberate refusal by
the Executive (except by reason of disability) to
perform the duties under the terms of this Agreement;
or if the Executive:
(1) Files a petition in bankruptcy court or is adjudicated
a bankrupt;
(2) Institutes or permits to be instituted any procedure
in bankruptcy court for reorganization or
rearrangement of the Executive's financial affairs;
(3) Appoints a receiver of the Executive's assets or
property due to insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Claridge terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) In the event at the time of hire the Executive is a
non-New Jersey resident and the Executive fails to
establish residency in New Jersey within six (6)
months after a Board Resolution directing the
Executive to do so. Provided that no such resolution
shall be adopted so long as: (i) a sale of the
Claridge is an option being considered by the Board
of Directors; or, (ii) the Claridge's audited
financial statements are expected to contain a "going
concern" qualification in the Independent Auditor's
Report.
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; paragraph 7 (sale of the Claridge); or, if the
Claridge elects not to renew this Agreement pursuant to paragraph 2 above,
then the Claridge shall make a lump sum payment to the Executive equal to
one hundred and twenty-five percent (125%) of the Executive's base annual
salary then in effect. Upon making of such payment, the Claridge shall have
no further liability or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) (voluntary resignation) above, and the Executive gives
notice of the intent to resign at least twelve (12) weeks prior to terminating
employment, then the Claridge shall continue to pay the Executive weekly
compensation for a period of twelve (12) weeks after the resignation
date. Upon expiration of this additional twelve (12) week period,
<PAGE>
the Claridge shall have no further liability or obligation to the
Executive under this Agreement. If notice of the intent to resign to the
Claridge is given less than twelve weeks before the resignation date, the
Claridge shall have no obligation to pay the Executive beyond the resignation
date.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv)
(termination without cause), if the Claridge has an existing stock option plan,
the Executive shall receive stock options in the Claridge, if any, in an amount
equal to those that could be exercised within one (1) year from the date of
termination. Provided, however, that such stock options must be exercised by
the Executive within 90 days after termination, or the options shall expire.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i) (revocation, suspension or termination of casino key
employee license), (a)(ii) (bankruptcy) or (a)(iii) (death or permanent
disability) above, the Claridge shall have no further liability or obligation
to continue salary payments to the Executive, or the Executive's estate (as the
case may be), after the date the Executive is no longer employed by the
Claridge.
(f) If the Executive's title, responsibilities, duties or status within
the Claridge should materially diminish, the Executive may resign and terminate
this Agreement. In this case, the Executive shall be entitled to a lump sum
payment consistent with subparagraph 5(b). Such a resignation will not be
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE. (a) During the term of this
Agreement, the Executive shall not, without the written consent of the Claridge
, alone or with others, directly or indirectly, participate, engage or become
interested in (as owner, stockholder, partner, lender or other investor,
director, officer, employee, consultant, or otherwise) any business activity
that is in competition with the Claridge's business as then constituted .
(b) Nothing in this Agreement shall prohibit the Executive from
acquiring or owning, without disclosure to the Company, less than one (1%)
percent of the outstanding securities of any class of any corporation listed on
a national securities exchange or traded in the over-the-counter market.
(c) During and after the term of this Agreement, the Executive agrees
that all information which may have been obtained during the course of
employment will be kept strictly confidential with respect to the business
practices, finances, developments, customer's affairs, and trade secrets of the
Claridge not generally known to the public. The Executive will not disclose
such information to any other person, firm or corporation, except solely in the
course of business on behalf of the Claridge pursuant to this Agreement. The
Executive further agrees that upon the termination of employment (irrespective
of the time, manner or cause of termination), all lists, books, written records
and data of every kind relating to or in connection with the Claridge's
customers and business will be delivered and returned to the Claridge.
(d) (i) Subject to the provisions of subparagraph
6(d)(ii) (change of control) below, if this Agreement
is terminated pursuant to subparagraph 5(a)(v)
(voluntary resignation) above, the Executive agrees
that for a period of one (1) year thereafter the
Executive shall not compete with the Claridge, or
engage in the casino business in Atlantic City, New
Jersey, as an officer, director, stockholder,
employee, representative, agent, or consultant.
(ii) In the event the Claridge, its shareholders, or
persons having voting control enter into an agreement
to sell, acquire, merge or consolidate the assets or
stock of the Claridge with the anticipated
<PAGE>
result that a change of control of the Claridge or
the Claridge's business as presently constituted would
occur upon the closing of such agreement, the
Executive may terminate this Agreement pursuant to
subparagraph 5(a)(v) (voluntary resignation) above.
In these circumstances, the Executive shall not be
precluded from immediately competing with the Claridge,
or engaging in the casino business in Atlantic City,
New Jersey, as an officer, director, stockholder,
employee, representative, agent or consultant. In
addition, the Executive shall be entitled to the
benefits provided for in subparagraph 5(c)
(voluntary resignation) above provided proper notice
of the intent to resign is given to the Claridge.
(e) From the date of termination of this Agreement and for a period of
one (1) year thereafter, the Executive shall not, alone or with others,
directly or indirectly:
(i) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment or other services of any employee or
consultant of the Claridge or its subsidiaries as
well as independent companies affiliated or
associated with the Claridge; or
(ii) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment of any employee of any customer of the
Claridge.
(f) As additional consideration for the agreement contained in
subparagraphs 6(d) (non-compete) and (e) (no solicitation), the Executive shall
be entitled to a lump sum payment equal to twenty-five percent (25%) of the sum
of the Executive's then base annual salary. The Executive shall make a request
to receive this lump sum within ten (10) days following termination of
employment by giving notice to the Claridge consistent with paragraph 11.
Within ten (10) days following receipt of this notice, the Claridge shall send
the Executive either: (i) the lump sum payment described in this subparagraph
(f); or (ii) a notice that the Claridge has waived the Executive's obligations
under subparagraph 6(d) (non-compete) and (e) (no solicitation), in which event
the Executive shall be released from the obligations under these subparagraphs.
In this case, the Claridge shall be released from its obligation to pay the
Executive any additional consideration under this subparagraph (f). All
payments made pursuant to this subparagraph (f) shall be in addition to, and
not in lieu of, any payments to which the Executive may be entitled under
paragraph 5 (termination provisions).
7. SALE OF THE CLARIDGE. The Claridge shall make its best efforts to
have any successor corporation or business entity assume the obligations under
this Agreement. If this Agreement is not assumed by a successor corporation or
business entity, the obligations of the Claridge to the Executive hereunder
shall continue in full force and effect, subject to the right of the Claridge,
in its sole discretion, to terminate the Executive pursuant to paragraph 5
(termination provisions). If during the term of this Agreement: (a) the
Claridge, its shareholders, or persons having voting control sell stock or
assets or merge with another entity resulting in a change in control of the
Claridge or the Claridge's business as presently constituted; or, (b) if by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as presently constituted, then the Executive,
in the Executive's sole discretion may terminate this Agreement within six
months after such a change of control or assignment occurs. In this event the
Executive will be entitled to receive the severance benefits provided for in
subparagraph 5(b) (lump sum payment provisions) of this Agreement and shall not
be precluded from immediately competing with the Claridge or any assignee of
this Agreement, or engaging in the casino business in Atlantic City, New Jersey,
as an officer, director, stockholder, employee, representative, agent or
consultant.
<PAGE>
8. PARTICIPATION. The Executive shall devote all of his working time,
attention and best efforts to the business of the Claridge. During the term of
this Agreement the Executive shall not be engaged directly or indirectly in any
other business activity whether or not such business activity is pursued for
gain, profit or other monetary advantage. However, this shall not be construed
to prevent the Executive from investing assets in such a form and manner which
will not require any services on the part of the Executive in the operation of
the companies in which such investments are made. Neither shall the Executive
be precluded from involvement in any civic or charitable organizations.
9. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or breach thereof, shall be settled by arbitration in New Jersey
pursuant to New Jersey law in accordance with the rules of the American
Arbitration Association. Any judgment upon an award rendered pursuant to
arbitration may be entered in any court within the State of New Jersey having
appropriate jurisdiction. In the event of conflict between the rules of the
American Arbitration Association and any statute of the State of New Jersey,
the parties agree to be bound by the laws of New Jersey.
10. INJUNCTIVE RELIEF. The parties acknowledge that in the event of a
breach or a threatened breach by the Executive of any of the obligations under
this Agreement, the Claridge will not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach by the Executive,
the Claridge shall be entitled to such equitable and injunctive relief as may
be available to restrain the Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach or threatened
breach from the violation of the provisions of the Agreement. Nothing in this
Agreement shall be construed as prohibiting the Claridge from pursuing any
other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the immediate termination of the
employment of the Executive under this Agreement.
11. NOTICES. All notices shall be in writing and shall be delivered by
certified or registered mail, return receipt requested, to the parties as
follows:
If to the Claridge : c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
And Compensation Committee
If to the Executive: Raymond A. Spera
101 Flyatt Road
Vincentown, New Jersey 08088
Either party may change the address to which notices are to be
transmitted by notice given according to this paragraph.
12. MISCELLANEOUS. (a) The Executive represents to the Claridge that
there are no restrictions or agreements to which the Executive is a party which
would be violated by execution of this Agreement and subsequent employment .
(b) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
<PAGE>
(d) If any provision of this Agreement is held to be invalid or
unenforceable, that provision shall be deemed limited or modified to the extent
necessary to make it valid and enforceable, and in no event shall this Agreement
or any of the provisions of this Agreement be rendered void or unenforceable.
(e) The headings of the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
(f) No waiver by the Claridge of any breach by the Executive of any
provision or condition of this Agreement by the Executive to be performed shall
be deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time.
(g) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Claridge, but no interest in this Agreement
shall be transferable in any manner by the Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of
the parties. It may not be changed orally but only by an Agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge in sought.
IN WITNESS WHEREOF, this Agreement has been executed by the Claridge's
duly authorized officer. The Executive has also executed this Agreement.
WITNESS: EXECUTIVE
/s/ Frank Bellis BY:/s/ Raymond A. Spera
- ---------------- ------------------------
RAYMOND A. SPERA
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank Bellis BY: /s/ James M. Montgomery
- ---------------- ---------------------------
JAMES M. MONTGOMERY
CHAIR OF HUMAN RESOURCES
AND COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(bm)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of November 1, 1996 ("Effective Date")
between The Claridge at Park Place, Incorporated, a New Jersey corporation
having its principal place of business at Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 ("Claridge"), and Jean I. Abbott, an
individual residing at 48 English Lane, Egg Harbor Township, New Jersey, 08234
("Executive") .
W I T N E S S E T H
WHEREAS, the Claridge desires to employ the Executive and the Executive
has agreed to accept employment, on the terms and conditions provided in this
Agreement;
WHEREAS, the Executive and the Claridge are parties to an Employment
Agreement dated January 1, 1996 and continuing for three (3) years thereafter;
WHEREAS, the Board of Directors intends that all executives of the
Claridge party to employment agreements have uniform employment agreements with
the same terms and conditions; and
WHEREAS, in order to accomplish this goal, the Claridge and the
Executive agree to recind as of October 31, 1996 the Executive's current
Employment Agreement dated January 1, 1996 and replace that agreement with this
Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Claridge hereby employs the Executive as its
Executive Vice President of Operations. In this capacity, the Executive shall
perform such executive duties as are typical for this position including but not
limited to, those duties outlined in the Claridge's internal controls, and such
additional duties as may be specified from time to time by the Board of
Directors. In addition, the Executive may be asked to serve as a member of the
Claridge's Board of Directors without additional compensation for these
services.
2. TERM. The term of this Agreement shall commence on the Effective
Date and terminate on December 31, 1998 ("Initial Term") subject to paragraphs
5 or 7. Thereafter, the Board may review and extend the Agreement for
consecutive one (1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base annual
salary of One Hundred Sixty-Two Thousand Seven Hundred Sixty Dollars ($162,760),
payable in weekly installments consistent with the Claridge's regular payroll
practice. The Board of Directors may, from time to time, in their sole
discretion, increase the base annual salary.
(b) Until termination of the Agreement, the Executive shall continue to
receive full compensation and be entitled to all the benefits of this Agreement.
Upon termination, the Executive shall not be entitled to receive any
compensation or benefits except as set forth in this Agreement or as otherwise
agreed in writing between the parties.
(c) The Executive shall be entitled to vacation time consistent with
the Claridge's vacation plan, and shall also be entitled to participate in
any bonus plan, incentive compensation plan, qualified pension plan,
<PAGE>
qualified profit-sharing plan, medical and/or dental reimbursement plan, group
term life insurance plan, as well as any other employee benefit plan that may be
established by the Claridge or its operating subsidiaries. The participation in
any of these plans shall be consistent with the terms of such plans, and be
available only upon the Claridge or its operating subsidiaries having or
establishing such a plan.
4. CASINO CONTROL COMMISSION. The Executive represents that he
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during his employment with the Claridge. The Claridge will pay all attorneys'
fees and other costs that the Executive may incur: (a) in connection with any
investigation or proceeding against the Executive; or, (b) in which the
Executive may be involved (other than with respect to any act defined as "cause"
for termination as noted in 5(a)(ii); or, (c) relating to any criminal charges
filed against the Executive, by the Division of Gaming Enforcement of the New
Jersey Attorney General's Office or by the New Jersey Casino Control Commission.
5. TERMINATION. (a) Notwithstanding anything to the contrary in this
Agreement, the Executive's employment may be terminated upon the occurrence of
any of the following events:
(i) Upon revocation, suspension, or termination of the
Executive's casino key employee license or failure to
comply, within a reasonable time, with any conditions
imposed upon the Executive's casino key employee
license;
(ii) Upon an act committed by the Executive constituting
"cause", defined as a breach of any of the provisions
of this Agreement; the indictment and/or conviction
of any criminal offense; the deliberate refusal by
the Executive (except by reason of disability) to
perform the duties under the terms of this Agreement;
or if the Executive:
(1) Files a petition in bankruptcy court or is adjudicated
a bankrupt;
(2) Institutes or permits to be instituted any procedure
in bankruptcy court for reorganization or rearrangement
of the Executive's financial affairs;
(3) Appoints a receiver of the Executive's assets or
property due to insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Claridge terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) In the event at the time of hire the Executive is a
non-New Jersey resident and the Executive fails to
establish residency in New Jersey within six (6)
months after a Board Resolution directing the
Executive to do so. Provided that no such resolution
shall be adopted so long as: (i) a sale of the
Claridge is an option being considered by the Board
of Directors; or, (ii) the Claridge's audited
financial statements are expected to contain a "going
concern" qualification in the Independent Auditor's
Report.
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above;
<PAGE>
5(f) (diminished responsibilities) below; paragraph 7 (sale of the Claridge);
or, if the Claridge elects not to renew this Agreement pursuant to paragraph
2 above, then the Claridge shall make a lump sum payment to the Executive
equal to one hundred and twenty-five percent (125%) of the Executive's base
annual salary then in effect. Upon making of such payment, the Claridge
shall have no further liability or obligation to the Executive under this
Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) (voluntary resignation) above, and the Executive gives
notice of the intent to resign at least twelve (12) weeks prior to terminating
employment, then the Claridge shall continue to pay the Executive weekly
compensation for a period of twelve (12) weeks after the resignation date. Upon
expiration of this additional twelve (12) week period, the Claridge shall have
no further liability or obligation to the Executive under this Agreement. If
notice of the intent to resign to the Claridge is given less than twelve weeks
before the resignation date, the Claridge shall have no obligation to pay the
Executive beyond the resignation date.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv)
(termination without cause), if the Claridge has an existing stock option plan,
the Executive shall receive stock options in the Claridge, if any, in an amount
equal to those that could be exercised within one (1) year from the date of
termination. Provided, however, that such stock options must be exercised by
the Executive within 90 days after termination, or the options shall expire.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i) (revocation, suspension or termination of casino key
employee license), (a)(ii) (bankruptcy) or (a)(iii) (death or permanent
disability) above, the Claridge shall have no further liability or obligation
to continue salary payments to the Executive, or the Executive's estate (as the
case may be), after the date the Executive is no longer employed by the
Claridge.
(f) If the Executive's title, responsibilities, duties or status within
the Claridge should materially diminish, the Executive may resign and terminate
this Agreement. In this case, the Executive shall be entitled to a lump sum
payment consistent with subparagraph 5(b). Such a resignation will not be
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE. (a) During the term of this
Agreement, the Executive shall not, without the written consent of the Claridge
, alone or with others, directly or indirectly, participate, engage or become
interested in (as owner, stockholder, partner, lender or other investor,
director, officer, employee, consultant, or otherwise) any business activity
that is in competition with the Claridge's business as then constituted .
(b) Nothing in this Agreement shall prohibit the Executive from
acquiring or owning, without disclosure to the Company, less than one (1%)
percent of the outstanding securities of any class of any corporation listed on
a national securities exchange or traded in the over-the-counter market.
(c) During and after the term of this Agreement, the Executive agrees
that all information which may have been obtained during the course of
employment will be kept strictly confidential with respect to the business
practices, finances, developments, customer's affairs, and trade secrets of the
Claridge not generally known to the public. The Executive will not disclose
such information to any other person, firm or corporation, except solely in the
course of business on behalf of the Claridge pursuant to this Agreement. The
Executive further agrees that upon the termination of employment (irrespective
of the time, manner or cause of termination), all lists, books, written records
and data of every kind relating to or in connection with the Claridge's
customers and business will be delivered and returned to the Claridge.
<PAGE>
(d) (i) Subject to the provisions of subparagraph
6(d)(ii) (change of control) below, if this Agreement
is terminated pursuant to subparagraph 5(a)(v)
(voluntary resignation) above, the Executive agrees
that for a period of one (1) year thereafter the
Executive shall not compete with the Claridge, or
engage in the casino business in Atlantic City, New
Jersey, as an officer, director, stockholder,
employee, representative, agent, or consultant.
(ii) In the event the Claridge, its shareholders, or persons
having voting control enter into an agreement to sell,
acquire, merge or consolidate the assets or stock of the
Claridge with the anticipated result that a change of
control of the Claridge or the Claridge's business as
presently constituted would occur upon the closing of such
agreement, the Executive may terminate this Agreement
pursuant to subparagraph 5(a)(v) (voluntary
resignation) above. In these circumstances, the
Executive shall not be precluded from immediately
competing with the Claridge, or engaging in the
casino business in Atlantic City, New Jersey, as an
officer, director, stockholder, employee,
representative, agent or consultant. In addition,
the Executive shall be entitled to the benefits
provided for in subparagraph 5(c) (voluntary resignation)
above provided proper notice of the intent to resign
is given to the Claridge.
(e) From the date of termination of this Agreement and for a period of
one (1) year thereafter, the Executive shall not, alone or with others,
directly or indirectly:
(i) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment or other services of any employee or
consultant of the Claridge or its subsidiaries as
well as independent companies affiliated or
associated with the Claridge; or
(ii) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment of any employee of any customer of the
Claridge .
(f) As additional consideration for the agreement contained in
subparagraphs 6(d) (non-compete) and (e) (no solicitation), the Executive shall
be entitled to a lump sum payment equal to twenty-five percent (25%) of the sum
of the Executive's then base annual salary. The Executive shall make a request
to receive this lump sum within ten (10) days following termination of
employment by giving notice to the Claridge consistent with paragraph 11.
Within ten (10) days following receipt of this notice, the Claridge shall send
the Executive either: (i) the lump sum payment described in this subparagraph
(f); or (ii) a notice that the Claridge has waived the Executive's obligations
under subparagraph 6(d) (non-compete) and (e) (no solicitation), in which
event the Executive shall be released from the obligations under these
subparagraphs. In this case, the Claridge shall be released from its
obligation to pay the Executive any additional consideration under this
subparagraph (f). All payments made pursuant to this subparagraph (f) shall be
in addition to, and not in lieu of, any payments to which the Executive may be
entitled under paragraph 5 (termination provisions).
7. SALE OF THE CLARIDGE. The Claridge shall make its best efforts to
have any successor corporation or business entity assume the obligations under
this Agreement. If this Agreement is not assumed by a successor corporation or
business entity, the obligations of the Claridge to the Executive hereunder
shall continue in full force and effect, subject to the right of the Claridge,
in its sole discretion, to terminate the Executive pursuant to paragraph 5
(termination provisions). If during the term of this Agreement: (a) the
Claridge, its shareholders, or persons having voting control sell stock or
assets or merge with another entity resulting in a change in control
of the Claridge or the Claridge's business as presently
<PAGE>
constituted; or, (b) if by any other transaction this Agreement is assigned to
an entity not controlled by the Board of Directors of the Company as presently
constituted, then the Executive, in the Executive's sole discretion may
terminate this Agreement within six months after such a change of control or
assignment occurs. In this event the Executive will be entitled to receive the
severance benefits provided for in subparagraph 5(b) (lump sum payment
provisions) of this Agreement and shall not be precluded from immediately
competing with the Claridge or any assignee of this Agreement, or engaging in
the casino business in Atlantic City, New Jersey, as an officer, director,
stockholder, employee, representative, agent or consultant.
8. PARTICIPATION. The Executive shall devote all of his working time,
attention and best efforts to the business of the Claridge. During the term of
this Agreement the Executive shall not be engaged directly or indirectly in any
other business activity whether or not such business activity is pursued for
gain, profit or other monetary advantage. However, this shall not be construed
to prevent the Executive from investing assets in such a form and manner which
will not require any services on the part of the Executive in the operation of
the companies in which such investments are made. Neither shall the Executive be
precluded from involvement in any civic or charitable organizations.
9. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or breach thereof, shall be settled by arbitration in New Jersey
pursuant to New Jersey law in accordance with the rules of the American
Arbitration Association. Any judgment upon an award rendered pursuant to
arbitration may be entered in any court within the State of New Jersey having
appropriate jurisdiction. In the event of conflict between the rules of the
American Arbitration Association and any statute of the State of New Jersey,
the parties agree to be bound by the laws of New Jersey.
10. INJUNCTIVE RELIEF. The parties acknowledge that in the event of a
breach or a threatened breach by the Executive of any of the obligations under
this Agreement, the Claridge will not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach by the Executive,
the Claridge shall be entitled to such equitable and injunctive relief as may
be available to restrain the Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach or threatened
breach from the violation of the provisions of the Agreement. Nothing in this
Agreement shall be construed as prohibiting the Claridge from pursuing any
other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the immediate termination of the
employment of the Executive under this Agreement.
<PAGE>
11. NOTICES. All notices shall be in writing and shall be delivered by
certified or registered mail, return receipt requested, to the parties as
follows:
If to the Claridge : c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
And Compensation Committee
If to the Executive: Jean I. Abbott
48 English Lane
Egg Harbor Township, New Jersey 08234
Either party may change the address to which notices are to be
transmitted by notice given according to this paragraph.
12. MISCELLANEOUS. (a) The Executive represents to the Claridge that
there are no restrictions or agreements to which the Executive is a party which
would be violated by execution of this Agreement and subsequent employment .
(b) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
(d) If any provision of this Agreement is held to be invalid or
unenforceable, that provision shall be deemed limited or modified to the extent
necessary to make it valid and enforceable, and in no event shall this
Agreement or any of the provisions of this Agreement be rendered void or
unenforceable.
(e) The headings of the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
(f) No waiver by the Claridge of any breach by the Executive of any
provision or condition of this Agreement by the Executive to be performed shall
be deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time.
(g) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Claridge, but no interest in this Agreement
shall be transferable in any manner by the Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire Agreement
of the parties. It may not be changed orally but only by an Agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge in sought.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the Claridge's duly
authorized officer. The Executive has also executed this Agreement.
WITNESS: EXECUTIVE
/s/ Kathryn Loftus BY: /s/ Jean I. Abbott
- ------------------ ----------------------
JEAN I. ABBOTT
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank Bellis BY: /s/ James M. Montgomery
- ---------------- ---------------------------
JAMES M. MONTGOMERY
CHAIR OF HUMAN RESOURCES
AND COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(bn)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of November 1, 1996 ("Effective Date")
between The Claridge at Park Place, Incorporated, a New Jersey corporation
having its principal place of business at Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 ("Claridge"), and Frank A. Bellis, Jr., an
individual residing at 10 Hanover Court, Jacobstown, New Jersey, 08562
("Executive") .
W I T N E S S E T H
WHEREAS, the Claridge desires to employ the Executive and the Executive
has agreed to accept employment, on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Claridge hereby employs the Executive as its Senior
Vice President and General Counsel. In this capacity, the Executive shall
perform such executive duties as are typical for this position including but
not limited to, those duties outlined in the Claridge's internal controls, and
such additional duties as may be specified from time to time by the Board of
Directors. In addition, the Executive may be asked to serve as a member of the
Claridge's Board of Directors without additional compensation for these
services.
2. TERM. The term of this Agreement shall commence on the Effective
Date and terminate on December 31, 1998 ("Initial Term") subject to paragraphs
5 or 7. Thereafter, the Board may review and extend the Agreement for
consecutive one (1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base
annual salary of One Hundred Thirty One Thousand Dollars ($131,000), payable
in weekly installments consistent with the Claridge's regular payroll practice.
The Board of Directors may, from time to time, in their sole discretion,
increase the base annual salary.
(b) Until termination of the Agreement, the Executive shall continue to
receive full compensation and be entitled to all the benefits of this Agreement.
Upon termination, the Executive shall not be entitled to receive any
compensation or benefits except as set forth in this Agreement or as otherwise
agreed in writing between the parties.
(c) The Executive shall be entitled to vacation time consistent with
the Claridge's vacation plan, and shall also be entitled to participate in any
bonus plan, incentive compensation plan, qualified pension plan, qualified
profit-sharing plan, medical and/or dental reimbursement plan, group term life
insurance plan, as well as any other employee benefit plan that may be
established by the Claridge or its operating subsidiaries. The participation in
any of these plans shall be consistent with the terms of such plans, and be
available only upon the Claridge or its operating subsidiaries having or
establishing such a plan.
4. CASINO CONTROL COMMISSION. The Executive represents that he
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during his employment with the Claridge. The Claridge will pay all attorneys'
fees and other costs that the Executive may incur: (a) in connection with any
investigation or proceeding against the Executive; or, (b) in which the
Executive may be involved (other than with respect to any act defined
<PAGE>
as "cause" for termination as noted in 5(a)(ii); or, (c) relating to any
criminal charges filed against the Executive, by the Division of
Gaming Enforcement of the New Jersey Attorney General's Office or by the New
Jersey Casino Control Commission.
5. TERMINATION. (a) Notwithstanding anything to the contrary in this
Agreement, the Executive's employment may be terminated upon the occurrence of
any of the following events:
(i) Upon revocation, suspension, or termination of the
Executive's casino key employee license or failure to
comply, within a reasonable time, with any conditions
imposed upon the Executive's casino key employee
license;
(ii) Upon an act committed by the Executive constituting
"cause", defined as a breach of any of the provisions
of this Agreement; the indictment and/or conviction
of any criminal offense; the deliberate refusal by
the Executive (except by reason of disability) to
perform the duties under the terms of this Agreement;
or if the Executive:
(1) Files a petition in bankruptcy court or is adjudicated
a bankrupt;
(2) Institutes or permits to be instituted any procedure in
bankruptcy court for reorganization or rearrangement of
the Executive's financial affairs;
(3) Appoints a receiver of the Executive's assets or property
due to insolvency; or
(4) Makes a general assignment for the benefit of creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Claridge terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) In the event at the time of hire the Executive is a
non-New Jersey resident and the Executive fails to
establish residency in New Jersey within six (6)
months after a Board Resolution directing the
Executive to do so. Provided that no such resolution
shall be adopted so long as: (i) a sale of the
Claridge is an option being considered by the Board
of Directors; or, (ii) the Claridge's audited
financial statements are expected to contain a "going
concern" qualification in the Independent Auditor's
Report.
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; paragraph 7 (sale of the Claridge); or, if the
Claridge elects not to renew this Agreement pursuant to paragraph 2 above, then
the Claridge shall make a lump sum payment to the Executive equal to one
hundred and twenty-five percent (125%) of the Executive's base annual salary
then in effect. Upon making of such payment, the Claridge shall have no further
liability or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) (voluntary resignation) above, and the Executive gives
notice of the intent to resign at least twelve (12) weeks prior to terminating
employment, then the Claridge shall continue to pay the Executive weekly
compensation for a period of twelve (12) weeks after the resignation
date. Upon expiration of this additional twelve (12) week
<PAGE>
period, the Claridge shall have no further liability or obligation to the
Executive under this Agreement. If notice of the intent to resign to the
Claridge is given less than twelve weeks before the resignation date, the
Claridge shall have no obligation to pay the Executive beyond the resignation
date.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv)
(termination without cause), if the Claridge has an existing stock option plan,
the Executive shall receive stock options in the Claridge, if any, in an amount
equal to those that could be exercised within one (1) year from the date of
termination. Provided, however, that such stock options must be exercised by
the Executive within 90 days after termination, or the options shall expire.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i) (revocation, suspension or termination of casino key
employee license), (a)(ii) (bankruptcy) or (a)(iii) (death or permanent
disability) above, the Claridge shall have no further liability or obligation
to continue salary payments to the Executive, or the Executive's estate (as the
case may be), after the date the Executive is no longer employed by the
Claridge.
(f) If the Executive's title, responsibilities, duties or status within
the Claridge should materially diminish, the Executive may resign and terminate
this Agreement. In this case, the Executive shall be entitled to a lump sum
payment consistent with subparagraph 5(b). Such a resignation will not be
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE. (a) During the term of this
Agreement, the Executive shall not, without the written consent of the Claridge,
alone or with others, directly or indirectly, participate, engage or become
interested in (as owner, stockholder, partner, lender or other investor,
director, officer, employee, consultant, or otherwise) any business activity
that is in competition with the Claridge's business as then constituted.
(b) Nothing in this Agreement shall prohibit the Executive from
acquiring or owning, without disclosure to the Company, less than one (1%)
percent of the outstanding securities of any class of any corporation listed on
a national securities exchange or traded in the over-the-counter market.
(c) During and after the term of this Agreement, the Executive agrees
that all information which may have been obtained during the course of
employment will be kept strictly confidential with respect to the business
practices, finances, developments, customer's affairs, and trade secrets of the
Claridge not generally known to the public. The Executive will not disclose such
information to any other person, firm or corporation, except solely in the
course of business on behalf of the Claridge pursuant to this Agreement. The
Executive further agrees that upon the termination of employment (irrespective
of the time, manner or cause of termination), all lists, books, written records
and data of every kind relating to or in connection with the Claridge's
customers and business will be delivered and returned to the Claridge.
(d) (i) Subject to the provisions of subparagraph
6(d)(ii) (change of control) below, if this Agreement
is terminated pursuant to subparagraph 5(a)(v)
(voluntary resignation) above, the Executive agrees
that for a period of one (1) year thereafter the
Executive shall not compete with the Claridge, or
engage in the casino business in Atlantic City, New
Jersey, as an officer, director, stockholder,
employee, representative, agent, or consultant.
(ii) In the event the Claridge, its shareholders, or persons
having voting control enter into an agreement to sell,
acquire, merge or consolidate the assets or stock of the
Claridge with the anticipated result that a change of
control of the Claridge or the Claridge's business as
<PAGE>
presently constituted would occur upon the closing of such
agreement, the Executive may terminate this Agreement
pursuant to subparagraph 5(a)(v) (voluntary resignation)
above. In these circumstances, the Executive shall not be
precluded from immediately competing with the Claridge, or
engaging in the casino business in Atlantic City, New
Jersey, as an officer, director, stockholder, employee,
representative, agent or consultant. In addition, the
Executive shall be entitled to the benefits provided for in
subparagraph 5(c) (voluntary resignation) above provided
proper notice of the intent to resign is given to the
Claridge.
(e) From the date of termination of this Agreement and for a period of
one (1) year thereafter, the Executive shall not, alone or with others,
directly or indirectly:
(i) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment or other services of any employee or
consultant of the Claridge or its subsidiaries as
well as independent companies affiliated or
associated with the Claridge; or
(ii) solicit for the Executive's benefit or the benefit of
any person or organization other than the Claridge,
the employment of any employee of any customer of the
Claridge.
(f) As additional consideration for the agreement contained in
subparagraphs 6(d) (non-compete) and (e) (no solicitation), the Executive shall
be entitled to a lump sum payment equal to twenty-five percent (25%) of the sum
of the Executive's then base annual salary. The Executive shall make a request
to receive this lump sum within ten (10) days following termination of
employment by giving notice to the Claridge consistent with paragraph 11.
Within ten (10) days following receipt of this notice, the Claridge shall send
the Executive either: (i) the lump sum payment described in this subparagraph
(f); or (ii) a notice that the Claridge has waived the Executive's obligations
under subparagraph 6(d) (non-compete) and (e) (no solicitation), in which event
the Executive shall be released from the obligations under these subparagraphs.
In this case, the Claridge shall be released from its obligation to pay the
Executive any additional consideration under this subparagraph (f). All
payments made pursuant to this subparagraph (f) shall be in addition to, and
not in lieu of, any payments to which the Executive may be entitled under
paragraph 5 (termination provisions).
7. SALE OF THE CLARIDGE. The Claridge shall make its best efforts to
have any successor corporation or business entity assume the obligations under
this Agreement. If this Agreement is not assumed by a successor corporation or
business entity, the obligations of the Claridge to the Executive hereunder
shall continue in full force and effect, subject to the right of the Claridge,
in its sole discretion, to terminate the Executive pursuant to paragraph 5
(termination provisions). If during the term of this Agreement: (a) the
Claridge, its shareholders, or persons having voting control sell stock or
assets or merge with another entity resulting in a change in control of the
Claridge or the Claridge's business as presently constituted; or, (b) if by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as presently constituted, then the Executive,
in the Executive's sole discretion may terminate this Agreement within six
months after such a change of control or assignment occurs. In this event the
Executive will be entitled to receive the severance benefits provided for in
subparagraph 5(b) (lump sum payment provisions) of this Agreement and shall not
be precluded from immediately competing with the Claridge or any assignee of
this Agreement, or engaging in the casino business in Atlantic City, New Jersey,
as an officer, director, stockholder, employee, representative, agent or
consultant.
8. PARTICIPATION. The Executive shall devote all of his working time,
attention and best efforts to the business of the Claridge. During the term
of this Agreement the Executive shall not be engaged directly or
<PAGE>
indirectly in any other business activity whether or not such business
activity is pursued for gain, profit or other monetary advantage.
However, this shall not be construed to prevent the Executive from investing
assets in such a form and manner which will not require any services on the
part of the Executive in the operation of the companies in which such
investments are made. Neither shall the Executive be precluded from involvement
in any civic or charitable organizations.
9. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or breach thereof, shall be settled by arbitration in New Jersey
pursuant to New Jersey law in accordance with the rules of the American
Arbitration Association. Any judgment upon an award rendered pursuant to
arbitration may be entered in any court within the State of New Jersey having
appropriate jurisdiction. In the event of conflict between the rules of the
American Arbitration Association and any statute of the State of New Jersey,
the parties agree to be bound by the laws of New Jersey.
10. INJUNCTIVE RELIEF. The parties acknowledge that in the event of a
breach or a threatened breach by the Executive of any of the obligations under
this Agreement, the Claridge will not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach by the Executive,
the Claridge shall be entitled to such equitable and injunctive relief as may
be available to restrain the Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach or threatened
breach from the violation of the provisions of the Agreement. Nothing in this
Agreement shall be construed as prohibiting the Claridge from pursuing any
other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the immediate termination of the
employment of the Executive under this Agreement.
11. NOTICES. All notices shall be in writing and shall be delivered by
certified or registered mail, return receipt requested, to the parties as
follows:
If to the Claridge : c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
And Compensation Committee
If to the Executive: Frank A. Bellis, Jr.
10 Hanover Court
Jacobstown, New Jersey 08562
Either party may change the address to which notices are to be
transmitted by notice given according to this paragraph.
12. MISCELLANEOUS. (a) The Executive represents to the Claridge that
there are no restrictions or agreements to which the Executive is a party which
would be violated by execution of this Agreement and subsequent employment .
(b) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
(d) If any provision of this Agreement is held to be invalid or
unenforceable, that provision shall be deemed limited or modified to the extent
necessary to make it valid and enforceable, and in no event shall
<PAGE>
this Agreement or any of the provisions of this Agreement be rendered void or
unenforceable.
(e) The headings of the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
(f) No waiver by the Claridge of any breach by the Executive of any
provision or condition of this Agreement by the Executive to be performed shall
be deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time.
(g) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Claridge, but no interest in this Agreement
shall be transferable in any manner by the Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of
the parties. It may not be changed orally but only by an Agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge in sought.
IN WITNESS WHEREOF, this Agreement has been executed by the Claridge's
duly authorized officer. The Executive has also executed this Agreement.
WITNESS: EXECUTIVE
/s/ Kathryn Loftus BY: /s/ Frank A. Bellis, Jr.
- ------------------- ----------------------------
FRANK A. BELLIS, JR.
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank Bellis BY: /s/ James M. Montgomery
- ----------------- -----------------------------
JAMES M. MONTGOMERY
CHAIR OF HUMAN RESOURCES
AND COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(bo)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of February 1, 1997 ("Effective Date")
between The Claridge at Park Place, Incorporated, a New Jersey corporation
having its principal place of business at Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 ("Claridge"), and Glenn Lillie, an individual
residing at 157 Federal Road, Absecon, New Jersey, 08201 ("Executive").
W I T N E S S E T H
WHEREAS, the Claridge desires to employ the Executive and the Executive
has agreed to accept employment, on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Claridge hereby employs the Executive as
its Vice President of Marketing Communications. In this capacity, the Executive
shall perform such executive duties as are typical for this position including
but not limited to, those duties outlined in the Claridge's internal controls,
and such additional duties as may be specified from time to time by the Board
of Directors. In addition, the Executive may be asked to serve as a member of
the Claridge's Board of Directors without additional compensation for these
services.
2. TERM. The term of this Agreement shall commence on the
Effective Date and terminate on January 31, 1999 ("Initial Term") subject to
paragraphs 5 or 7. Thereafter, the Board may review and extend the Agreement
for consecutive one (1) year renewal terms upon specific action by the
Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive
a base annual salary of ONE HUNDRED TWENTY THOUSAND DOLLARS ($120,000), payable
in weekly installments consistent with the Claridge's regular payroll practice.
The Board of Directors may, from time to time, in their sole discretion,
increase the base annual salary.
(b) Until termination of the Agreement, the Executive shall
continue to receive full compensation and be entitled to all the benefits of
this Agreement. Upon termination, the Executive shall not be entitled to
receive any compensation or benefits except as set forth in this Agreement or
as otherwise agreed in writing between the parties.
(c) The Executive shall be entitled to vacation time
consistent with the Claridge's vacation plan, and shall also be entitled to
participate in any bonus plan, incentive compensation plan, qualified pension
plan, qualified profit-sharing plan, medical and/or dental reimbursement plan,
group term life insurance plan, as well as any other employee benefit plan that
may be established by the Claridge or its operating subsidiaries. The
participation in any of these plans shall be consistent with the terms of such
plans, and be available only upon the Claridge or its operating subsidiaries
having or establishing such a plan.
4. CASINO CONTROL COMMISSION. The Executive represents that
he possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during his employment with the Claridge. The Claridge will pay all
<PAGE>
attorneys' fees and other costs that the Executive may incur: (a) in connection
with any investigation or proceeding against the Executive; or, (b) in which the
Executive may be involved (other than with respect to any act defined as "cause"
for termination as noted in 5(a)(ii); or, (c) relating to any criminal charges
filed against the Executive, by the Division of Gaming Enforcement of the New
Jersey Attorney General's Office or by the New Jersey Casino Control Commission.
5. TERMINATION. (a) Notwithstanding anything to the contrary
in this Agreement, the Executive's employment may be terminated upon the
occurrence of any of the following events:
(i) Upon revocation, suspension, or termination
of the Executive's casino key employee
license or failure to comply, within a
reasonable time, with any conditions imposed
upon the Executive's casino key employee
license;
(ii) Upon an act committed by the Executive
constituting "cause", defined as a breach of
any of the provisions of this Agreement; the
indictment and/or conviction of any criminal
offense; the deliberate refusal by the
Executive (except by reason of disability)
to perform the duties under the terms of
this Agreement ; or if the Executive:
(1) Files a petition in bankruptcy court or is
adjudicated a bankrupt;
(2) Institutes or permits to be instituted any procedure
in bankruptcy court for reorganization or
rearrangement of the Executive's financial affairs;
(3) Appoints a receiver of the Executive's assets or
property due to insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Claridge terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) In the event at the time of hire the Executive is a
non-New Jersey resident and the Executive fails to
establish residency in New Jersey within six (6) months
after a Board Resolution directing the Executive to
do so. Provided that no such resolution
shall be adopted so long as: (i) a sale of
the Claridge is an option being considered
by the Board of Directors; or, (ii) the
Claridge's audited financial statements are
expected to contain a "going concern"
qualification in the Independent Auditor's Report.
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; paragraph 7 (sale of the Claridge); or, if the
Claridge elects not to renew this Agreement pursuant to paragraph 2 above, then
the Claridge shall make a lump sum payment to the Executive equal to one
hundred percent (100%) of the Executive's base annual salary then in effect.
Upon making of such payment, the Claridge shall have no further liability or
obligation to the Executive under this Agreement.
<PAGE>
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) (voluntary resignation) above, and the Executive gives
notice of the intent to resign at least twelve (12) weeks prior to terminating
employment, then the Claridge shall continue to pay the Executive weekly
compensation for a period of twelve (12) weeks after the resignation date. Upon
expiration of this additional twelve (12) week period, the Claridge shall have
no further liability or obligation to the Executive under this Agreement. If
notice of the intent to resign to the Claridge is given less than twelve weeks
before the resignation date, the Claridge shall have no obligation to pay the
Executive beyond the resignation date.
(d) Upon termination of this Agreement under subparagraph
5(a)(iv) (termination without cause), if the Claridge has an existing stock
option plan, the Executive shall receive stock options in the Claridge, if any,
in an amount equal to those that could be exercised within one (1) year from
the date of termination. Provided, however, that such stock options must be
exercised by the Executive within 90 days after termination, or the options
shall expire.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i) (revocation, suspension or termination of casino key
employee license), (a)(ii) (bankruptcy) or (a)(iii) (death or permanent
disability) above, the Claridge shall have no further liability or obligation
to continue salary payments to the Executive, or the Executive's estate (as the
case may be), after the date the Executive is no longer employed by the
Claridge.
(f) If the Executive's title, responsibilities, duties or
status within the Claridge should materially diminish, the Executive may resign
and terminate this Agreement. In this case, the Executive shall be entitled to
a lump sum payment consistent with subparagraph 5(b). Such a resignation will
not be considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE. (a) During the term of
this Agreement, the Executive shall not, without the written consent of the
Claridge, alone or with others, directly or indirectly, participate, engage or
become interested in (as owner, stockholder, partner, lender or other investor,
director, officer, employee, consultant, or otherwise) any business activity
that is in competition with the Claridge's business as then constituted .
(b) Nothing in this Agreement shall prohibit the Executive
from acquiring or owning, without disclosure to the Company, less than one (1%)
percent of the outstanding securities of any class of any corporation listed on
a national securities exchange or traded in the over-the-counter market.
(c) During and after the term of this Agreement, the
Executive agrees that all information which may have been obtained during the
course of employment will be kept strictly confidential with respect to the
business practices, finances, developments, customer's affairs, and trade
secrets of the Claridge not generally known to the public. The Executive will
not disclose such information to any other person, firm or corporation, except
solely in the course of business on behalf of the Claridge pursuant to this
Agreement. The Executive further agrees that upon the termination of employment
(irrespective of the time, manner or cause of termination), all lists, books,
written records and data of every kind relating to or in connection with the
Claridge's customers and business will be delivered and returned to the
Claridge.
(d) (i) Subject to the provisions of the subparagraph
6(d)(ii)(change of control) below, if this
Agreement is terminated pursuant to subparagraph
5(a)(v) (voluntary resignation) above, the
Executive agrees that for a period of one (1) year
therefter the Executive shall not compete with
Claridge, or engage in the casino business in
Atlantic City, New Jersey, as an officer, director,
stockholder, employee, representative, agent, or
consultant.
<PAGE>
(ii) In the event the Claridge, its shareholders, or
persons having voting control enter into an
agreement to sell, acquire, merge or consolidate the
assets or stock of the Claridge with the anticipated
result that a change of control of the Claridge or
the Claridge's business as presently constituted
would occur upon the closing of such agreement, the
Executive may terminate this Agreement pursuant to
subparagraph 5(a)(v) (voluntary resignation) above.
In these circumstances, the Executive shall not be
precluded from immediately competing with
the Claridge, or engaging in the casino business in
Atlantic City, New Jersey, as an officer, director,
stockholder, employee, representative, agent or
consultant. In addition, the Executive shall be
entitled to the benefits provided for in
subparagraph 5(c) (voluntary resignation) above
provided proper notice of the intent to resign is
given to the Claridge.
(e) From the date of termination of this Agreement and for a
period of one (1) year thereafter, the Executive shall not, alone or with
others, directly or indirectly:
(i) solicit for the Executive's benefit or the
benefit of any person or organization other
than the Claridge, the employment or other
services of any employee or consultant of
the Claridge or its subsidiaries as well as
independent companies affiliated or
associated with the Claridge; or
(ii) solicit for the Executive's benefit or the
benefit of any person or organization other
than the Claridge, the employment of any
employee of any customer of the Claridge.
(f) As additional consideration for the agreement contained
in subparagraphs 6(d) (non-compete) and (e) (no solicitation), the Executive
shall be entitled to a lump sum payment equal to twenty-five percent (25%) of
the sum of the Executive's then base annual salary. The Executive shall make a
request to receive this lump sum within ten (10) days following termination of
employment by giving notice to the Claridge consistent with paragraph 11.
Within ten (10) days following receipt of this notice, the Claridge shall send
the Executive either: (i) the lump sum payment described in this subparagraph
(f); or (ii) a notice that the Claridge has waived the Executive's obligations
under subparagraph 6(d) (non-compete) and (e) (no solicitation), in which event
the Executive shall be released from the obligations under these subparagraphs.
In this case, the Claridge shall be released from its obligation to pay the
Executive any additional consideration under this subparagraph (f). All
payments made pursuant to this subparagraph (f) shall be in addition to,
and not in lieu of, any payments to which the Executive may be entitled under
paragraph 5 (termination provisions).
7. SALE OF THE CLARIDGE. The Claridge shall make its best
efforts to have any successor corporation or business entity assume the
obligations under this Agreement. If this Agreement is not assumed by a
successor corporation or business entity, the obligations of the Claridge to
the Executive hereunder shall continue in full force and effect, subject to the
right of the Claridge, in its sole discretion, to terminate the Executive
pursuant to paragraph 5 (termination provisions). If during the term of this
Agreement: (a) the Claridge, its shareholders, or persons having voting control
sell stock or assets or merge with another entity resulting in a change in
control of the Claridge or the Claridge's business as presently constituted; or,
(b) if by any other transaction this Agreement is assigned to an entity not
controlled by the Board of Directors of the Company as presently constituted,
then the Executive, in the Executive's sole discretion may terminate this
Agreement within six months after such a change of control or assignment occurs.
In this event the Executive will be entitled to receive the severance
benefits provided for in subparagraph 5(b) (lump sum payment provisions)
of this Agreement and shall not be precluded from immediately competing
<PAGE>
with the Claridge or any assignee of this Agreement, or engaging in the
casino business in Atlantic City, New Jersey, as an officer, director,
stockholder, employee, representative, agent or consultant.
8. PARTICIPATION. The Executive shall devote all of his
working time, attention and best efforts to the business of the Claridge.
During the term of this Agreement the Executive shall not be engaged directly
or indirectly in any other business activity whether or not such business
activity is pursued for gain, profit or other monetary advantage. However, this
shall not be construed to prevent the Executive from investing assets in such a
form and manner which will not require any services on the part of the
Executive in the operation of the companies in which such investments are made.
Neither shall the Executive be precluded from involvement in any civic or
charitable organizations.
9. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or breach thereof, shall be settled by arbitration
in New Jersey pursuant to New Jersey law in accordance with the rules of the
American Arbitration Association. Any judgment upon an award rendered pursuant
to arbitration may be entered in any court within the State of New Jersey
having appropriate jurisdiction. In the event of conflict between the rules of
the American Arbitration Association and any statute of the State of New Jersey,
the parties agree to be bound by the laws of New Jersey.
10. INJUNCTIVE RELIEF. The parties acknowledge that in the
event of a breach or a threatened breach by the Executive of any of the
obligations under this Agreement, the Claridge will not have an adequate remedy
at law. Accordingly, in the event of any breach or threatened breach by the
Executive, the Claridge shall be entitled to such equitable and injunctive
relief as may be available to restrain the Executive and any business, firm,
partnership, individual, corporation or entity participating in the breach or
threatened breach from the violation of the provisions of the Agreement.
Nothing in this Agreement shall be construed as prohibiting the Claridge from
pursuing any other remedies available at law or in equity for such breach or
threatened breach, including the recovery of damages and the immediate
termination of the employment of the Executive under this Agreement.
11. NOTICES. All notices shall be in writing and shall be
delivered by certified or registered mail, return receipt requested, to the
parties as follows:
If to the Claridge : c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
And Compensation Committee
If to the Executive: Glenn Lillie
157 Federal Road
Absecon, New Jersey 08201
Either party may change the address to which notices are to
be transmitted by notice given according to this paragraph.
12. MISCELLANEOUS. (a) The Executive represents to the
Claridge that there are no restrictions or agreements to which the Executive is
a party which would be violated by execution of this Agreement and subsequent
employment .
(b) This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed
<PAGE>
by and construed in accordance with the laws of the State of New Jersey.
(c) No amendment or waiver or any provision of this Agreement
shall be effective unless in writing signed by both parties.
(d) If any provision of this Agreement is held to be invalid
or unenforceable, that provision shall be deemed limited or modified to the
extent necessary to make it valid and enforceable, and in no event shall this
Agreement or any of the provisions of this Agreement be rendered void or
unenforceable.
(e) The headings of the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
(f) No waiver by the Claridge of any breach by the Executive
of any provision or condition of this Agreement by the Executive to be
performed shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time.
(g) This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the Claridge, but no interest in
this Agreement shall be transferable in any manner by the Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement of the parties. It may not be changed orally but only by an
Agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge in sought.
IN WITNESS WHEREOF, this Agreement has been executed by the
Claridge's duly authorized officer. The Executive has also executed this
Agreement.
WITNESS: EXECUTIVE
/s/ Kathryn Loftus BY:/s/ Glenn Lillie
- ------------------ --------------------
GLENN LILLIE
ATTEST: THE CLARIDGE AT PARK PLACE,
INCORPORATED
/s/ Frank Bellis BY:/s/ James M. Montgomery
- ---------------- --------------------------
JAMES M. MONTGOMERY
CHAIR OF HUMAN RESOURCES
AND COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(bp)
SPREADER AGREEMENT OF A CERTAIN MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
AND FINANCING STATEMENT RECORDED ON JANAURY 31, 1997
IN THE OFFICE OF THE ATLANTIC COUNT CLERK, NEW JERSEY
IN REEL ______, AT PAGE ______
This Spreader Agreement (the "Agreement") made as of the 28 day of
January, 1997, by The Claridge at Park Place, Inc., a New Jersey corporation,
whose address is Indiana Avenue and the Boardwalk, Atlantic City, New Jersey
("Mortgagor") in favor of IBJ Schroeder Bank & Trust Company, a New York
banking corporation, as collateral trustee under certain Collateral Trust
Agreement dated as of January 31, 1994 ("Mortgagee").
W I T N E S S E T H:
Whereas, in connection with a certain $85,000,000 indenture (the
"Indenture") dated as of January 31, 1994 among The Claridge Hotel and Casino
Corporation, as Issuer, Mortgagor, as Guarantor, and IBJ Schroeder Bank & Trust
Company, as Trustee, Atlantic City Boardwalk Associates, L.P., executed and
delivered to Mortgagee a certain Mortgage, Assignment of Leases and Rents,
Security Agreement, and Financing Statement dated as of January 31, 1994,
recorded in the Office of the Clerk of Atlantic County, New Jersey on
____________ in Reel ______at Page ______(the "Mortgage"); and
Whereas, pursuant to Section 4.23 of the Indenture, Mortgagor agreed
that in the event that it acquired certain additional property, it would subject
such additional property to the lien of the Mortgage; and
Whereas, Mortgagor has acquired certain real property more particularly
described on Exhibit A attached hereto, which is used as a parking facility for
The Claridge Hotel and Casino; and
Whereas, Mortgagee has agreed to allow the lien of the Mortgage to be
spread to encumber its fee interest in the Premises.
Now therefore, in consideration of the mutual convenants herein
contained and of other valuable consideration each to the other in hand paid,
receipt whereof is hereby acknowledged, Mortgagor hereby covenants and agrees
as follows:
1. From and after the date hereof, the Mortgage, and the liens created
thereby, shall be and hereby are spread to cover the fee of the Premises (in
addition to all other property covered by the Mortgage). The Mortgage, as
spread hereby, shall continue to secure the indebtedness evidenced by those
certain notes issued pursuant to the Indenture (the "Notes").
2. Nothing contained herein shall in any manner (a) impair the security
held for the indebtedness evidenced by the Notes, (b) alter, waive, annul, vary
or affect any of the provisions, conditions or covenants contained in the Notes
or the Mortgage, or (c) affect or impair any right, power, or remedy of
Mortgagee under the Notes or the Mortgage, as spread hereby, it being the intent
of the parties hereto that the terms and provisions of the Notes and the
Mortgage shall continue in full force and effect and shall have the additional
benefit of the Premises to which it is spread hereby.
<PAGE>
3. This Agreement may not be changed or terminated orally. The
covenants contained herein shall run with the land and shall be binding on and
inure to the benefit of the parties hereto, and their respective successors and
assigns.
In witness whereof, Mortgagor has executed this Spreader Agreement as
of the date and year first written above.
THE CLARIDGE AT PARK PLACE, INC.
By: /s/ Frank A. Bellis, Jr.
---------------------------
Frank A. Bellis, Jr.
Senior Vice President/General Counsel
<PAGE>
Exhibit A
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:
Tract #1
Beginning at the Southeasterly corner of Pacific and Ohio Avenues; thence
(1) Eastwardly along the Southerly line of Pacific Avenue 144 feet to the
Westerly line of Park Place; thence
(2) Southwardly along the Westerly line of Park Place 150 feet; thence
(3) Westwardly parallel with Pacific Avenue 144 feet to the Easterly line
of Ohio Avenue; thence
(4) Northwardly along the Easterly line of Ohio Avenue 150 feet to the
place of beginning.
In compliance with Chapter 157, Laws of 1977 premises herein known as Lot 6 in
Block 31, on the Official Tax Map of the City of Atlantic City.
Tract #2
(1) Southwardly along Park Place 50 feet; thence
(2) Westwardly parallel with Pacific Avenue 148 feet to the Easterly line
of Ohio Avenue; thence
(3) Northwardly along same 50 feet; thence
(4) Eastwardly parallel with Pacific Avenue 148 feet to the point and place
of beginning.
In compliance with Chapter 157, Laws of 1977 premises herein known as Lot 7 in
Block 31, on the Official Tax Map of the City of Atlantic City.
Now known as Lot 26 in Block 31 on the Official Tax Map of the City of Atlantic
City.
<PAGE>
EXHIBIT 10(bq)
SPREADER AGREEMENT AND MODIFICATION OF SPREADER AGREEMENT
OF A CERTAIN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT RECORDED
ON FEBRUARY 7, 1994 IN THE OFFICE OF THE
CLERK OF ATLANTIC COUNTY, NEW JERSEY
IN MORTGAGE BOOK 5276, PAGE 311, AS SPREAD TO BLOCK NO. 31,
LOTS 6 AND 7, PURSUANT OT SPREADER AGREEMENT DATED AS OF
JANUARY 28, 1997, RECORDED IN THE OFFICE OF SUCH
CLERK ON JANUARY 31, 1997
THIS SPREADER AGREEMENT AND MODIFICATION OF SPREADER AGREEMENT
made as of the 18th day of February, 1997 of a certain Mortgage, Assignment of
Leases and Rents, Security Agreement and Financing Statement dated as of
January 31, 1994, recorded on February 7, 1994 in the Office of the Atlantic
County Clerk, New Jersey, in Mortgage Book 5276, Page 311, from THE CLARIDGE AT
PARK PLACE, INC., a New Jersey corporation, whose address is Indiana Avenue and
the Boardwalk, Atlantic City, New Jersey ("Mortgagor"), in favor of IBJ
SCHROEDER BANK & TRUST COMPANY, a New York banking corporation, as collateral
trustee under a certain Collateral Trust Agreement dated as of January 31, 1994
("Mortgagee"), as spread to the Parking Facility (defined herein) by the
Spreader (defined herein).
WITNESSETH:
WHEREAS, in connection with a certain $85,000,000 indenture (the
"Indenture") dated as of January 31, 1994 among The Claridge Hotel and Casino
Corporation, as Issuer, Mortgagor, as Guarantor and IBJ Schroeder Bank & Trust
Company, as Trustee, Atlantic City Boardwalk Associates, L.P. ("ACBA"),
executed and delivered to Mortgagee a certain Mortgage, Assignment of Leases
and Rents, Security Agreement and Financing Statement dated as of January 31,
1994, recorded on February 7, 1994, in the Office of the Clerk of Atlantic
County, New Jersey in Mortgage Book 5276, at Page 311 (the "Mortgage"); and
WHEREAS, pursuant to Section 4.23 of the Indenture, Mortgagor agreed
that in the event that it acquired certain additional property, it would subject
such additional property to the lien of the Mortgage; and
WHEREAS, Mortgagor acquired certain real property known as Block No. 31,
Lot numbers 6 and 7, Atlantic City, New Jersey which is used as a parking
facility for The Claridge Hotel and Casino (the "Parking Facility"); and
WHEREAS, pursuant to a Spreader Agreement dated as of January 28, 1997
and recorded January 31, 1997 in the Office of the Atlantic County Clerk, New
Jersey (the "Spreader") the lien of the Mortgage was spread to encumber the fee
interest in the Parking Facility; and
WHEREAS, certain recording information relating to the Mortgage was
incorrectly set forth in the Spreader and Mortgagor desires to correct such
inaccuracies; and
<PAGE>
WHEREAS, Mortgagor also has acquired certain real property known as
Block No. 33, Lot numbers 58 and 66, Atlantic City, New Jersey, more
particularly described on Exhibit A attached hereto (the "Additional Property");
and
WHEREAS, Mortgagor has agreed to allow the lien of the Mortgage to be
spread to encumber its fee interest in the Additional Property; and
WHEREAS, Mortgagor has agreed that with respect to the Parking Facility
and the Additional Property, the Mortgagor would observe certain additional
covenants as set forth more fully below.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and of other valuable consideration the receipt whereof is hereby
acknowledged, Mortgagor hereby covenants and agrees as follows:
1. The Spreader is hereby modified effective as of January 28, 1997 to
provide that the Mortgage, Assignment of Leases and Rents, Security Agreement
and Financing Statement referred to in the Spreader shall be deemed to refer to
that certain Mortgage, Assignment of Leases and Rents, Security Agreement and
Financing Statement from ACBA to Mortgagee dated January 31, 1994, recorded in
the Office of the Clerk of Atlantic County, New Jersey, on February 7, 1994, in
Mortgage Book 5276, Page 311, and each reference therein to such mortgage shall
be deemed to refer to the Mortgage and, where so referenced, the appropriate
date, recording date and recording information set forth herein shall be deemed
inserted in the Spreader in place of the information therein.
2. From and after the date hereof, the Mortgage, and the liens created
thereby, shall be are hereby are spread to encumber the fee of the Additional
Property (in addition to all other property covered by the Mortgage). The
Mortgage as spread hereby, shall continue to secure the indebtedness evidenced
by those certain notes pursuant to the Indenture (the "Notes").
3. The provisions of the Mortgage, including the defined terms, the
granting clauses, respresentations, warranties, covenants and conditions shall
also apply to the Parking Facility and Additional Property, and to the Mortgagor
described in this agreement with the same force and effect as if said Mortgagor
had originally been a "Mortgagor" under the Mortgage and said Parking Facility
and Additional Property had originally been described in Schedule A to the
Mortgage, except that:
(a) all references to the "Mortgagor" in the Mortgage with
respect to the Wraparound Mortgage and the Operating Leases
shall be deemed applicable only to Atlantic City Boardwalk
Associates, L.P. and the Mortgaged Property (as defined in
the Mortgage);
(b) the provisions of Section 6.09 shall not be applicable to
Mortgagor, as defined in this Agreement; and
(c) the matters set forth in Schedule B to the Mortgage shall
not be applicable to the Parking Facility and Additional
Property, and Schedule B attached to this Agreement shall be
applicable to the Parking Facility and Additional Property
as indicated thereon.
<PAGE>
4. Nothing contained herein shall in any manner (a) impair the security
held for the indebtedness evidenced by the Notes, (b) alter, waive, annul, vary
or affect any of the provisions, conditions or covenants contained in the Notes
or the Mortgage, or (c) affect or impair any right, power or remedy of
Mortgagee under the Notes or the Mortgage, it being the intent of the parties
hereto that the terms and provisions of the Notes and the Mortgage shall
continue in full force and effect and shall have the additional benefit of the
Parking Facility and Additional Property to which it is spread by the Spreader
and by this Agreement.
5. This Agreement may not be changed or terminated orally. The
covenants contained herein shall run with the land and shall be binding on and
inure to the benefit of the parties hereto, and their respective successors and
assigns.
IN WITNESS WHEREOF, Mortgagor has executed this Agreement as of the
date and year first above written.
THE CLARIDGE AT PARK PLACE, INC.
By: /s/ Frank A. Bellis, Jr.
----------------------------
NAME: Frank A. Bellis, Jr.
TITLE: Senior Vice President and
General Counsel
<PAGE>
EXHIBIT A
Description of Additional Property
The land and all the buildings and structures on the land in the City of
Atlantic City, County of Atlantic and State of New Jersey, more particularly
described as follows:
TRACT I:
BEGINNING at a point in the Easterly line of Indiana Avenue 140 feet
Southwardly of Atlantic Avenue; and extending thence
1. Eastwardly, parallel with Atlantic Avenue 109 feet; thence
2. Southwardly, parallel with Indiana Avenue 40 feet; thence
3. Westwardly, parallel with Atlantic Avenue 109 feet to the
Easterly line of Indiana Avenue; thence
4. Northwardly, along the same, 40 feet to the BEGINNING.
TRACT II:
BEGINNING at a point in the Easterly line of Indiana Avenue 180 feet
Southwardly from the Southerly line of Atlantic Avenue and also the corner of
lot formerly owned by Daniel Lacy; and extending thence
1. Southwardly, along Indiana Avenue 40 feet to a corner of now
or late Naphey's lot; thence
2. Eastwardly, along the line of said Naphey's lot and parallel
with Atlantic Avenue 150 feet; thence
3. Northwardly, parallel with Indiana Avenue 40 feet to a corner
of lot now or formerly owned by Daniel Lacy; thence
4. Westwardly, along the line of said lot, and parallel with
Atlantic Avenue, 150 feet to the point and place of BEGINNING.
Intended to be the same property conveyed by Robert Schiff, a divorced
man, whose address is 1931 Boardwalk, Atlantic City, New Jersey, to The
Claridge at Park Place, Inc. by Deed dated January 5, 1995, recorded in
the Office of the Atlantic County Clerk on January 6, 1995 in Deed Book
5750, page 320.
<PAGE>
SCHEDULE B
Permitted Encumbrances
A. Parking Facility, Block number 31, Lot numbers 6 and 7, now known as
Block 31, Lot 26
1. Real estate taxes, a lien not yet due and payable.
2. Building restrictions as contained in Deed Book 75, page 629,
Deed Book 76, page 608, as modified in Deed Book 954, page
393.
3. Rights granted to the Atlantic City Electric Company in Deed
Book 957, page 422, and Deed Book 1997, page 336.
B. Additional Property, Block number 33, Lot numbers 58 and 66.
1. Real estate taxes, a lien not yet due and payable.
2. Building restrictions as contained in Deed Book 49, Page 195.
3. Rights granted to the Atlantic City Electric Company in Deed
Book 940, page 114.
4. Subject to Contract for Sale between The Claridge at Park
Place, Inc. And Thermal Energy Limited Partnership I dated
September 20, 1995.
<PAGE>
EXHIBIT 10(br)
FIFTH AMENDMENT TO OPERATING
LEASE AGREEMENT AND FOURTH AMENDMENT TO
EXPANSION OPERATING LEASE AGREEMENT
THIS FIFTH AMENDMENT TO OPERATING LEASE AGREEMENT AND FOURTH
AMENDMENT TO EXPANSION OPERATING LEASE AGREEMENT (this "Fifth Amendment &
Fourth Expansion Amendment"), dated as of the ____ day of March, 1997, to (a)
that certain 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 a place of business at 2880 West Meade Avenue, Suite
201, Las Vegas, Nevada 89102 ("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"), a Memorandum of which was recorded in the
Atlantic County Clerk's office on October 31, 1983, in Book 3850 Page 204 (the
"Operating Lease") and (b) that certain EXPANSION OPERATING LEASE AGREEMENT,
dated as of the 17th day of March, 1986 by and between Lessor and Lessee, a
Memorandum of which was recorded in the Atlantic County Clerk's office on March
18, 1986 in Book 4215 Page 128 (the "Expansion Operating Lease").
W I T N E S S E T H:
WHEREAS, pursuant to the Operating Lease and the Expansion
Operating Lease, Lessor is leasing to Lessee certain land and air rights more
particularly described in Exhibits "A" and "B" respectively, annexed hereto and
made a part hereof, and the buildings and improvements located thereon, situate,
lying and being in the County and City of Atlantic, State of New Jersey, all as
more particularly defined in the Operating Lease and the Expansion Operating
Lease; and
WHEREAS, pursuant to that certain Amendment to Operating
Lease Agreement and the
<PAGE>
Expansion Operating Lease Agreement dated June 15, 1989, between Lessor and
Lessee (the "First Amendment"), Lessor and Lessee amended certain terms and
provisions of the Operating Lease and Expansion Operating Lease; and
WHEREAS, pursuant to that certain Second Amendment to
Operating Lease Agreement and Expansion Operating Lease Agreement dated March
27, 1990 between Lessor and Lessee (the "Second Amendment"), Lessor and Lessee
further amended certain terms and provisions of the Operating Lease and the
Expansion Operating Lease; and
WHEREAS, pursuant to that certain Third Amendment to
Operating Lease Agreement and Expansion Operating Lease Agreement dated as of
August 1, 1991, between Lessor and Lessee (the "Third Amendment"), Lessor and
Lessee further amended certain terms and provisions of the Operating Lease and
the Expansion Operating Lease; and
WHEREAS, pursuant to that certain Fourth Amendment to
Operating Lease Agreement dated as of January 31, 1994, between Lessor and
Lessee (the "Fourth Amendment"), Lessor and Lessee further amended certain
terms and provisions of the Operating Lease; and
WHEREAS, the parties now desire to further modify certain
terms and provisions of the Operating Lease and the Expansion Operating Lease,
as same have been amended by the First Amendment, Second Amendment, Third
Amendment, and Fourth Amendment.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. (a) The following language appearing in Paragraph 1(b) of
the Third Amendment is hereby deleted in its entirety (but without thereby
limiting the effect of such language to set forth the agreement of the parties
from January 1, 1991 to the date hereof):
"For the period commencing on January 1,
1991 and ending on December 31, 1991, and for each
calendar year thereafter through and
<PAGE>
including the calendar year ending on December 31,
1998, Basic Rent payable during each such calendar
year shall be abated in amounts to be determined by
Lessee (the "Abatement") in its reasonable
discretion, provided the Abatement applicable during
any calendar year complies with the following three
(3) criteria:
(i) the Abatement shall not exceed $10,000,000
in any one calendar year;
(ii) the aggregate Abatement shall not exceed
$38,820,000 for the period commencing on January 1,
1991 and ending on December 31, 1998; and
(iii) Lessor shall have the right to limit the
Abatement allocated to any particular calendar year,
to the extent required to cover the payments
described in subsections (1) and (2) of the last
paragraph of Section 1 of the First Amendment.
Basic Rent may be abated during the year
1999 and thereafter in amounts to be determined by
the Lessor."
(b) The following language is hereby inserted
in place of the language deleted pursuant to
subparagraph (a) above:
"(i) The Basic Rent payable on March 1,
1997 shall be reduced to an amount so that the
total amount of Basic Rent payable on March 1, 1997
shall be $1,927,607;
(ii) The foregoing reduction in Basic Rent
consist of $867,953 of rent abatement and $1,300,000
of Deferred Rent (as that term is defined in the
Third Amendment);
(iii) The $1,300,000 of Deferred Rent
referred to in clause (ii) above shall be
<PAGE>
paid by the Lessee to the Lessor under the
circumstances set forth in the Third
Amendment and as follows: $25,000 shall be payable
each month after March of 1997 for the remainder of
1997, $50,000 shall be payable monthly for the year
1998 and thereafter until the foregoing rent deferral
is paid in full, provided, however, that in the event
the Lessee is awarded a judgment or receives a
settlement in connection with the Lessee's claim
against the general contractor or any other parties
arising out of the self-parking garage accident, an
amount of proceeds from any such award or settlement
not to exceed the outstanding balance of the
Deferred Rent under clause (ii) above shall be paid
to the Lessor
(iv) For the period commencing on April 1,
1997 and ending on December 31, 1997, and for each
calendar year thereafter through and including the
calendar year ending on December 31, 2003, Basic Rent
payable during each such calendar year shall be
abated in amounts to be determined by Lessee (the
"Abatement") in its reasonable discretion, provided
that: (A) Lessor shall have the right to limit the
Abatement allocated to any particular calendar year
or to require the Lessee to pay Additional Rent, to
the extent required to cover the payments described
in subsections (1) and (2) of the last paragraph of
Section 1 of the First Amendment (which includes all
payment due under the Expandable Wraparound Mortgage
Loan Agreement dated October 31, 1983, as amended);
and (B) the Abatement, determined without reference
to this clause (B), shall be reduced by $83,333 for
each month of the period commencing on January 1,
1999 and ending on December 31, 2000; $125,000 for
each month of the calendar year 2001 and; $166,667
for each month of each calendar year thereafter
through and including the calendar year ending on
December 31, 2003.
<PAGE>
Basic Rent may be abated during the year
2004 and thereafter in amounts to be determined by
the Lessor."
2. Article 16 of the Operating Lease and the Expansion
Operating Lease are hereby amended as follows:
a. Section 16.1 of the Operating Lease and
Expansion Operating Lease are hereby amended to add
the following to the end of that Section:
"Lessor and Lessee agree that for the purposes of
the September 30, 1998 Option Date, if Lessee
exercises its purchase option, Lessor shall sell
to Lessee Lessor's Interest in the Property for the
Fair Market Value of the Property (as set forth
above in this Section 16.1), but in no event
less than an amount equal to the sum of: (x) the
amount outstanding at the Option Date in respect of
that certain Expandable Wraparound Mortgage Loan
Agreement dated as of October 31, 1983, as amended
from time to time, between the Lessor and Lessee;
(y) $2,500,000 and (3) any amount still outstanding
in respect of the $1,300,000 of Deferred Rent
set forth in clause 1(b)(ii) above. The costs of any
appraisal requested by the Lessor to assist it in
negotiating Fair Market Value prior to institution
of formal appraisal proceedings shall be borne by
the Lessee.
b. Section 16.4 of the Operating Lease and
Expansion Operating Lease are hereby amended so that
after all references therein to "relevant Option
Date", the following is added:
"or if the option is exercised on September 30,
2003, on January 1, 2004,"
3. This Fifth Amendment & Fourth Expansion Amendment is
subject to prior approval by the New Jersey Casino Control Commission (the
"Commission") and shall not become effective until approval by the Commission
has been granted. Lessee shall use its best efforts to obtain such consent as
promptly as practical.
4. All of the obligations, terms and conditions set
forth in the Operating Lease and the Expansion Operating Lease, as same have
been amended by the First Amendment, the Second Amendment, the Third
<PAGE>
Amendment, and the Fourth Amendment, shall remain unchanged and in full force
and effect, except as specifically modified herein.
5. This Fifth Amendment & Fourth Expansion Amendment
may be signed 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Fifth Amendment & Fourth Expansion Amendment the day and year first above
written.
LESSOR:
Signed, Sealed and Delivered ATLANTIC CITY BOARDWALK
the Presence of or Attested by: ASSOCIATES, L.P.
/b/ Barbara A, Constantine By: /s/ Anthony C. Atchley
- -------------------------- --------------------------
Name: Name: Anthony C. Atchley
Title: General Partner
LESSEE:
Signed, Sealed and Delivered THE CLARIDGE AT PARK PLACE,
in the Presence of or Attested INCORPORATED
by:
/s/ Kathryn Loftus By: /s/ Robert M. Renneisen
- -------------------------- --------------------------
Name: Name: Robert M. Renneisen
Title: Vice Chairman/Chief Executive
Officer
<PAGE>
STATE OF NEVADA )
: ss.:
COUNTY OF CLARK )
BE IT REMEMBERED, that on this 20th day of March, 1997,
before me, the subscriber, a Notary Public of the State of Nevada, personally
appeared Anthony C. Atchley 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 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/ Barbara A. Constantine
--------------------------
Notary Public
My Commission Expires:
January 7, 2000
STATE OF NEW JERSEY)
: ss.:
COUNTY OF ATLANTIC )
BE IT REMEMBERED, that on this 26 day of March, 1997, before
me, the subscriber, a Notary Public of the State of New Jersey, personally
appeared Robert M. Renneisen of THE CLARIDGE AT PARK PLACE, INCORPORATED, a New
Jersey corporation, and he thereupon acknowledged that he signed the foregoing
instrument as 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 THE CLARIDGE AT PARK PLACE,
INCORPORATED, a corporation.
/s/ Kathryn Loftus
------------------
Notary Public
My Commission Expires:
October 25, 1998
<PAGE>
EXHIBIT 10(bs)
RESTRUCTURING AGREEMENT
This RESTRUCTURING AGREEMENT is entered into this _____ day of March,
1997 by and among THE CLARIDGE HOTEL AND CASINO CORPORATION, a New York
corporation (the "Corporation"), THE CLARIDGE AT PARK PLACE, INCORPORATED, a
New Jersey corporation ("CPPI"), and ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.,
a New Jersey limited partnership ("ACBA").
WHEREAS, CPPI and ACBA have entered into an Operating Lease, dated
October 31, 1983, which has been amended on various occasions prior to the date
hereof (the Operating Lease, as so amended, is hereinafter referred to as the
"Operating Lease"); and
WHEREAS, CPPI and ACBA have entered into an Expansion Operating Lease,
dated March 17, 1986, which has been amended on various occasions prior to the
date hereof (the Expansion Operating Lease, as so amended, is hereinafter
referred to as the "Expansion Operating Lease"); and
WHEREAS, ACBA and CPPI have entered into an Expandable Wraparound
Mortgage Agreement, dated October 31, 1983, and amended as of March 17, 1986
(the "First Amendment") and as of June 15, 1989 (the "Second Amendment") (the
Wraparound Mortgage Agreement, as so amended, is hereinafter referred to as the
"Wraparound Mortgage Agreement"), which contemplated the execution and delivery
by ACBA to CPPI of a Wraparound Mortgage Note, dated October 31, 1983, which has
been amended on several occasions prior to the date hereof (such Wraparound
Mortgage Note, as so amended, is hereinafter referred to as the "Wraparound
Mortgage Note") and a Wraparound Mortgage, dated October 31, 1983, which has
been amended on several occasions prior to the date hereof (such Wraparound
Mortgage, as so amended, is hereinafter referred to as the "Wraparound
Mortgage"); and
WHEREAS, pursuant to an Indenture dated as of January 31, 1994 (the
"Indenture"), between the Corporation, as Issuer, CPPI, as Guarantor, and IBJ
Schroder Bank and Trust Company (the "Trustee"), the Corporation issued $85
million of 11 3/4% First Mortgage Notes due 2002 (the "First Mortgage Notes")
WHEREAS, the Corporation and CPPI desire to amend certain relationships
among themselves in order to provide a more stable financial situation for each
of the parties.
NOW, THEREFORE, the parties hereto, in consideration of the premises,
the terms hereof and other valuable consideration, the receipt of which is
hereby acknowledged, hereby agree as follows:
1. Amendments
If the conditions set forth in Section 4 of this Restructuring Agreement
have been satisfied or waived by ACBA on or before the execution of this
Restructuring Agreement (the "Closing Date"), on the Closing Date or as soon
thereafter as is possible, the following agreements, instruments or documents
shall be amended, modified, extinguished or delivered as follows:
(a) Operating Lease. CPPI and ACBA shall enter into an amendment to
the Operating Lease in the form attached hereto as Exhibit A;
(b) Exercise of Option to Extend. CPPI shall deliver to ACBA a notice,
in the form of Exhibit B hereto, notifying ACBA of CPPI's
<PAGE>
election to exercise the option under Section 1.2 of the
Operating Lease to extend the term thereof.
2. Agreement Regarding Wraparound Mortgage
(a) If the Closing Date of this Restructuring Agreement occurs,
CPPI will use its best efforts to cause a modification of the
Expandable Wraparound Mortgage Agreement (the "Wraparound
Modification") that is permitted by, or is in compliance with,
the terms of the Indenture and the Related Documents (as
defined in the Indenture);
(b) The Wraparound Modification, if so permitted, shall provide
for the following modifications:
(i) The definition of "Maturity Date" in Section 1 of
the Expandable Wraparound Mortgage Loan Agreement will be
amended by replacing "September 30, 2000" with
"January 1, 2004".
(ii) Section 9 of the First Amendment will be amended
as follows:
a. In Section 2.1(a)(i), the reference to
"September 30, 2000" will be replaced with "January 1,
2004".
(iii) On or after September 30, 2003, ACBA will pay
Basic Interest at 14%, payable in accordance with the
terms the Wraparound Mortgage Agreement or will
pay Basic Interest at a rate that does not change the
yield-to-maturity under the Wraparound Mortgage Note.
(c) Notwithstanding the foregoing, if the Closing Date of this
Restructuring Agreement occurs, then at such time as the Notes
are no longer outstanding, CPPI will effect the Wraparound
Modification at such time.
(d) In the event the Wraparound Modification does not occur by
September 30, 2000, then:
(i) CPPI acknowledges that the Wraparound Mortgage Agreement
prohibits CPPI from instituting a foreclosure thereunder so
long as the Notes (as defined in the Indenture) are
outstanding and covenants not to institute any
such action so long as the Notes are outstanding and for
such period thereafter as is necessary for the Wraparound
Modification to be effected by CPPI and ACBA; and
(ii) for such time as CPPI is required to forebear from
instituting a foreclosure action as set forth in 2(c)(i)
above, ACBA will pay Basic Interest at 14%, payable in
accordance with the terms of the Wraparound Mortgage
Agreement or will pay Basic Interest at such other rate that
does not change the yield-to-maturity under the Wraparound
Note.
(e) CPPI acknowledges that Section 2.11 of the Wraparound Mortgage
Agreement shall apply to a failure by CPPI to pay, any amounts due under the
Operating Lease and that such Section and Section 7.3 apply to a failure by
CPPI to pay the $1,300,000 of Deferred Rent in accordance with the terms of
Exhibit A.
(f) All obligations, terms and conditions set forth in the Expandable
Wraparound Mortgage Loan Agreement, as same has been amended by the First
Amendment and the Second Amendment, remain unchanged in full force and effect,
except as specifically modified herein.
(g) The parties will execute, deliver or record such documents or
instruments as may be necessary to implement the Wraparound Modification.
<PAGE>
(h) Neither ACBA nor its partners shall be personally liable to the
Corporation or CPPI for (a) the non-payment of any principal of or interest on
the Wraparound Mortgage Note, (b) the non-payment of any other amount owing to
the Corporation or CPPI under this Restructuring Agreement, or (c) damages
arising out of the failure to perform any obligation under this Restructuring
Agreement, the Corporation and CPPI's recourse being expressly limited to the
Collateral (as such term is defined in the Wraparound Mortgage Agreement);
provided, however, that except as expressly set forth herein nothing contained
in this Restructuring Agreement shall limit, restrict or impair the rights of
the Corporation or CPPI to accelerate the maturity of the Wraparound Mortgage
Note and all other Indebtedness (as such term is defined in the Wraparound
Mortgage Agreement) upon the occurrence of an Event of Default (as such term is
defined in the Wraparound Mortgage Agreement), to bring suit and obtain a
judgment against ACBA or its general partners on the Wraparound Mortgage Note
and such other Indebtedness (so long as ACBA 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
Restructuring Agreement, or otherwise to realize upon the Collateral. This
paragraph shall not be deemed to be a waiver by the Corporation or CPPI of any
claims in the nature of fraud or deceit arising under or in connection with
this Restructuring Agreement.
3. Agreement Regarding Rent Deferral
CPPI will use the benefit of the $1,300,000 rent deferral, as described
in Exhibit A hereto, to make the interest payment due under the Indenture on
March 5, 1997 which, with such deferral, CPPI is able to make in full so as to
cure any default under the Indenture
4. Conditions
The obligation of ACBA to take the actions contemplated by Section 1 of
this Restructuring Agreement are subject to satisfaction, or waiver by ACBA in
writing, of the following conditions on or before the Closing Date:
(a) No person shall have commenced any foreclosure or other action
or proceeding for the purpose of terminating the ownership
interest of ACBA in its assets or any substantial portion
thereof.
(b) No person shall have commenced any bankruptcy or other
insolvency proceeding against ACBA.
(c) ACBA shall have received a copy of the opinion of counsel that
the Corporation is required to deliver to the Trustee pursuant
to Section 4.12(i) of the Indenture.
5. Effective Date
The Effective Date of this Restructuring Agreement is March 1, 1997.
6. Entire Agreement; Amendment
This Restructuring Agreement sets forth the entire agreement among the
parties hereto as to the subject matter hereof and it may not be amended or
modified in any respect except by an instrument in writing signed by all the
parties hereto.
<PAGE>
7. Assignment
No party to this Restructuring Agreement may assign its rights
hereunder without the written consent of each of the other parties hereto.
8. Acknowledgment
ACBA acknowledges receipt of a true copy of this Restructuring
Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this
Restructuring Agreement as of the date and year 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
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
--------------------------
Name: Anthony C. Atchley
Title: General Partner
<PAGE>
Exhibit A
FIFTH AMENDMENT TO OPERATING
LEASE AGREEMENT AND FOURTH AMENDMENT TO
EXPANSION OPERATING LEASE AGREEMENT
THIS FIFTH AMENDMENT TO OPERATING LEASE AGREEMENT AND FOURTH
AMENDMENT TO EXPANSION OPERATING LEASE AGREEMENT (this "Fifth Amendment &
Fourth Expansion Amendment"), dated as of the ____ day of March, 1997, to (a)
that certain 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 a place of business at 2880 West Meade Avenue, Suite
201, Las Vegas, Nevada 89102 ("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"), a Memorandum of which was recorded in the
Atlantic County Clerk's office on October 31, 1983, in Book 3850 Page 204 (the
"Operating Lease") and (b) that certain EXPANSION OPERATING LEASE AGREEMENT,
dated as of the 17th day of March, 1986 by and between Lessor and Lessee, a
Memorandum of which was recorded in the Atlantic County Clerk's office on March
18, 1986 in Book 4215 Page 128 (the "Expansion Operating Lease").
W I T N E S S E T H:
WHEREAS, pursuant to the Operating Lease and the Expansion
Operating Lease, Lessor is leasing to Lessee certain land and air rights more
particularly described in Exhibits "A" and "B" respectively, annexed hereto and
made a part hereof, and the buildings and improvements located thereon, situate,
lying and being in the County and City of Atlantic, State of New Jersey, all as
more particularly defined in the Operating Lease and the Expansion Operating
Lease; and
WHEREAS, pursuant to that certain Amendment to Operating
Lease Agreement and the Expansion Operating Lease Agreement dated June 15,
1989, between Lessor and Lessee (the "First Amendment"), Lessor and
<PAGE>
Lessee amended certain terms and provisions of the Operating Lease and
Expansion Operating Lease; and
WHEREAS, pursuant to that certain Second Amendment to
Operating Lease Agreement and Expansion Operating Lease Agreement dated March
27, 1990 between Lessor and Lessee (the "Second Amendment"), Lessor and Lessee
further amended certain terms and provisions of the Operating Lease and the
Expansion Operating Lease; and
WHEREAS, pursuant to that certain Third Amendment to
Operating Lease Agreement and Expansion Operating Lease Agreement dated as of
August 1, 1991, between Lessor and Lessee (the "Third Amendment"), Lessor and
Lessee further amended certain terms and provisions of the Operating Lease and
theExpansion Operating Lease; and
WHEREAS, pursuant to that certain Fourth Amendment to
Operating Lease Agreement dated as of January 31, 1994, between Lessor and
Lessee (the "Fourth Amendment"), Lessor and Lessee further amended certain
terms and provisions of the Operating Lease; and
WHEREAS, the parties now desire to further modify certain
terms and provisions of the Operating Lease and the Expansion Operating Lease,
as same have been amended by the First Amendment, Second Amendment, Third
Amendment, and Fourth Amendment.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. (a) The following language appearing in Paragraph 1(b) of
the Third Amendment is hereby deleted in its entirety (but without thereby
limiting the effect of such language to set forth the agreement of the parties
from January 1, 1991 to the date hereof):
"For the period commencing on January 1,
1991 and ending on December 31, 1991, and for each
calendar year thereafter through and including the
calendar year ending on December 31, 1998, Basic Rent
<PAGE>
payable during each such calendar year shall be abated
in amounts to be determined by Lessee (the "Abatement")
in its reasonable discretion, provided the Abatement
applicable during any calendar year complies with the
following three (3) criteria:
(i) the Abatement shall not exceed $10,000,000
in any one calendar year;
(ii) the aggregate Abatement shall not exceed
$38,820,000 for the period commencing on January 1,
1991 and ending on December 31, 1998; and
(iii) Lessor shall have the right to limit the
Abatement allocated to any particular calendar year,
to the extent required to cover the payments
described in subsections (1) and (2) of the last
paragraph of Section 1 of the First Amendment.
Basic Rent may be abated during
the year 1999 and thereafter in amounts to be
determined by the Lessor."
(b) The following language is hereby inserted in
place of the language deleted pursuant to
subparagraph (a) above:
"(i) The Basic Rent payable on March 1,
1997 shall be reduced to an amount so that the total
amount of Basic Rent payable on March 1, 1997 shall
be $1,927,607;
(ii) The foregoing reduction in Basic Rent
consist of $867,953 of rent abatement and $1,300,000
of Deferred Rent (as that term is defined in the
Third Amendment);
(iii) The $1,300,000 of Deferred Rent
referred to in clause (ii) above shall be paid by
the Lessee to the Lessor under the circumstances set
<PAGE>
forth in the Third Amendment and as follows: $25,000
shall be payable each month after March of 1997 for
the remainder of 1997, $50,000 shall be payable
monthly for the year 1998 and thereafter until the
foregoing rent deferral is paid in full, provided,
however, that in the event the Lessee is awarded a
judgment or receives a settlement in connection with
the Lessee's claim against the general contractor or
any other parties arising out of the self-parking
garage accident, an amount of proceeds from any such
award or settlement not to exceed the outstanding
balance of the Deferred Rent under clause (ii) above
shall be paid to the Lessor
(iv) For the period commencing on April 1,
1997 and ending on December 31, 1997, and for each
calendar year thereafter through and including the
calendar year ending on December 31, 2003, Basic Rent
payable during each such calendar year shall be
abated in amounts to be determined by Lessee (the
"Abatement") in its reasonable discretion, provided
that:
(A) Lessor shall have the right to limit the
Abatement allocated to any particular calendar year
or to require the Lessee to pay Additional Rent, to
the extent required to cover the payments described
in subsections (1) and (2) of the last paragraph of
Section 1 of the First Amendment (which includes all
payment due under the Expandable Wraparound Mortgage
Loan Agreement dated October 31, 1983, as amended);
and (B) the Abatement, determined without reference
to this clause
(B), shall be reduced by $83,333 for each month of
the period commencing on January 1, 1999 and ending
on December 31, 2000; $125,000 for each month of the
calendar year 2001 and; $166,667 for each month of
each calendar year thereafter through and including
the calendar year ending on December 31, 2003.
<PAGE>
Basic Rent may be abated during the year
2004 and thereafter in amounts to be determined by
the Lessor."
2. Article 16 of the Operating Lease and the Expansion
Operating Lease are hereby amended as follows:
a. Section 16.1 of the Operating Lease and
Expansion Operating Lease are hereby amended to add the following to the end of
that Section:
"Lessor and Lessee agree that for the purposes of the September 30,
1998 Option Date, if Lessee exercises its purchase option, Lessor shall
sell to Lessee Lessor's Interest in the Property for the Fair Market
Value of the Property (as set forth above in this Section 16.1), but
in no event less than an amount equal to the sum of: (x) the amount
outstanding at the Option Date in respect of that certain Expandable
Wraparound Mortgage Loan Agreement dated as of October 31, 1983, as
amended from time to time, between the Lessor and Lessee; (y)
$2,500,000 and (3) any amount still outstanding in respect of the
$1,300,000 of Deferred Rent set forth in clause 1(b)(ii) above. The
costs of any appraisal requested by the Lessor to assist it in
negotiating Fair Market Value prior to institution of formal appraisal
proceedings shall be borne by the Lessee.
b. Section 16.4 of the Operating Lease and
Expansion Operating Lease are hereby amended so that after all references
therein to "relevant Option Date", the following is added:
"or if the option is exercised on September 30, 2003, on January 1,
2004,"
3. This Fifth Amendment & Fourth Expansion Amendment is
subject to prior approval by the New Jersey Casino Control Commission (the
"Commission") and shall not become effective until approval by the Commission
has been granted. Lessee shall use its best efforts to obtain such consent as
promptly as practical.
4. All of the obligations, terms and conditions set forth in
the Operating Lease and the Expansion Operating Lease, as same have been amended
by the First Amendment, the Second Amendment, the Third Amendment, and the
Fourth Amendment, shall remain unchanged and in full force and effect,
<PAGE>
except as specifically modified herein.
5. This Fifth Amendment & Fourth Expansion Amendment may be
signed 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Fifth Amendment & Fourth Expansion Amendment the day and year first above
written.
LESSOR:
Signed, Sealed and Delivered ATLANTIC CITY BOARDWALK
the Presence of or Attested by: ASSOCIATES, L.P.
/b/ Barbara A, Constantine By:/s/ Anthony C. Atchley
- -------------------------- -------------------------
Name: Name: Anthony C. Atchley
Title: General Partner
LESSEE:
Signed, Sealed and Delivered THE CLARIDGE AT PARK PLACE,
in the Presence of or Attested INCORPORATED
by:
/s/ Kathryn Loftus By:/s/ Robert M. Renneisen
- ------------------ --------------------------
Name: Name: Robert M. Renneisen
Title: Vice Chairman/Chief Executive
Officer
<PAGE>
STATE OF NEVADA )
: ss.:
COUNTY OF CLARK )
BE IT REMEMBERED, that on this 20th day of March, 1997,
before me, the subscriber, a Notary Public of the State of Nevada, personally
appeared Anthony C. Atchley 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 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/ Barbara A. Constantine
--------------------------
Notary Public
My Commission Expires:
January 7, 2000
STATE OF NEW JERSEY)
: ss.:
COUNTY OF ATLANTIC )
BE IT REMEMBERED, that on this 26 day of March, 1997, before
me, the subscriber, a Notary Public of the State of New Jersey, personally
appeared Robert M. Renneisen of THE CLARIDGE AT PARK PLACE, INCORPORATED, a New
Jersey corporation, and he thereupon acknowledged that he signed the foregoing
instrument as 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 THE CLARIDGE AT PARK PLACE,
INCORPORATED, a corporation.
/s/ Kathryn Loftus
------------------
Notary Public
My Commission Expires:
October 25, 1998
<PAGE>
Exhibit B
[Letterhead of The Claridge At Park Place, Incorporated]
March 26, 1997
Atlantic City Boardwalk Associates, L.P.
2880 West Meade Avenue, Suite 201
Las Vegas, Nevada 89102
Attention: General Partner
Re: Notice of Option to Extend Operating Lease Agreement
Dear Sir/Madam:
The undersigned hereby notifies you that in accordance with
Section 1.2 of the Operating Lease Agreement (the "Lease"), dated October 31,
1983, by and between Atlantic City Boardwalk Associates, L.P. ("Lessor"), and
The Claridge At Park Place, Incorporated ("Lessee"), the undersigned elects to
exercise its Option to Extend the Lease for an Extended Term (as defined in the
Lease) beginning on October 1, 1998.
THE CLARIDGE AT PARK PLACE,
INCORPORATED
/s/ Robert M. Renneisen
-----------------------
By: Robert M. Renneisen
Title: Vice Chairman/Chief Executive Officer
<PAGE>
EXHIBIT 12(b)
THE CLARIDGE HOTEL AND CASINO CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Loss) income before income
taxes and extraordinary items $(20,787) (2,278) (9,294) 8,554 10,123
Add:
One-third of rent expense to
Partnership deemed
representative of interest 12,854 12,546 12,073 11,527 11,553
Interest expense 9,350 9,516 9,956 4,173 4,240
Amortization of capitalized
interest 28 -0- -0- -0- -0-
-------- ------ ------ ------ ------
Income as adjusted $ 1,445 19,784 12,735 24,254 25,916
======== ====== ====== ====== ======
Fixed charges:
One-third of rent expense to
Partnership deemed
representative of interest $12,854 12,546 12,073 11,527 11,553
Interest expense 9,350 9,516 9,956 4,173 4,240
Capitalized interest 1,069 1,138 -0- -0- -0-
-------- ------ ------ ------ ------
Fixed charges $23,273 23,200 22,029 15,700 15,793
======== ====== ====== ====== ======
Ratio of earnings to fixed charges .06 .85 .58 1.54 1.64
======== ====== ====== ====== ======
</TABLE>
Earnings in 1996, 1995, and 1994 were insufficient to cover fixed charges by
$21,828,000, $3,416,000, and $9,294,000, respectively.
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000730409
<NAME> CLARIDGE HOTEL AND CASINO CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 8,532,000
<SECURITIES> 0
<RECEIVABLES> 20,643,000
<ALLOWANCES> 899,000
<INVENTORY> 278,000
<CURRENT-ASSETS> 31,753,000
<PP&E> 48,818,000
<DEPRECIATION> 13,630,000
<TOTAL-ASSETS> 164,163,000
<CURRENT-LIABILITIES> 39,027,000
<BONDS> 85,000,000
0
0
<COMMON> 5,000
<OTHER-SE> (9,839,000)
<TOTAL-LIABILITY-AND-EQUITY> 164,163,000
<SALES> 0
<TOTAL-REVENUES> 193,311,000
<CGS> 0
<TOTAL-COSTS> 116,798,000
<OTHER-EXPENSES> 87,712,000
<LOSS-PROVISION> 238,000
<INTEREST-EXPENSE> 9,350,000
<INCOME-PRETAX> (20,787,000)
<INCOME-TAX> (5,398,000)
<INCOME-CONTINUING> (15,389,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,389,000)
<EPS-PRIMARY> (3.05)
<EPS-DILUTED> 0
</TABLE>
