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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, 1998
[ ] 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 0-11287
THE CLARIDGE HOTEL AND CASINO CORPORATION
(Exact name of registrant as specified in its charter)
New York 22-2469172
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
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(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)
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
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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 30, 1999
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Class A Stock 5,062,500
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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 8, 1999 (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 93% of the Corporation's common stock is
owned by persons who also own limited partnership interests in the Partnership.
The Partnership does not currently engage in any significant business activities
other than those relating to the Claridge.
In October 1988, the Corporation and New Claridge entered into an
agreement to restructure the financial obligations of the Corporation and New
Claridge (the "Restructuring Agreement"). The restructuring, which was
consummated in June 1989, resulted in (i) a reorganization of the ownership
interests in the Claridge; (ii) modifications of the rights and obligations of
certain lenders; (iii) satisfaction and termination of the obligations and
commitments of Webb and DEWNJ under the original structure; (iv) modifications
of the lease agreements between New Claridge and the Partnership; and (v) the
forgiveness by Webb of substantial indebtedness.
On January 31, 1994, the Corporation completed an offering of $85 million
of First Mortgage Notes (the "Notes") due 2002, bearing interest at 11 3/4%. The
Notes are secured by (i) a non-recourse mortgage granted by the Partnership
representing a first lien on the Hotel Assets; (ii) a pledge granted by the
Corporation of all outstanding shares of capital stock of New Claridge; and
(iii) a guarantee by New Claridge. New Claridge's guarantee of the Notes is
secured by a collateral assignment of the second lien Expandable Wraparound
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
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revolving credit line arrangement. On January 28, 1997, New Claridge entered
into an agreement to subject its 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 its 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"). With the completion of the construction of the
self-parking garage, the proceeds of the offering of the Notes had largely been
expended.
Current Developments
During 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 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.
The Corporation has experienced recurring losses and deterioration in its
cash flow since 1996. Since the Corporation does not have substantial cash
reserves or access to a line of credit, the Corporation needed to experience
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 did improve over 1996 levels, due primarily to the
positive impact of the availability of the self-parking garage, lower bus
package pricing, and other cost containment initiatives. However, operating
results in 1998 fell below 1997 levels due to increased competition for casino
customers. In 1998, the Corporation experienced a net loss of $9.4 million,
compared to a net loss of $6.0 million in 1997. In the fall of 1998, New
Claridge redirected its bus program to reduce the number of customers who arrive
by bus, and, thereby, related costs. Total coin issued to bus passengers in 1998
was $13.5 million, compared to $15.0 million of coin issued to bus passengers in
1997. Marketing efforts are being directed toward the mid-level slot customer
through the use of promotions and advertising. Additionally, management
continues to conserve cash
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through various cost containment measures. Management will also consider various
refinancing alternatives, including a sale of the Corporation, or a
restructuring of its financial obligations.
In view of the operating results of New Claridge in 1998, and in order to
meet its obligations, management of the Corporation took several steps to
enhance its cash position, through both operational changes, including the
previously mentioned redirection of the bus program, and certain transactions
with PDS Financial Corporation ("PDS") and the New Jersey Casino Reinvestment
Development Authority ("CRDA"), as further discussed below.
In December 1997, New Claridge obtained a commitment from PDS for a sale
lease-back facility (the "Facility"). Under the terms of the Facility, New
Claridge could sell certain of its slot machines to PDS under a sale lease-back
arrangement, for a specified amount per slot machine. In February 1998, New
Claridge sold 370 slot machines to PDS for approximately $1 million under this
Facility. The machines were then leased back to New Claridge under an operating
lease arrangement for two years. After two years, New Claridge has an option to
either purchase the machines, renew the lease arrangement for twelve months, or
return the equipment to PDS. In December 1998, New Claridge completed the sale
of an additional 379 slot machines to PDS for approximately $776,000, under
terms similar to those described above. No additional financing is available
under this Facility.
In October 1998, the CRDA approved the direct investment of New Claridge
funds, already on deposit with the CRDA, and the completion of certain donations
of New Claridge funds also already on deposit. These transactions resulted in
the receipt by New Claridge of approximately $930,000 from the CRDA in December
1998.
In addition, in February 1999, the Corporation and New Claridge agreed to
a settlement of approximately $2.3 million in the arbitration proceedings
concerning the accident which took place in New Claridge's self-parking garage
in July 1996. The settlement proceeds were received by New Claridge in late
February 1999.
As a result of these transactions, on March 2, 1999, New Claridge was able
to pay the interest due on the Notes on February 1, 1999, under the 30-day grace
period allowed in accordance with the terms of the indenture governing the Notes
(the "Indenture").
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 under the terms of an operating lease (the "Operating
Lease"), and an expansion operating lease (the "Expansion Operating
Lease"), which covered certain expansion improvements made to the Claridge
in 1986 (the "Expansion Improvements"). The initial terms of both leases
expired on September 30, 1998; each lease provides for three ten-year
renewal options at the election of New Claridge. In connection with the
March 1, 1997 restructuring agreement (discussed below), New Claridge
agreed to exercise the first of the ten-year renewal options, extending
the term of the Operating Lease and Expansion Operating Lease through
September 30, 2008.
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Basic rent during the renewal term of each lease is calculated pursuant to
a defined formula, with such rent for the lease year commencing October 1,
1998 through September 30, 1999 not to be more than $29.5 million nor less
than $24 million for the Operating Lease, and not to be more than $3
million nor less than $2.5 million for the Expansion Operating Lease. In
addition, in each subsequent year, rent will be calculated pursuant to a
defined formula, but may not exceed 10% more than the basic rent for the
immediately preceding lease year. Basic rent, as calculated pursuant to
the defined formula, for the lease year commencing October 1, 1998, will
be $24 million for the Operating Lease and $2.5 million for the Expansion
Operating Lease.
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 are to 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 could not exceed $10
million in any one calendar year, and $38.8 million in the aggregate. All
of the $38.8 million of available rent abatements were fully utilized by
the end of March 1997.
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 (subject to acceleration
under certain circumstances).
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).
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Under the terms of the Operating Lease, as amended effective March 1,
1997, New Claridge had an option to purchase (the "Purchase Option"), on
September 30, 1998, the Hotel Assets and the underlying land. To exercise
the Purchase Option, New Claridge was required to give notice to the
Partnership, at least nine months prior to the option date, of its
election to do so. Based on its financial situation, New Claridge did not
give such notice to the Partnership in respect of the September 30, 1998
option date. However, New Claridge may also 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.
Effective September 30, 1998, the Operating Lease and Expansion Operating
Lease were further amended, pursuant to a Sixth Amendment to the Operating
Lease and Fifth Amendment to the Expansion Operating Lease (the "Sixth
Amendment"), to allow for the deferral of $1.1 million of rent in either
February 1999 or March 1999, dependent upon certain conditions being met.
These conditions, which must have occurred prior to March 2, 1999, include
(i) New Claridge having received the proceeds in connection with its
settlement of the parking garage litigation; and (ii) the Corporation or
New Claridge having paid the interest due on the Notes on February 1,
1999. New Claridge received the proceeds from the settlement of the
parking garage litigation in February 1999, and paid the interest that was
due on the Notes on March 2, 1999, within the 30-day grace period allowed
in accordance with the terms of the Indenture. The $1.1 million of basic
rent deferred in 1999 is to be paid to the Partnership in monthly
installments of $25,000 commencing January 1, 2000 until paid in full
(subject to acceleration under certain circumstances). This amendment also
provides for additional abatements of rent, through December 31, 2004, as
necessary to reduce the Partnership's cash flow to an amount necessary
only to meet the Partnership's cash requirements; these abatements,
however, are to be reduced by specified amounts for each period commencing
January 1, 2000 and ending December 31, 2004 ($83,333 per month in 2000,
$130,000 per month in 2001, $180,000 per month in 2002 and 2003, and
$130,000 per month in 2004).
In addition to the deferral and abatements of rent provided for in the
Sixth Amendment, the amendment provides for the payment of $3.5 million of
additional basic rent on the earlier of (i) the maturity date of the
Expandable Wraparound Mortgage Note (see below); (ii) such earlier date,
if any, as the entire principal amount of the Expandable Wraparound
Mortgage becomes due and payable; or (iii) the date on which any merger,
consolidation, or similar transaction to which the Corporation or New
Claridge is a party, or any sale of all or substantially all of the assets
of the Corporation or New Claridge is consummated, or any change in
control of the Corporation or New Claridge occurs.
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
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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 are to 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 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.
Effective September 30, 1998, the Corporation, New Claridge, and the
Partnership agreed to amend the March 1997 restructuring agreement to
provide for an extension of the maturity date of the Expandable Wraparound
Mortgage to January 1, 2005. In addition, the Expandable Wraparound
Mortgage Agreement and Note were amended to defer the principal payments
which were payable during the fourth quarter of 1998 (totalling $3.5
million) to the earlier of (i) the maturity date of the Expandable
Wraparound Mortgage Agreement and Note; (ii) such earlier date, if any, as
the entire principal amount of the Expandable Wraparound Mortgage Note
becomes due and payable; or (iii)
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the date on which any merger, consolidation, or similar transaction to
which the Corporation or New Claridge is a party, or any sale of all or
substantially all of the assets of the Corporation or New Claridge is
consummated, or any change of control of the Corporation or New Claridge
occurs.
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. It is estimated that at December 31, 1998, the aggregate amount payable
in respect of the Contingent Payment was $88.3 million.
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 could have been exercised any time
prior to December 31, 1997. Given the recent operating results (see Item 1.
Business - "Current Developments"), the Corporation was not able to exercise
this Contingent Payment option, and it expired in accordance with its terms on
December 31, 1997.
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, and move and enlarge two restaurants. 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
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levels with various adjacent mezzanine levels. The casino currently contains
approximately 1,752 slot machines and sixty-four table games, including
thirty-six blackjack tables, eight craps tables, five roulette tables, three
Caribbean stud poker tables, two mini-baccarat and two baccarat tables, and
eight 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, 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, 1998, the twelve existing casino facilities offered approximately
1,212,000 square feet of gaming space, a 3.3% increase over the casino square
footage as of December 31, 1997 of approximately 1,173,000 square feet. This
increase was primarily due to a casino expansion at Caesars Atlantic City
Casino, which added approximately 800 slot machines to its existing casino in
the second quarter in 1998. The increase in casino square footage in 1997 over
1996 was approximately 8.6%, resulting from the opening of Bally's Wild Wild
West Casino in July 1997. However, for the years ended December 31, 1998 and
1997, citywide gaming revenues, as reported, increased only 3.6% and 2.4%,
respectively, over prior year levels.
The Atlantic City gaming market is not expected to experience significant
growth over the next several years, until 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. In addition to recent increases in casino space and
hotel rooms at the existing casinos, several Las Vegas casino operators have
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, which was completed in May 1997, contains 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 is the largest
exhibition space between Boston and Atlanta. A 500-room non-casino hotel, which
is linked to the new convention center by an elevated walkway, opened in
November 1997. The development of the corridor which links the convention center
to the boardwalk area is complete, and features a wide, landscaped boulevard
with a reflecting pool, an expanded park area, and a 60-foot lighthouse which is
illuminated each night by a light show. In February 1997, construction of the
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. Construction of a $300 million tunnel, which will provide access from
the Atlantic City Expressway to the marina casino district, began in late 1998.
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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 also increased
their hotel space in 1997, including Harrah's (approximately 400 rooms), Hilton
(approximately 300 rooms), and Caesars (approximately 600 rooms), for a total
increase in 1997 of approximately 1,500 hotel rooms. 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, in the form of higher coin
incentives; New Claridge was forced to match the citywide increases, thus
increasing its per patron average coin cost to approximately $19 in 1996 from
approximately $13 in 1995. New Claridge relied heavily on attracting patrons who
travel to Atlantic City by bus because the Claridge previously lacked a
self-parking facility, and therefore had to remain competitive with other casino
operators in regards to the incentives offered. Even with its 1,200-space
parking facility, New Claridge continued to rely on its bus customers as a
significant source of business in 1997 and 1998. In 1997, citywide bus package
pricing competition eased somewhat; the average coin cost per patron arriving by
bus to the Claridge decreased to $16 in 1997. However, in 1998, bus package
pricing competition began to increase again, fueled by the expansion at Caesars
Atlantic City Casino (which added approximately 800 slot machines in early
1998), as well as the opening of Bally Park Place's bus transportation center in
the third quarter of 1998. In response to increasing bus package pricing,
beginning in the fall of 1998, New Claridge redirected its marketing efforts to
reduce the number of customers who arrive by bus, and, thereby, related costs.
In the fourth quarter of 1998, 130,000 passengers were brought to the Claridge
by bus, compared to 207,000 bus passengers in the same period of 1997, a
reduction of approximately 37%. Instead, efforts are being directed toward the
mid-level slot customer through the use of direct marketing promotions and
advertising, as well as the continued efforts to increase the table games
segment of the 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 majority of the Claridge's casino
revenue is generated by slot machine play, although efforts have been taken in
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recent years to increase table games play. In 1997, 76% of the Claridge's casino
revenue came from slot play as compared to 69% reported for all Atlantic City
properties. In 1998, 74% of the Claridge's casino revenue was generated from
slot play, compared to 70% 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. 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" below) 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.
Casino competition outside of New Jersey includes land-based casinos,
river boat gaming, slot machines at racetracks, and Indian gaming. By far, the
most competitive threat to Atlantic City has been the Indian gaming operations
at Foxwoods and the Mohegan Sun casinos in Connecticut, and the slot machine
facilities at the Delaware racetracks. The two Indian gaming casinos in
Connecticut, with a combined total of approximately 8,700 slot machines as of
December 31, 1998, reported total slot win of $1.1 billion for 1998, an increase
of 18% over 1997 slot revenue of $945 million. In Delaware, the three tracks
that are currently authorized to offer slot machine gaming had a combined total
of approximately 3,000 slot machines as of the end of 1998. These machines
generated $350.8 million of slot revenue during the year, an increase of 17%
over 1997 revenue. The Pennsylvania Senate recently voted against a bill which
would have allowed the state's voters to consider, in a non-binding referendum,
the authorization of riverboat casinos, slot machines at racetracks, and video
poker in drinking establishments. It is unlikely that Pennsylvania's Legislature
will consider another gambling bill while the current Governor, whose term ends
in January 2003, is in office. However, the effect of any future legalization of
casino gaming in Pennsylvania on the Atlantic City market would depend on the
form and scope of such gaming.
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
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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 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 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) who 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, must 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. 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
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Commission for the period commencing September 30, 1995.
d. Investigations and Disqualifications. The Commission may find any
holder of any amount of securities of the Corporation not qualified to own
securities of the Corporation. Further, as required by New Jersey, the charter
and the by-laws of the Corporation and New Claridge provide that securities of
the Corporation and New Claridge are held subject to the condition that if a
holder is found to be disqualified by the Commission the holder must dispose of
the securities of the Corporation or New Claridge, as the case may be. The
Corporation will periodically report the names and addresses of owners of record
of Class A Stock to the Commission as is required for all publicly traded
holding companies that have wholly-owned subsidiaries holding casino licenses.
e. Casino Fees and Taxes. The Act provides for a casino license issue fee
of not less than $200,000, based upon the cost of the investigation and
consideration of the license application, and renewal fee of not less than
$200,000, as amended in January 1995, based upon the cost of maintaining control
and regulatory activities. The renewal fee is charged to the casino licensee on
a monthly basis, based on the cost of actual investigatory time spent monitoring
activities at the casino hotel. 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.
Employees
As of December 31, 1998, New Claridge employed approximately 2,150
persons, of whom approximately 760 are represented by labor unions.
Approximately 650 of the 760 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
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renewed, together with the collective bargaining agreements of all Atlantic City
casinos with respect to Local 54, for a period of five years. The Corporation's
collective bargaining agreement covering the approximately 650 employees
represented by Local 54 is scheduled to expire in September 1999. The collective
bargaining agreements of all Atlantic City properties with respect to Local 54
also expire at that time.
The management of the Claridge believes that its employee relations are
generally satisfactory. All of the employees represented by labor unions are
covered by collective bargaining agreements which prohibit work stoppages during
their terms.
Item 2. PROPERTIES
The Claridge hotel was constructed in 1929 at the northeastern end of
Absecon Island, on which Atlantic City is located. After remodeling,
modernization and expansion at a cost of approximately $138 million, the
Claridge opened as a casino-hotel in July 1981. Located in the Boardwalk Casino
section of Atlantic City on Brighton Park, approximately 550 feet north of the
Boardwalk, the Claridge occupies three parcels of property.
The casino-hotel, situated on the main parcel (41,408 square feet with 138
feet fronting the park and 300 feet deep), is a concrete steel frame structure,
26 stories high at its highest point. The valet-parking garage, situated on an
adjacent parcel of land (21,840 square feet) west of the casino-hotel site, is
an eight-level reinforced concrete ramp structure, built in 1981. Including the
bus drive-through area, a bus patron waiting room and an electrical room, it
totals an area of 197,100 square feet and provides parking for approximately 475
vehicles. 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 retained the law firm of Zelle and Larson LLP of Minneapolis,
Minnesota to assist in the recovery of certain expenses incurred in reopening
the self-parking garage and potential lost profit claims. On July 22, 1997, New
Claridge filed a Complaint and Demand for Arbitration in the amount of $10
million against the general contractor and the architect for the garage,
alleging negligence, breach of warranty and breach of contract in the design and
construction of the garage. In February 1999, the Corporation and New Claridge
entered into a settlement agreement of approximately $2.3 million in the
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arbitration proceedings.
A wrongful death action was commenced by the estates of the two patrons
who died in the July 1996 accident in the self-parking garage. New Claridge is
fully insured and indemnified for any financial liability that may result due to
either an award to or a negotiated settlement with the plaintiffs in this
action.
During 1995, the Corporation received notice from the Internal Revenue
Service ("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 consolidated 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. In January 1997, the Corporation
filed a petition with the United States Tax Court (the "Court") requesting a
redetermination of the asserted deficiency. In January 1999, the Corporation
reached a settlement agreement with the IRS District Counsel, which was
submitted to the Court on January 25, 1999. On March 4, 1999, the Court
confirmed this settlement. This settlement agreement does not have a material
impact on the Corporation's consolidated financial statements.
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 February 16, 1999, there were approximately
491 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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Item 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data for the years ended December 31, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----- ---- ---- ---- ----
(in thousands except per share data)
Income Statement Data
<S> <C> <C> <C> <C> <C>
Net revenues $ 191,000 192,753 193,311 203,348 190,755
Net loss $ (9,415) (5,979) (15,389) (1,908) (6,901)
Net loss per share $ (1.89) (1.20) (3.05) (.38) (1.37)
Balance Sheet Data at Year End
Total assets $ 131,776 150,380 164,163 189,074 190,484
Current assets $ 18,403 37,096 31,753 55,542 59,426
Current liabilities $ 42,088 41,234 39,027 40,420 37,003
Long-term debt, net of
note payable and
current installments
of long-term debt $ 85,170 85,023 85,000 85,000 85,000
Stockholders' (deficiency) equity $ (25,228) (15,813) (9,834) 5,555 7,463
</TABLE>
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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, 1998
The Corporation had a net loss of $9,415,000 for the year ended December
31, 1998, compared to a net loss of $5,979,000 for the year ended December 31,
1997.
Total Claridge casino revenues during 1998 were $166,010,000, a slight
increase over 1997 total casino revenues of $165,371,000. Citywide casino
revenues, as reported, for the year ended December 31, 1998 increased 3.6% over
1997 revenues. As of December 31, 1998, the twelve existing casino facilities
offered approximately 1,212,000 square feet of gaming space, a 3.3% increase
over the casino square footage as of December 31, 1997 of approximately
1,173,000 square feet. This increase was primarily due to a casino expansion at
Caesars Atlantic City Casino ("Caesars"), which added approximately 800 slot
machines to its existing casino in the second quarter of 1998.
New Claridge's table games revenue for 1998 was $43,762,000, reflecting
an 11.5% increase over 1997 table games revenue of $39,256,000. Table games drop
(the amount of gaming chips purchased by patrons) increased 16.1% in 1998 over
the 1997 drop; however, the hold percentage (the percentage of win to drop)
declined, to 13.7% in 1998, from 14.2% in 1997. The increase in table games drop
is attributable to ongoing efforts to increase that segment of New Claridge's
casino business, through various marketing programs aimed at domestic Asian
table games business, junket business, and player development programs. Citywide
table games drop, as reported, decreased slightly in 1998 from 1997 levels;
however, the citywide hold percentage increased to 15.8% (from 15.5% in 1997),
resulting in an increase in citywide table games revenue of 1.9% in 1998 over
the prior year.
New Claridge's slot machine revenues during 1998 were $122,248,000, a
decrease of 3.1% from 1997 slot machine revenues. Citywide slot machine
revenues, as reported, increased 3.9% in 1998 over 1997 revenues. However, as a
result of the 4.9% increase in the average number of slot machines available
citywide (primarily resulting from the casino expansion at Caesars), the
citywide win per machine per day actually decreased 1.4% from 1997 levels. The
average number of slot machines at the Claridge in 1998 was in line with the
1997 average, while New Claridge's win per slot machine per day decreased 3.1%.
Citywide competition for attracting customers who arrive in Atlantic
City by bus continued to accelerate in the second half of 1998, as companies
struggled to increase revenues to support recently expanded properties, such as
the opening of Caesars and the new bus center at Bally's Park Place Casino. As a
result, coin incentives issued to bus customers increased. During the fourth
quarter of 1998, New Claridge redirected its bus program to reduce the number of
customers who arrive by bus, and, thereby, related costs. During 1998, 842,000
casino customers arrived at the Claridge by bus, and were issued $13,500,000 in
coin incentives, for an average incentive per passenger of $16. This compares to
the 955,000 bus customers who arrived at the Claridge in 1997 and were issued a
total of $15,023,000 of coin incentives, also an average of $16 per passenger.
Marketing efforts have been directed toward the mid-level slot customer through
the use of direct promotions and advertising. Through these direct marketing
programs, 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 level of gaming activity. Promotional incentives issued through these
programs in 1998 totalled $11,612,000, compared to $11,366,000 in 1997.
Hotel revenues in 1998 were $9,576,000, an increase of 1.3% over 1997
revenues of $9,456,000. Hotel occupancy in 1998 was 89%, slightly lower than the
91% occupancy in 1997; however, the average room rate
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in 1998 increased to $59, from $58 in 1997. Food and beverage revenues in 1998
were $18,989,000, reflecting a 3.2% decrease from prior year revenues of
$19,609,000; this decrease was primarily due to a reduction in complimentary
beverages served on the casino floor. Although food revenues in 1998 were in
line with the prior year, the number of covers (meals served) decreased to
1,163,000, from 1,364,000 in 1997, while the average price per cover increased
to $11.22 in 1998 from $9.56 in 1997. The reduction in the number of covers was
reflected primarily in the buffet; this outlet was temporarily closed in early
1998 for renovations, and was permanently closed at the end of November 1998 as
part of the refocusing of marketing efforts away from the bus program.
Promotional allowances, which represent the value of goods and services provided
free of charge to customers under various marketing programs, increased 4.1 % in
1998 to $20,056,000, from $19,272,000 in 1997.
Total costs and expenses during 1998 of $200,415,000 were slightly
higher than 1997 expenses. Casino operating expenses of $102,150,000 increased
5.6% over 1997 expenses, resulting from higher payroll costs and marketing costs
related to the initiatives to increase table games business, higher costs of
providing promotional allowances, and higher slot equipment rental costs as a
result of the limited capital expenditure funding available and certain popular
varieties of slots being available for lease only. Hotel and food and beverage
expenses during 1998 decreased 15.9% from 1997 expenses, primarily due to lower
cash revenues. Rent expense to the Partnership of $26,374,000 is lower than 1997
expense of $30,554,000 resulting primarily from increased abatements of rent,
which are recorded as a reduction to rent expense; during 1998, approximately
$11.1 million of rent was abated, compared to approximately $9.0 million in
1997.
For the year ended December 31, 1998, the Corporation recorded an income
tax benefit of $4,391,000, which represents the tax benefit likely to be
realized as a result of the carry forward of Federal net operating losses,
offset by an increase in the valuation allowance of $4,391,000. For the year
ended December 31, 1997, the Corporation recorded an income tax benefit of
$2,311,000, which represents the tax benefit likely to be realized as a result
of the carry forward of Federal net operating losses, offset by an increase in
the valuation allowance of $2,311,000.
Results of Operations for the Year Ended December 31, 1997
The Corporation had a net loss of $5,979,000 for the year ended December
31, 1997, compared to a loss of $20,787,000 before an income tax benefit of
$5,398,000 for the year ended December 31, 1996. For the year ended December 31,
1997, the Corporation recorded an income tax benefit of $2,311,000, offset by an
increase in the valuation allowance of $2,311,000.
During 1997, New Claridge's casino revenues were $165,371,000, an
increase of 1.2% over total 1996 casino revenues of $163,369,000. Citywide
casino revenues, as reported, for the year ended December 31, 1997, increased
2.4% over 1996 revenues. As of December 31, 1997, the twelve existing casino
facilities offered approximately 1,173,000 square feet of gaming space
(including the addition of Bally's Wild Wild West Casino on July 1, 1997), an
8.6% increase over the casino square footage as of December 31, 1996 of
approximately 1,080,000. In addition, the number of hotel rooms available
citywide increased, resulting from additions at Harrah's (approximately 400
rooms), Caesars (approximately 600 rooms), and the Hilton (approximately 300
rooms), as well as the 500-room non-casino hotel linked to the new convention
center.
New Claridge's table games revenue for 1997 was $39,256,000, a decrease
of 2.8% from 1996 table games revenue of $40,374,000. Although table games drop
during 1997 increased 1.2% over 1996 levels, the hold percentage decreased to
14.2% in 1997 from 14.8% in 1996. Citywide table games drop, as reported,
increased 3.0% during 1997 over 1996 levels, while citywide table games revenue
decreased slightly from 1996 revenues, resulting from a reduction in the
citywide hold percentage, to 15.5% in 1997, from 15.9% in 1996.
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New Claridge's slot machine revenue during 1997 was $126,115,000,
reflecting an increase of 2.5% over 1996 revenues of $122,995,000. Citywide slot
machine revenue during 1997, as reported, increased 3.6% over 1996 revenues. The
number of slot machines available citywide increased 7.3%, primarily as a result
of the opening of Bally's Wild Wild West Casino on July 1, 1997, while the
average number of slot machines available at the Claridge decreased 6.0% from
1996 as a result of a reconfiguration of the casino floor in early 1997 which
provided a more comfortable atmosphere for casino patrons. As a result, New
Claridge's average win per slot machine per day was $197 in 1997, an increase of
8.8% over 1996, compared to a 3.1% decline in the 1997 citywide average win per
slot machine per day, to $220.
During 1997, competition for attracting bus passengers in Atlantic City
eased somewhat, as evidenced by reductions in the average coin packages offered
to patrons. In 1997, approximately 955,000 casino patrons arrived at the
Claridge by bus and were issued $15,023,000 in coin incentives, resulting in an
average coin incentive per passenger of $16. This compares to 1,015,000 bus
passengers arriving at the Claridge in 1996, at an average coin incentive per
passenger of $19, for a total of $19,495,000 of coin incentives. Promotional
incentives issued through New Claridge's direct marketing programs in 1997
totalled $11,366,000, compared to $11,031,000 in 1996.
Hotel revenues earned in 1997 of $9,456,000 were 3.3% higher than 1996
revenues of $9,150,000. Hotel occupancy in both 1997 and 1996 was 91%, while the
average room rate was $58 and $56, respectively. Food and beverage revenues
earned during 1997 were $19,609,000, reflecting a 4.8% decline from 1996
revenues. This decrease was due primarily to a reduction in the number of covers
in 1997 to 1,364,000 from 1,735,000 covers in 1996, offset somewhat by an
increase in the average price per cover to $9.56 in 1997 from $8.08 in 1996. The
decrease in volume was due primarily to a decline in buffet business, as well as
the outsourcing of New Claridge's "fast food" restaurant in late 1996.
Promotional allowances increased slightly during 1997 to $19,272,000, from
$19,241,000 in 1996.
Total costs and expenses for the year ended December 31, 1997 were
$198,732,000, reflecting a 7.2% decrease from 1996 expenses. Casino expenses of
$96,760,000 were 3.5% lower than 1996 expenses as a result of the lower bus
program coin incentives paid, as well as lower payroll costs resulting from
reduced staffing levels initiated as part of New Claridge's cost containment
efforts. Food and beverage expenses of $9,811,000 were 10.3% lower than 1996
expenses, due to lower payroll and other operating costs as a result of the
reduced volume in the restaurants and cost containment efforts. General and
administrative expenses of $27,157,000 decreased 11.1% from 1996 levels, due to
lower advertising expenditures and decreased payroll costs resulting from lower
staffing levels; 1997 expenses included approximately $1.3 million for financial
and legal services related to the Corporation's attempted reorganization early
in the year. Interest expense in 1997 was higher than 1996 due to the
capitalization of interest during the construction of the self-parking garage
facility in 1996. Rent expense to the Partnership in 1997 of $30,554,000 was
lower than 1996 expense due to the abatement of rent pursuant to the March 1,
1997 amendments to the Operating Lease and Expansion Operating Lease (see
"Liquidity and Capital Resources"). For the year ended December 31, 1997, the
reduction to lease expense resulting from the abatement of rent was
approximately $9 million.
For the year ended December 31, 1997, the Corporation recorded an income
tax benefit of $2,311,000,which represents the tax benefit likely to be realized
as a result of the carry forward of Federal net operating losses, offset by an
increase in the valuation allowance of $2,311,000. For the year ended December
31, 1996, the Corporation recorded an income tax benefit of $5,398,000, which
represents the tax benefit likely to be realized as a result of the carry
forward of Federal net operating losses, net of an increase in the valuation
allowance of $2,460,000 and increased deferred tax credits.
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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, 1998, the Corporation's Excess Cash
was less than $10 million, and therefore the Corporation is not required to make
an Excess Cash Offer in 1998.
At December 31, 1998, the Corporation had a working capital deficiency
of $23,685,000, as compared to a working capital deficiency of $4,138,000 at
December 31, 1997. The increase in the working capital deficiency is principally
attributable to a decrease in receivables of $15,906,000 (primarily due to a
decrease in the current portion of the Expandable Wraparound Mortgage due from
the Partnership resulting from principal payments received), a decrease in cash
and cash equivalents of $2,626,000, a decrease in prepaid expenses and other
current assets of $200,000, an increase in other current liabilities of
$209,000, an increase in accounts payable of $333,000, and an increase in the
current portion of long term debt (which represents capital lease obligations)
of $312,000. Current liabilities at December 31, 1998 and 1997 included deferred
rental payments of $15,078,000, and the $3.6 million loan from the Partnership
plus accrued interest thereon of $4,122,000 and $3,690,000 at December 31, 1998
and 1997, 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
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place. If these amounts were not included in current liabilities, the
Corporation's working capital deficiency at December 31, 1998 would have been
$885,000 and the Corporation would have had working capital of $18,230,000 at
December 31, 1997.
For the year ended December 31, 1998, cash flows used in operating
activities were $16,735,000, compared to cash flows used in operating activities
of $11,543,000 for the year ended December 31, 1997. The increase in cash used
in operating activities was primarily due to the increase in pre-tax net loss.
Cash flows provided by investment activities for the year ended December 31,
1998 were $14,343,000, compared to cash flows provided by investment activities
of $15,451,000 for the year ended December 31, 1997. Cash flows provided by
investment activities in 1998 and 1997 were primarily from the receipt of
Expandable Wraparound Mortgage principal payments. In addition, cash flows in
1998 included the approximately $1.8 million in proceeds received from PDS for
the sale of certain slot machines under a sale lease-back arrangement. Cash
flows used by financing activities in 1998 and 1997 represent payments of
capital lease obligations for certain gaming equipment.
For the year ended December 31, 1998, the Corporation's "Adjusted
EBITDA" was $8,554,000, compared to $12,432,000 for the year ended December 31,
1997. "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, 1998, 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 .52, from .71 in 1997, and compared to .06 in 1996. The
deficiency of earnings to fixed charges in 1998, 1997 and 1996 was $9,358,000,
$5,922,000, and $21,828,000, respectively. Refer to the independent auditors'
report regarding going concern of the Corporation. Management of the Corporation
is considering various refinancing alternatives, including a sale of the
Corporation, or a restructuring of its financial obligations.
During 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 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
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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.
The Corporation has experienced recurring losses and deterioration in
its cash flow since 1996. Since the Corporation does not have substantial cash
reserves or access to a line of credit, the Corporation needed to experience
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 did improve over 1996 levels, due primarily to the
positive impact of the availability of the self-parking garage, lower bus
package pricing, limited capital expenditures, and other cost containment
initiatives. However, operating results in 1998 fell below 1997 levels due to
increased competition for casino customers. In 1998, the Corporation experienced
a net loss of $9.4 million, compared to a net loss of $6.0 million in 1997. In
the fall of 1998, New Claridge redirected its bus program to reduce the number
of customers who arrive by bus, and, thereby, related costs. Total coin issued
to bus passengers in 1998 was $13.5 million, compared to $15.0 million of coin
issued to bus passengers in 1997. Marketing efforts are being directed toward
the mid-level slot customer through the use of promotions and advertising.
Additionally, management continues to conserve cash through various cost
containment measures. Management is also considering various refinancing
alternatives, including a sale of the Corporation, or a restructuring of its
financial obligations.
In view of the operating results of New Claridge in 1998, and in order
to meet its obligations, management of the Corporation took several steps to
enhance its cash position, through both operational changes, including the
previously mentioned redirection of the bus program, and certain transactions
with PDS and CRDA, as further discussed below.
In December 1997, New Claridge obtained a commitment from PDS for a sale
lease-back facility (the "Facility"). Under the terms of the Facility, New
Claridge could sell certain of its slot machines to PDS under a sale lease-back
arrangement, for a specified amount per slot machine. In February 1998, New
Claridge sold 370 slot machines to PDS for approximately $1 million under this
Facility. The machines were then leased back to New Claridge under an operating
lease arrangement for two years. After two years, New Claridge has an option to
either purchase the machines, renew the lease arrangement for twelve months, or
return the equipment to PDS. In December 1998, New Claridge completed the sale
of an additional 379 slot machines to PDS for approximately $776,000, under
terms similar to those described above. No additional financing is available
under this Facility.
In October 1998, the CRDA approved the direct investment of New Claridge
funds, already on deposit with the CRDA, and the completion of certain donations
of New Claridge funds also already on deposit. These transactions resulted in
the receipt by New Claridge of approximately $930,000 from the CRDA in December
1998.
In addition, in February 1999, the Corporation and New Claridge agreed
to a settlement of approximately $2.3 million in the arbitration proceedings
concerning the accident which took place in New Claridge's self-parking garage
in July 1996. The settlement proceeds were received by New Claridge in late
February 1999.
As a result of these transactions, on March 2, 1999, New Claridge was
able to pay the interest that was due on the Notes on February 1, 1999, under
the 30-day grace period allowed in accordance with the terms of the Indenture.
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
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Expandable Wraparound Mortgage, granted by the Partnership to New Claridge, by
its terms may secure up to $25 million of additional loans to the Partnership
from New Claridge to finance the replacements of furniture, fixtures and
equipment, facility maintenance, and engineering shortfalls. The advances to the
Partnership are in the form of FF&E Loans and are secured by the Hotel Assets.
One half of the FF&E Loan principal is due in the 48th month following the
advance, with the remaining balance due in the 60th month following the date of
issuance. In connection with the offering of $85 million of First Mortgage Notes
on January 31, 1994, the Corporation agreed to use not less than $8 million from
the net proceeds of the offering to finance internal improvements to the
Claridge, which were funded through additional FF&E Loans. In connection
therewith, the Expandable Wraparound Mortgage Loan agreement as well as the
Operating Lease, and the Expansion Operating Lease were amended to provide that
the principal on these additional FF&E Loans will be payable at final maturity
of the Expandable Wraparound Mortgage. New Claridge is obligated to pay as
additional rent to the Partnership the debt service on the FF&E Loans.
The Expandable Wraparound Mortgage requires monthly principal payments
to be made by the Partnership to New Claridge, commencing in the year 1988 and
continuing through the year 1998, in escalating amounts 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, 1998 (including the outstanding
FF&E Loans and the $20 million of deferred interest) was $86.2 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 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.
Effective September 30, 1998, the Corporation, New Claridge, and the
Partnership agreed to amend the March 1997 restructuring agreement to provide
for an extension of the maturity date of the Expandable Wraparound Mortgage to
January 1, 2005. In addition, the Expandable Wraparound Mortgage Agreement and
Note were amended to defer the principal payments which were payable during the
fourth quarter of 1998 (totalling $3.5 million) to the earlier of (i) the
maturity date of the Expandable Wraparound Mortgage Agreement and Note; (ii)
such earlier date, if any, as the entire principal amount of the Expandable
Wraparound Mortgage becomes due and payable; or (iii) the date on which any
merger, consolidation or similar transaction to which the Corporation or New
Claridge is a party, or any sale of all or substantially all of the assets of
the Corporation or New Claridge is consummated, or any change of control of the
Corporation or New Claridge, occurs.
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The Hotel Assets are owned by the Partnership and leased by the
Partnership to New Claridge under the terms of an Operating Lease originally
entered into on October 31, 1983, and an Expansion Operating Lease, which
covered the expansion improvements made to the Claridge in 1986. The initial
terms of both leases expired on September 30, 1998; each lease provides for
three ten-year renewal options at the election of New Claridge. In connection
with the March 1997 restructuring agreement, New Claridge agreed to exercise the
first of the ten-year renewal options, extending the term of the Operating Lease
and Expansion Operating Lease through September 30, 2008.
Basic rent during the renewal term of each lease is calculated pursuant
to a defined formula, with such rent for the lease year commencing October 1,
1998 through September 30, 1999 not to be more than $29.5 million nor less than
$24 million for the Operating Lease, and not to be more than $3 million nor less
than $2.5 million for the Expansion Operating Lease. In addition, in each
subsequent lease year, rent will be calculated pursuant to a defined formula,
but may not exceed 10% more than the basic rent for the immediately preceding
lease year. Basic rent, as calculated pursuant to the defined formula for the
lease year commencing October 1, 1998 will be $24 million for the Operating
Lease and $2.5 million for the Expansion Operating Lease.
New Claridge is also required to pay, as additional rent, certain
amounts including certain taxes, insurance, and other charges related to the
occupancy of the land and Hotel Assets, certain expenses and debt service
related to furniture, fixture and equipment replacements and building
improvements, and the general and administrative costs of the Partnership.
Effective with the consummation of the restructuring in June 1989, the
Operating Lease Agreement and Expansion Operating Lease Agreement were amended
to provide for the deferral of $15.1 million of rental payments due 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. Lease expense (which had been recognized on
leveled basis in accordance with Statement of Financial Accounting Standards No.
13) was reduced prospectively as a result of the abatements provided for in
connection with the June 1989 restructuring. 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 could not exceed $10 million in any one calendar
year, and $38.8 million in the aggregate. All of the $38.8 million of available
rent abatements were fully utilized by the end of March 1997.
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 (subject to
acceleration under certain circumstances).
Under the terms of the Operating Lease, as amended effective March 1,
1997, New Claridge had an option to purchase (the "Purchase Option"), on
September 30, 1998, the Hotel Assets and the underlying land. To exercise the
Purchase Option, New Claridge was required to give notice to the Partnership, at
least nine months prior to the option date, of its election to do so. Based on
its financial situation, New Claridge did not give such notice to the
Partnership in respect of the September 30, 1998 option date. However, New
Claridge may also exercise an option, on September 30, 2003, to purchase the
Hotel Assets and the underlying land, on
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January 1, 2004, for their fair market value at the time the option is
exercised.
Effective September 30, 1998, the Operating Lease and Expansion
Operating Lease were further amended, to allow for the deferral of $1.1 million
of rent in either February 1999 or March 1999, dependent upon certain conditions
being met. These conditions, which must have occurred prior to March 2, 1999,
include (i) New Claridge having received the proceeds in connection with its
settlement of the parking garage litigation; and (ii) the Corporation or New
Claridge having paid the interest that was due on the Notes on February 1, 1999.
New Claridge received the proceeds from the settlement of the parking garage
litigation in February 1999, and paid the interest due on the Notes on March 2,
1999, within the 30-day grace period allowed in accordance with the terms of the
Indenture. The $1.1 million of basic rent deferred in 1999 is to be paid to the
Partnership in monthly installments of $25,000 commencing January 1, 2000 until
paid in full (subject to acceleration under certain circumstances). This
amendment also provides for additional abatements of rent, through December 31,
2004, as necessary to reduce the Partnership's cash flow to an amount necessary
only to meet the Partnership's cash requirements; these abatements, however, are
to be reduced by specified amounts for each period commencing January 1, 2000
and ending December 31, 2004 ($83,333 per month in 2000, $130,000 per month in
2001, $180,000 per month in 2002 and 2003, and $130,000 per month in 2004).
In addition to the deferral and abatements of rent provided for in the
Sixth Amendment, the amendment provides for the payment of $3.5 million of
additional basic rent on the earlier of (i) the maturity date of the Expandable
Wraparound Mortgage Note; (ii) such earlier date, if any, as the entire
principal amount of the Expandable Wraparound Mortgage becomes due and payable;
or (iii) the date on which any merger, consolidation, or similar transaction to
which the Corporation or New Claridge is a party, or any sale of all or
substantially all of the assets of the Corporation or New Claridge is
consummated, or any change in control of the Corporation or New Claridge occurs.
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.
No tax benefit was recorded for the years ended December 31 1998 and
1997, due to the increase in the valuation allowance provided, resulting from
the uncertainty of realizing any tax benefit in future periods as a result of
the current financial condition of the Corporation (see Item 1. Business -
"Current Developments"). The components of income tax expense did not change
significantly from the prior years except for the increase in the valuation
allowance of $4,391,000 and $2,311,000, which was provided against deferred tax
assets as of December 31, 1998 and 1997, respectively.
Management of the Corporation is aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"year 2000" problem is the result of computer programs which were written using
two digits rather than four to define the applicable year, which could cause
certain systems to recognize the year 2000 as the year 1900. The Corporation has
assessed its hardware, software, and other non-Information Technology ("IT")
systems, and believes it has a plan in place to address year 2000 issues on a
timely basis. The Corporation's management anticipates using primarily internal
staff to identify, correct, and test the systems for year 2000 compliance,
which, therefore, will not likely result in incremental costs, but rather will
represent a redeployment of existing IT resources. While non-essential, non-year
2000 IT projects may be delayed, adequate resources are available to address
essential non-year 2000 projects, such as regulatory requirements and marketing
programs. The total cost of addressing year 2000 issues is estimated to be
approximately $2.3 million. Approximately 70% of the total cost relates to
labor, while the remaining 30% relates to the cost of supplies, equipment,
software and hardware. Through December 31, 1998, the Corporation has spent
approximately $800,000, or 35% of the anticipated total year 2000 project cost.
The Corporation does
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not expect the amounts required to be expensed related to correcting the year
2000 problem to have a material effect on its financial position or results of
operations. Although management of the Corporation anticipates completion of
this project by the end of 1999, there can be no assurances of this. If the
modifications are not completed timely, the year 2000 problem could have a
material impact on the Corporation's ability to conduct its business.
In addition to addressing its internal systems, the Corporation is
contacting its significant vendors concerning their year 2000 readiness, and is
formulating contingency plans in the event that certain vendors are not able to
fulfill their obligations to the Corporation.
Recently Issued Accounting Pronouncements
On January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 establishes standards for disclosures
about segments of a company and provides different information about the
different type of business activities in which a company engages, and the
different economic environments in which it operates. This statement supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise". The
adoption of SFAS 131 did not have an effect on the Corporation's financial
statements, since the Corporation operates in only one segment.
Factors Which May Influence the Corporation's Future Operating Results
The Atlantic City gaming market is not expected to experience
significant growth beginning over the next several years, until 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 1997 and 1998, current operations in
certain markets, most notably Indian gaming in Connecticut and slot machine
facilities at the Delaware racetracks, have had, and may continue to have, an
impact on the Atlantic City casino industry. In 1998, the three racetracks in
Delaware which offer slot machines reported revenues of $350.8 million, an
increase of 17% over 1997 revenues of $298.9 million. A bill, which was passed
in 1998 by the Delaware State Legislature, increased the number of slot machines
authorized at any of the three licensed facilities from the previous maximum of
1,000 machines to a new maximum of 2,000 machines. This will allow the Delaware
facilities to rival the slot capacity of many of the casinos in Atlantic City.
The Foxwoods Casino and the Mohegan Sun Resort in Connecticut reported total
slot win of $1.1 billion in 1998, an increase of 18% over 1997 slot revenues of
$945 million. 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.
26
<PAGE>
Item 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No effect.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedules are set forth
at pages F-1 to F-29 of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
27
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THIS REGISTRANT
Name Office Age
---- ------ ---
Robert M. Renneisen Chairman, President, Director 52
James M. Montgomery Vice Chairman, Director 59
David W. Brenner Director 63
Shannon L. Bybee Director 60
A. Bruce Crawley Director 53
Ned P. DeWitt Director 59
Mark H. Sayers Director 49
Jean I. Abbott Executive Vice President 43
Frank A. Bellis, Jr. Senior Vice President, Secretary 45
Albert T. Britton Executive Vice President 42
Glenn S. Lillie Vice President 50
Business Experience
Mr. Renneisen has served as Chairman of the Board of Directors of the
Corporation since June 1998, as President of the Corporation since June 1992,
and as Chief Executive Officer of the Corporation and New Claridge since July
1993. He was Vice Chairman of New Claridge from June 1994 to June 1998. 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. Montgomery has served as Vice Chairman of the Board of Directors
of the Corporation since June 1998, and has been 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. Brenner has served as a member of the Board of Directors of the
Corporation since February 1991, and was Chairman of the Board of Directors from
August 1993 to June 1998. 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. 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. From July 1993
28
<PAGE>
to August 1994, Mr. Bybee served as President and Chief Operating Officer for
United Gaming, Inc. Mr. Bybee was the Corporation's Chairman of the Board from
November 1988 to July 1993, and from August 1988 to October 1988. In June 1989,
Mr. Bybee was appointed to serve as the Chief Executive Officer of the
Corporation and New Claridge, a position he held through July 1993. From 1983 to
1987, he was Senior Vice President of Golden Nugget, Incorporated which operated
the Golden Nugget Casino Hotel in Atlantic City. From 1981 to 1983, Mr. Bybee
was President of GNAC Corporation, which operated the Golden Nugget Casino Hotel
in Atlantic City.
Mr. Crawley has served as a member of the Board of Directors of the
Corporation since February 1995. He currently serves as President and Director
of Public Relations and Marketing Services for Crawley, Haskins & Rodgers, a
Philadelphia based public relations and advertising firm. Prior to establishing
his own firm in May 1989, Mr. Crawley was employed at First Pennsylvania Bank
and First Pennsylvania Corporation, where he served as Senior Vice President and
Director of Public and Investor Relations. He also served, from 1976 to 1979, as
Vice President and Director of Advertising for First Pennsylvania Bank and First
Pennsylvania Corporation.
Mr. DeWitt has served as a member of the Board of Directors of the
Corporation since May 1995. Since July 1997, Mr. DeWitt has been Chairman and
Chief Executive Officer of U'Race Corporation. Mr. DeWitt served as President,
Chief Executive Officer, and a member of the Board of Directors of LBE
Technologies, Incorporated, in Saratoga, California, from November 1994 to
February 1997. 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. 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 has served as Executive Vice President of Finance and
Corporate Development of New Claridge since September 1997. From September 1996
to August 1997, she served as Executive Vice President of Operations, and from
July 1995 to August 1996, she was Executive Vice President of Marketing and
Casino Operations. Ms. Abbott served as a member of the Board of Directors of
the Corporation from August 1989 to June 1994, and served as a consultant to the
Corporation until March 26, 1994, at which time she became a Vice President of
New Claridge. From October 1992 to July 1993, Ms. Abbott was Finance Director
for the United Way of Atlantic County. She was Assistant Professor at Stockton
State College from September 1989 to June 1991. She served as Senior Vice
President, Treasurer of the Corporation and Senior Vice President, Controller of
New Claridge from May 1987 to September 1989. She was Vice President, Controller
of New Claridge from October 1985 to May 1987 and she was Director of Finance of
New Claridge from April 1984 to October 1985. From October 1980 through April
1984, Ms. Abbott held various executive positions with New Claridge and 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.
29
<PAGE>
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.
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 8, 1999.
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 8, 1999 is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1998, there were no beneficial owners of more than
5% of the Corporation's Class A Stock.
On February 12, 1992, the Corporation's Board of Directors approved a
Long Term Incentive Plan which provided for the grant to certain key officers of
the Corporation and/or New Claridge of the 273,938 shares which were held as
treasury shares by the Corporation. These shares were issued to the key
employees upon approval by the Commission on April 15, 1992, and upon receipt
the transfer of, and right to continue to hold the shares, are subject to
certain vesting restrictions.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has a direct material interest in the Expandable
Wraparound Mortgage Loan Agreement, the Operating Lease and the Expansion
Operating Lease together with amendments thereto. See Item 1.
Business - "Corporate Structure."
30
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1)and(2): The response to this portion of Item 14 is submitted as
a separate section of this report beginning on page F-1. All
other schedules have been omitted as inapplicable, or not
required, or because the required information is included in
the Consolidated Financial Statements or notes thereto.
(a)(3) Exhibits. The exhibits required to be filed as part of this
annual report on Form 10-K are listed in the attached Index
to Exhibits.
(b) Reports on Form 8-K. The Corporation filed no reports on Form
8-K during the last quarter of the period covered by this
report.
(c) Index to Exhibits and Exhibits filed as a part of this
report.
3(a) 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.
31
<PAGE>
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.
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<PAGE>
10(af) Second Amendment to Expandable Wraparound Mortgage
Loan Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P., dated June 15, 1989.
Incorporated by reference to Exhibit 10.9 to Form S-1
Registration Statement (file number 33-71550) dated
November 12, 1993.
10(ag) Second Amendment to Expandable Wraparound Mortgage
and Security Agreement between New Claridge and
Atlantic City Boardwalk Associates, L.P., dated June
15, 1989. Incorporated by reference to Exhibit 10.11
to Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
10(ah) The 1992 Claridge Management Incentive Plan.
Incorporated by reference to Exhibit 10.18 to Form
S-1 Registration Statement (file number 33-71550)
dated November 12, 1993.
10(ai) The 1993 Claridge Management Incentive Plan.
Incorporated by reference to Exhibit 10.19 to Form
S-1 Registration Statement (file number 33-71550)
dated November 12, 1993.
10(aj) Form of Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing Statement.
Incorporated by reference to Exhibit 4.3 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ak) Form of Collateral Trust Agreement among the
Corporation, New Claridge, the Partnership and the
Collateral Trustee. Incorporated by reference to
Exhibit 4.4 to Pre-Effective Amendment No. 2 to Form
S-1 Registration Statement (file number 33-71550)
dated January 18, 1994.
10(al) Form of Corporation Pledge Agreement between the
Corporation and the Collateral Trustee. Incorporated
by reference to Exhibit 4.5 to Pre-Effective
Amendment No. 2 to Form S-1 Registration Statement
(file number 33-71550) dated January 18, 1994.
10(am) Form of New Claridge Pledge Agreement between New
Claridge and the Collateral Trustee. Incorporated by
reference to Exhibit 4.6 to Pre-Effective Amendment
No. 2 to Form S-1 Registration Statement (file number
33-71550) dated January 18, 1994.
10(an) Form of New Claridge Cash Collateral Pledge Agreement
between New Claridge and the Collateral Trustee.
Incorporated by reference to Exhibit 4.7 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ao) Form of New Claridge Security Agreement between New
Claridge and the Collateral Trustee. Incorporated by
reference to Exhibit 4.8 to Pre-Effective Amendment
No. 2 to Form S-1 Registration Statement (file number
33-71550) dated January 18, 1994.
10(ap) Form of New Claridge Trademark Security Agreement
between New Claridge and the Collateral Trustee.
Incorporated by reference to Exhibit 4.9 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
33
<PAGE>
10(aq) Form of Collateral Assignment of Expandable
Wraparound Mortgage and Security Agreement.
Incorporated by reference to Exhibit 4.10 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ar) Form of Collateral Assignment of Lessor's Interest in
Operating Leases. Incorporated by reference to
Exhibit 4.13 to Pre-Effective Amendment No. 2 to Form
S-1 Registration Statement (file number 33-71550)
dated January 18, 1994.
10(as) Form of Subordination Agreement among the
Partnership, New Claridge and the Collateral Trustee.
Incorporated by reference to Exhibit 4.14 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(at) Form of Assignment of Leases and Rents and Other
Contract Rights. Incorporated by reference to Exhibit
4.15 to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(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.
34
<PAGE>
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(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.
Incorporated by reference to Exhibit 10(bp) to Form
10-K for the year ended December 31, 1996.
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. Incorporated by
reference to Exhibit 10(bq) to Form 10-K for the year
ended December 31, 1996.
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. Incorporated by
reference to Exhibit 10(br) to Form 10-K for the year
ended December 31, 1996.
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. Incorporated by
reference to Exhibit 10(bs) to Form 10-K for the year
ended December 31, 1996.
10(bt) Amended Employment Agreement between Robert M.
Renneisen and The Claridge at Park Place,
Incorporated effective November 10, 1998.
10(bu) Amended Employment Agreement between Albert T.
Britton and The Claridge at Park Place, Incorporated
effective November 10, 1998.
10(bv) Amended Employment Agreement between Jean I. Abbott
and The Claridge at Park Place, Incorporated
effective November 10, 1998.
10(bw) Amended Employment Agreement between Frank A. Bellis,
Jr. and The Claridge at Park Place, Incorporated
effective November 10, 1998.
10(bx) Amended Employment Agreement between Glenn Lillie and
The Claridge at Park Place, Incorporated effective
November 10, 1998.
10(by) Sixth Amendment to Operating Lease Agreement and
Fifth Amendment to Expansion Operating Lease
Agreement between The Claridge at Park Place,
Incorporated and Atlantic City Boardwalk Associates,
L.P. effective September 30, 1998.
35
<PAGE>
10(bz) Amendment to Restructuring Agreement between The
Claridge Hotel and Casino Corporation, The Claridge
at Park Place, Incorporated and Atlantic City
Boardwalk Associates, L.P. effective September 30,
1998.
10(ca) Amendment to Wraparound Mortgage Agreement and Note
between The Claridge at Park Place, Incorporated and
Atlantic City Boardwalk Associates, L.P. effective
September 30, 1998.
10(cb) Amendment to Exhibit A to the Long-Term Management
Incentive Plan of The Claridge Hotel and Casino
Corporation effective November 10, 1998.
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.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CLARIDGE HOTEL AND CASINO CORPORATION
<TABLE>
<CAPTION>
<S> <C> <C>
Dated: March 30, 1999 By:/s/ ROBERT M. RENNEISEN By:/s/ JEAN I. ABBOTT
- ---------------------- -------------------------- ---------------------
Robert M. Renneisen Jean I. Abbott
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/ ROBERT M. RENNEISEN
- ------------------------------- Chairman, President, Director March 30, 1999
Robert M. Renneisen (Chief Executive Officer)
/s/ JAMES M. MONTGOMERY Vice Chairman, Director March 30, 1999
- -------------------------------
James M. Montgomery
/s/ DAVID W. BRENNER Director March 30, 1999
- -------------------------------
David W. Brenner
/s/ SHANNON L. BYBEE Director March 30, 1999
- -------------------------------
Shannon L. Bybee
/s/ A. BRUCE CRAWLEY Director March 30, 1999
- -------------------------------
A. Bruce Crawley
/s/ NED P. DEWITT Director March 30, 1999
- -------------------------------
Ned P. DeWitt
/s/ MARK H. SAYERS Director March 30, 1999
- -------------------------------
Mark H. Sayers
/s/ JEAN I ABBOTT Executive Vice President March 30, 1999
- --------------------------------- (Chief Financial Officer/
Jean I. Abbott Treasurer/Principal
Accounting Officer)
</TABLE>
37
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page
Reference In
Report on
Form 10-K
---------
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets at December 31, 1998 and 1997............. F-3
Consolidated Statements of Operations and Accumulated
(Deficit) Earnings for the Years Ended December 31, 1998,
1997 and 1996........................................................ F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.................................... F-5
Notes to Consolidated Financial Statements............................ F-7
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts.............. F-29
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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998 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 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 LLP
Short Hills, New Jersey
March 5, 1999
F-2
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
(dollars in thousands)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 9,798 12,424
Receivables, net (including $3,111 and $19,878 in 1998
and 1997, respectively, due from Partnership) (note 4) 5,561 21,467
Inventories 309 270
Prepaid expenses and other current assets 2,735 2,935
--------- ---------
Total current assets 18,403 37,096
--------- ---------
Property and equipment (note 5) 41,785 47,579
Less accumulated depreciation and amortization (12,408) (15,485)
--------- ---------
Net property and equipment 29,377 32,094
--------- ---------
Long-term receivables due from Partnership (note 4) 79,593 75,465
Deferred charges at cost, less accumulated amortization 1,510 2,020
Other assets (note 6) 2,893 3,705
--------- ---------
$ 131,776 150,380
========= =========
Liabilities and Stockholders' Deficiency
Current Liabilities:
Current maturities of long-term debt (note 9) $ 351 39
Accounts payable 3,535 3,202
Loan from the Partnership (note 7) 3,600 3,600
Other current liabilities (note 8) 34,602 34,393
--------- ---------
Total current liabilities 42,088 41,234
--------- ---------
Long-term debt (note 9) 85,170 85,023
Deferred rent due to Partnership (note 13) 5,827 16,506
Deferred income taxes (note 12) 2,579 2,580
Other noncurrent liabilities (note 10) 21,340 20,850
Commitments and contingent liabilities (notes 13 and 15)
Stockholders' deficiency (notes 16 and 17):
Common stock
Class A, par value $.001, authorized an
issued 5,062,500 shares 5 5
Additional paid-in capital 5,048 5,048
Accumulated deficit (30,281) (20,866)
Treasury stock, -0- and 91,770 Class A
shares at cost in 1998 and 1997, respectively -0- -0-
--------- ---------
Total stockholders' deficiency (25,228) (15,813)
--------- ---------
$ 131,776 150,380
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Accumulated (Deficit) Earnings
For the Years Ended December 31, 1998, 1997 and 1996
(in thousands except per share data)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
Revenue:
<S> <C> <C> <C>
Casino $ 166,010 165,371 163,369
Hotel 9,576 9,456 9,150
Food and beverage 18,989 19,609 20,602
Interest from the Partnership 12,039 14,230 16,007
Interest, other 757 439 753
Other 3,685 2,920 2,671
--------- --------- ---------
211,056 212,025 212,552
Less promotional allowances (note 11) 20,056 19,272 19,241
--------- --------- ---------
Net revenues 191,000 192,753 193,311
--------- --------- ---------
Costs and expenses:
Casino 102,150 96,760 100,220
Hotel 2,470 2,570 2,673
Food and beverage 7,948 9,811 10,938
Other 2,689 2,617 2,967
Rent expense to the Partnership (note 13) 26,374 30,554 38,561
Rent expense, other (note 13) 1,253 1,283 1,484
General and administrative 27,662 27,157 30,539
Gaming taxes 13,194 13,215 13,053
Reinvestment obligation expenses (note 6) 2,474 684 836
Provision for uncollectible accounts 1,128 218 238
Depreciation and amortization 2,554 3,296 3,239
Interest expense, other 10,519 10,567 9,350
--------- --------- ---------
Total costs and expenses 200,415 198,732 214,098
--------- --------- ---------
Loss before income taxes (9,415) (5,979) (20,787)
Income tax benefit (note 12) -0- -0- (5,398)
--------- --------- ---------
Net loss (9,415) (5,979) (15,389)
--------- --------- ---------
Accumulated (deficit) earnings at beginning of period (20,866) (14,887) 502
--------- --------- ---------
Accumulated deficit at end of period $ (30,281) (20,866) (14,887)
========= ========= =========
Net loss per share - basic and diluted (note 3(i)) $ (1.89) (1.20) (3.05)
========= ========= =========
</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, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (9,415) (5,979) (15,389)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,554 3,296 3,239
Deferred rent to the Partnership (10,679) (11,504) (2,737)
Deferred interest receivable and
discount from the Partnership (2,014) (1,752) (1,524)
Reinvestment obligation expenses 2,474 684 836
Loss (gain) on disposal of assets 1 30 (138)
Deferred income taxes - noncurrent (1) (1) (4,542)
Change in assets and liabilities:
Receivables, net, excluding current portion
of long-term receivables (663) (228) 338
Inventories (39) 8 1
Prepaid expenses and other current
assets 200 264 (491)
Accounts payable 333 205 (883)
Other current liabilities 209 1,963 (510)
Other noncurrent liabilities 305 1,471 (850)
-------- -------- --------
Net cash flows used in operating activities (16,735) (11,543) (22,650)
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements
(Continued)
F-5
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Cont'd.)
or the Years Ended December 31, 1998, 1997
and 1996 (in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
Cash flows from investment activities:
<S> <C> <C> <C>
Increase in deferred charges $ (48) (7) (195)
Additions to property and equipment, net (228) (136) (13,455)
Additions to other assets (1,662) (1,905) (1,436)
Proceeds from disposition of property 1,826 587 184
Increase in long-term receivables (660) (208) (3,508)
Receipt of long-term receivables 15,115 17,120 13,845
-------- -------- --------
Net cash flows provided by (used in)
investment activities 14,343 15,451 (4,565)
-------- -------- --------
Cash flows from financing activities:
Payment of long-term debt (234) (16) -0-
-------- -------- --------
Net cash flows used in financing activities (234) (16) -0-
-------- -------- --------
(Decrease) increase in cash and cash equivalents (2,626) 3,892 (27,215)
Cash and cash equivalents at beginning of period 12,424 8,532 35,747
-------- -------- --------
Cash and cash equivalents at end of period $ 9,798 12,424 8,532
======== ======== ========
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $ 10,087 10,135 8,918
======== ======== ========
Income taxes paid -0- -0- -0-
======== ======== ========
Non-cash financing and investing activities:
Capital lease obligation incurred to acquire
Casino Assets $ 693 78 -0-
======== ======== ========
</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. CURRENT DEVELOPMENTS
During 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 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.
The Corporation has experienced recurring losses and serious
deterioration in its cash flow since 1996. Since the Corporation does
not have substantial cash reserves or access to a line of credit, the
Corporation needed to experience 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 did improve over 1996 levels, due primarily to the positive
impact of the availability of the self-parking garage, lower bus package
pricing, and other cost containment initiatives. However, operating
results in 1998 fell below 1997 levels due to increased competition for
casino customers. In 1998, the Corporation experienced a net loss of
$9.4 million, compared to a net loss of $6.0 million in 1997. In the
fall of 1998, New Claridge redirected its bus program to reduce the
number of customers who arrive by bus, and, thereby, related costs.
Total coin issued to bus passengers in 1998 was $13.5 million, compared
to $15.0 million of coin issued to bus passengers in 1997. Marketing
efforts are being directed toward the mid-level slot customer through
the use of promotions and advertising. Additionally, management
continues to conserve cash through various cost containment measures.
Management is also considering various refinancing alternatives,
including a sale of the Corporation, or a restructuring of its financial
obligations.
In view of the operating results of New Claridge in 1998, and in order
to meet its obligations, management of the Corporation took several
steps to enhance its cash position, through both operational changes,
including the previously mentioned redirection of the bus program, and
certain transactions with PDS Financial Corporation ("PDS") and the
Casino Reinvestment Development Authority ("CRDA"), as further discussed
below.
F-8
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
2. CURRENT DEVELOPMENTS (cont'd.)
In December 1997, New Claridge obtained a commitment from PDS for a sale
lease-back facility (the "Facility"). Under the terms of the Facility,
New Claridge could sell certain of its slot machines to PDS under a sale
lease-back arrangement, for a specified amount per slot machine. In
February 1998, New Claridge sold 370 slot machines to PDS for
approximately $1 million under this Facility. The machines were then
leased back to New Claridge under an operating lease arrangement for two
years. After two years, New Claridge has an option to either purchase
the machines, renew the lease arrangement for twelve months, or return
the equipment to PDS. In December 1998, New Claridge completed the sale
of an addtional 379 slot machines to PDS for approximately $776,000,
under terms similar to those described above. No additional financing is
available under this Facility.
In October 1998, the CRDA approved the direct investment of New Claridge
funds, already on deposit with the CRDA, and the completion of certain
donations of New Claridge funds also already on deposit. These
transactions resulted in the receipt by New Claridge of approximately
$930,000 from the CRDA in December 1998.
In addition, in February 1999, the Corporation and New Claridge agreed
to a settlement of approximately $2.3 million in the arbitration
proceedings concerning the accident which took place in New Claridge's
self-parking garage in July 1996. The settlement proceeds were received
by New Claridge in late February 1999.
As a result of these transactions, on March 2, 1999, New Claridge was
able to pay the interest due on the Notes on February 1, 1999, under the
30-day grace period allowed in accordance with the terms of the
indenture governing the Notes (the "Indenture").
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 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"). CGI 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
F-9
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Corporation on a consolidated basis, and because the separate
financial statements and other disclosures concerning New
Claridge are not deemed material to holders of Notes. There are
no separate financial statements for CGI, which is the only other
subsidiary of the Corporation and is not a guarantor of the
Notes.
b) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
c) Cash and Cash Equivalents
Cash and cash equivalents include 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
F-10
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
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, 1998
and 1997 was $2,298,000 and $1,831,000, respectively.
h) Income Taxes
Deferred income taxes are provided for temporary differences
between financial statement reporting and income tax reporting
for rent leveling provisions, asset basis differences, and
various other expenses recorded for financial statement purposes.
i) Loss Per Share
Loss per share is calculated by dividing net loss by the weighted
average shares outstanding (4,983,804 for the year ended December
31, 1998, 4,995,219 for the year ended December 31, 1997, and
5,046,064 for the year ended December 31, 1996). Basic and
diluted net loss per share are the same for the years ended
December 31, 1998, 1997, and 1996.
F-11
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
4. RECEIVABLES
Receivables at December 31, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
Current Receivables 1998 1997
(in thousands)
<S> <C> <C>
Casino, less allowance for uncollectible accounts
of $1,305,000 and $717,000 at
December 31, 1998 and 1997, respectively $ 1,571 1,312
Hotel, less allowance for uncollectible accounts
of $24,000 and $31,000 at December 31,
1998 and 1997, respectively 100 102
Interest receivable due from the Partnership 804 1,014
Current portion Expandable Wraparound
Mortgage due from the Partnership -0- 14,000
Current portion of FF&E Promissory notes 2,046 2,448
Current portion of Expansion/Construction
promissory note -0- 2,167
Other, less allowance for uncollectible accounts
of $10,000 and $10,000 at December 31,
1998 and 1997, respectively 1,040 424
-------- ---------
$ 5,561 21,467
======== =======
Long-Term Receivables
$127,000,000 Expandable Wraparound Mortgage 14%, maturities
through September 30, 2000 (net of $4,525,000 discount and
$6,539,000 discount at
December 31, 1998 and 1997, respectively) $ 45,975 40,461
Deferred interest receivable, due
September 30, 2000 20,000 20,000
FF&E promissory notes, 14% 13,618 15,004
--------- -------
$ 79,593 75,465
======== =======
</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-12
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
4. RECEIVABLES (cont'd.)
Under the terms of the Expandable Wraparound Mortgage, New Claridge is
obligated to 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, 1999,
$2,046,000 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.
Effective September 30, 1998, the Corporation, New Claridge, and the
Partnership agreed to amend the March 1997 restructuring agreement to
provide for an extension of the maturity date of the Expandable
Wraparound Mortgage to January 1, 2005. In addition, the Expandable
Wraparound Mortage Agreement and Note were amended to defer the
principal payments which were payable during the fourth quarter of 1998
(totalling $3.5 million) to the earlier of (i) the maturity date of the
Expandable Wraparound Mortage Agreement and Note; (ii) such earlier
date, if any, as the entire principal amount of the Expandable
Wraparound Mortgage Note becomes due and payable; or (iii) the date on
which any merger, consolidation or similar transaction to which the
Corporation or New Claridge is a party, or any sale of all or
F-13
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
4. RECEIVABLES (cont'd.)
substantially all of the assets of the Corporation or New Claridge is
consummated, or any change of control of the Corporation or New
Claridge occurs.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Gaming equipment $12,457 18,366
Land and land improvements 7,598 7,598
Building 20,070 20,070
Leasehold improvements 745 745
Capital lease asset 808 693
Other equipment 107 107
------- -------
41,785 47,579
Less accumulated depreciation and amortization 12,408 15,485
------- -------
Net property and equipment $29,377 32,094
======= =======
</TABLE>
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
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, 1998, the Corporation
has deposited $20,411,000 of which $3,026,000 has been used to purchase
bonds issued by the CRDA. Since interest on these bonds and funds
deposited is paid at a discounted rate, New Claridge records a
valuation allowance of approximately one-third of the reinvestment
obligation. In addition, in January 1990, it was determined that
certain bonds issued by the CRDA had become impaired, and that the
payment of principal and interest was uncertain. As a result, New
Claridge has recorded a valuation allowance for the full amount of its
investment in these bonds, totalling $1,654,000.
From time to time, New Claridge has made donations to the CRDA of
funds which had
F-14
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
6. OTHER ASSETS (cont'd.)
previously been deposited with the State Treasurer. In exchange for
these donations, which have totalled $15,054,000 through December 31,
1998, New Claridge received credits towards future obligations or cash
credits, from the CRDA equal to 51% of the donations. As of December
31, 1998, 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, 1998, such interest, which is included in
other current liabilities, amounted to $4,122,000.
8. OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
---- -----
(in thousands)
<S> <C> <C>
Deferred rent, current $15,078 15,078
Deferred rent 475 1,075
Accrued payroll and related benefits 6,571 6,508
Accrued interest, Notes 4,161 4,161
Auto/General insurance reserves 1,424 1,488
Accrued interest due to Partnership 4,122 3,690
Other current liabilities 2,771 2,393
-------- -------
$34,602 34,393
======= ======
</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.
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
F-15
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
8. OTHER CURRENT LIABILITIES (cont'd.)
$867,953 of basic rent and for the deferral of $1.3 million of basic
rent on March 1, 1997, and for additional monthly abatements of rent
beginning April 1, 1997. The $1.3 million of basic rent deferred on
March 1, 1997 is to be paid to the Partnership as additional rent of
$25,000 per month for the period April 1, 1997 through December 31,
1997, and of $50,000 per month for the year 1998 and thereafter until
paid in full (subject to acceleration under certain circumstances).
9. LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- -----
(in thousands)
<S> <C> <C>
11 3/4% Notes due 2002 $ 85,000 85,000
Capital lease obligation 521 62
--------- ------
85,521 85,062
Less current installments 351 39
--------- ------
$ 85,170 85,023
========= ======
</TABLE>
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
F-16
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
9. LONG-TERM DEBT (cont'd.)
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,
1998, the Corporation's Excess Cash was less than $10 million, and
therefore the Corporation is not required to make an Excess Cash Offer
in 1999.
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
Other noncurrent liabilities at December 31, 1998 and 1997 consist of
the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Contingent Payment $ 19,000 19,000
License agreement 1,369 1,444
Other 971 406
-------- ------
$ 21,340 20,850
======== ======
</TABLE>
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 in the accompanying
consolidated financial statements since the likelihood of paying such
amount is not considered probable at this time. As of December 31,
1998, accrued interest would have amounted to approximately $68.3
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.
F-17
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
10. OTHER NONCURRENT LIABILITIES (cont'd.)
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
could have been exercised any time prior to December 31, 1997. Given
its operating results (see Note 2, "Current Developments"), the
Corporation was not able to exercise this Contingent Payment option,
and it expired in accordance with its terms on December 31, 1997.
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.
This amount will be recognized as income over the term of the
agreement, commencing April 1997.
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,
1998, 1997 and 1996 has been allocated to casino expenses as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Hotel $ 3,800 3,828 3,339
Food and beverage 13,716 11,815 12,001
Entertainment 1,073 1,134 1,725
------- ------ ------
Total $18,589 16,777 17,065
======= ====== ======
</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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ -0- -0- -0-
State -0- -0- -0-
Deferred -0- -0- (5,398)
----- ---- ------
$ -0- -0- (5,398)
===== ==== ======
</TABLE>
F-18
<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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax benefit $(3,201) (2,033) (7,068)
Increase (reduction) in income taxes
resulting from:
Change in the valuation allowance 4,391 2,311 2,460
State income tax, net of federal
income tax benefit (565) (359) (1,247)
Meals and entertainment (454) 454 550
Contingent Payment option -0- (400) -0-
Other (171) 27 (93)
------- ------ ------
$ -0- -0- (5,398)
======= ====== ======
</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, 1998 and 1997 are presented below (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 21,566 14,915
Rent leveling 3,204 7,476
Accrued expenses 1,354 1,460
Deferred revenue 633 578
Tax credit 940 940
Difference between book and tax basis
other liabilities 2,285 1,065
Other 637 857
-------- -------
Total gross deferred tax assets 30,619 27,291
Less valuation allowance (9,584) (5,193)
-------- -------
Net deferred tax assets 21,035 22,098
-------- -------
Deferred tax liabilities:
Gaming equipment, due to differences in depreciation (852) (1,019)
Difference between book and tax basis of
Expandable Wraparound Mortgage receivable (20,683) (22,745)
Difference between book and tax basis of receivables (679) (912)
Difference between book and tax basis of
Operating Lease expense (1,400) -0-
Other -0- (2)
-------- -------
Total gross deferred tax liabilities (23,614) (24,678)
-------- -------
Net deferred tax liability $ (2,579) (2,580)
======== =======
</TABLE>
F-19
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
12. INCOME TAXES (cont'd.)
The valuation allowance for deferred tax assets as of December 31, 1997
was $5,193,000. The net change in the total valuation allowance for the
year ended December 31, 1998 was an increase of $4,391,000.
The Corporation recorded an income tax benefit of $-0-, $-0-, and
$5,398,000, for the years ended December 31, 1998, 1997 and 1996,
respectively, which represents the tax benefit expected from the
carryforward of Federal net operating losses net of increased deferred
tax credits.
At December 31, 1998, the Corporation had net operating loss
carryforwards for federal income tax purposes of approximately $54.5
million. These net operating loss carryforwards are available to offset
future federal taxable income, if any, in the amounts of $23.6 million
through 2016, $12.7 million through 2017, and $18.2 million through
2018. 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.
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. In January 1997, the
Corporation filed a petition with the United States Tax Court (the
"Court") requesting a redetermination of the asserted deficiency. In
January 1999, the Corporation reached a settlement agreement with the
IRS District Counsel, which was submitted to the Court on January 25,
1999. On March 4, 1999, the Court confirmed this settlement. This
settlement agreement did not have a material impact on the
Corporation's consolidated financial statements.
13. OPERATING LEASE
The Hotel Assets are owned by the Partnership and leased by the
Partnership to New Claridge under the terms of an Operating Lease
originally entered into on October 31, 1983, and an Expansion Operating
Lease, which covered the expansion improvements made to the Claridge in
1986. The initial terms of both leases expired on September 30, 1998;
each lease provides for three ten-year renewal options at the election
of New Claridge. In connection with the
F-20
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. OPERATING LEASE (cont'd.)
March 1, 1997 restructuring agreement between the Corporation, New
Claridge, and the Partnership (discussed below), New Claridge agreed to
exercise the first of the ten-year renewal options, extending the term
of the Operating Lease and Expansion Operating Lease through September
30, 2008.
Basic rent during the renewal term of each lease is calculated pursuant
to a defined formula, with such rent for the lease year commencing
October 1, 1998 through September 30, 1999 not to be more than $29.5
million nor less than $24 million for the Operating Lease, and not to
be more than $3 million nor less than $2.5 million for the Expansion
Operating Lease. In addition, in each subsequent lease year, rent will
be calculated pursuant to a defined formula, but may not exceed 10%
more than the basic rent for the immediately preceding lease year.
Basic rent, as calculated pursuant to the defined formula for the lease
year commencing October 1, 1998 will be $24 million for the Operating
Lease and $2.5 million for the Expansion Operating Lease.
New Claridge is also required to pay, as additional rent, certain
amounts including certain taxes, insurance, and other charges related
to the occupancy of the land and Hotel Assets, certain expenses and
debt service related to furniture, fixture and equipment replacements
and building improvements, and the general and administrative costs of
the Partnership.
Effective with the consummation of the restructuring in June 1989, the
Operating Lease Agreement and Expansion Operating Lease Agreement were
amended to provide for the deferral of $15.1 million of rental payments
due 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.
Lease expense (which had been recognized on leveled basis in accordance
with Statement of Financial Accounting Standards No. 13) was reduced
prospectively as a result of the abatements provided for in connection
with the June 1989 restructuring. 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 could not exceed $10
million in any one calendar year, and $38.8 million in the aggregate.
All of the $38.8 million of available rent abatements were fully
utilized by the end of March 1997.
The Fifth Amendment to the Operating Lease and the Fourth Amendment to
the Expansion Operating Lease provided for the abatement of $867,953 of
basic rent, and for the deferral of $1.3 million of basic rent on March
1, 1997, and provided 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. All abatements of rent in excess of the
$38.8 million which was allowed in accordance with the
F-21
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. OPERATING LEASE (cont'd.)
1989 restructuring will be recognized as a reduction to lease expense
as abated. In 1998 and 1997, $11.1 million and $9.0 million,
respectively, of rent in excess of the $38.8 million was abated.
For the years ended December 31, 1998, 1997, and 1996, total expense
resulting from the Operating Lease and Expansion Operating Lease
amounted to $26,374,000, $30,554,000, and $38,561,000, respectively, of
which ($10,679,000), ($11,504,000), and ($2,737,000), 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 September 30, 1998, the Operating Lease and Expansion
Operating Lease were further amended, pursuant to a Sixth Amendment to
the Operating Lease and Fifth Amendment to the Expansion Operating
Lease (the "Sixth Amendment"), to allow for the deferral of $1.1
million of rent in either February 1999 or March 1999, dependent upon
certain conditions being met. These conditions, which must have
occurred prior to March 2, 1999, include (i) New Claridge having
received the proceeds in connection with its settlement of the parking
garage litigation (see Note 15(b), "Legal Proceedings"); and (ii) the
Corporation or New Claridge having paid the interest due on the Notes
on February 1, 1999. New Claridge received the proceeds from the
settlement of the parking garage litigation in February 1999, and paid
the interest that was due on the Notes on March 2, 1999, within the 30
day grace period allowed in accordance with the terms of the Indenture.
The $1.1 million of basic rent deferred in 1999 is to be paid to the
Partnership in monthly installments of $25,000 commencing January 1,
2000 until paid in full (subject to acceleration under certain
circumstances). This amendment also provides for additional abatements
of rent, through December 31, 2004, as necessary to reduce the
Partnership's cash flow to an amount necessary only to meet the
Partnership's cash requirements; these abatements, however, are to be
reduced by specified amounts for each period commencing January 1, 2000
and ending on December 31, 2004 ($83,333 per month in 2000, $130,000
per month in 2001, $180,000 per month in 2002 and 2003, and $130,000
per month in 2004).
In addition to the deferral and abatements of rent provided for in the
Sixth Amendment, the amendment provides for the payment of $3.5 million
of additional basic rent on the earlier of (i) the maturity date of the
Expandable Wraparound Mortgage Note; (ii) such earlier date, if any, as
the entire principal amount of the Expandable Wraparound Mortgage
becomes due and payable; or (iii) the date on which any merger,
consolidation or similar transaction to which the Corporation or New
Claridge is a party or any sale of all or substantially all of the
assets of the Corporation or New Claridge is consummated or any change
in control of the Corporation or New Claridge occurs.
Under the terms of the Operating Lease, as amended March 1, 1997, New
Claridge had an option to purchase (the "Purchase Option"), on
September 30, 1998, the Hotel Assets and the underlying land. To
exercise the Purchase Option, New Claridge was required to give notice
F-22
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. OPERATING LEASE (cont'd.)
to the Partnership, at least nine months prior to the option date, of
its election to do so. Based on the current financial situation, New
Claridge did not give such notice to the Partnership in respect of the
September 30, 1998 option date. However, New Claridge may also 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, 1998,
1997, and 1996, operating lease expense for these facilities amounted
to $1,253,000, $1,283,000, and $1,484,000, respectively. In addition,
New Claridge leases certain slot machines used on the casino floor
under various capital and operating leases. Future lease payments under
noncancellable operating leases (with initial or remaining lease terms
in excess of one year) and minimum capital lease payments as of
December 31, 1998 (in thousands) are as follows:
<TABLE>
<CAPTION>
Present Value of
Minimum Lease Operating
Payments Leases
---------------- ---------
<S> <C> <C>
1999 $ 391 1,604
2000 175 965
2001 -0- 602
2002 -0- 600
2003 -0- 600
-------- -----
Total minimum lease payments 566 4,371
=====
Less amount representing interest
(at rates ranging from 11% to 12%) 45
--------
Present value of minimum lease payments 521
Less current portion of capital lease obligations 351
--------
Long-term portion of capital lease obligations $ 170
========
</TABLE>
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. The carrying
F-23
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)
amounts and estimated fair values of the Corporation's financial
instruments as of December 31, 1998 and 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------------------------ -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 9,798 9,798 12,424 12,424
Long-term receivables due from the
Partnership (including current portion) 81,639 n/a 94,080 n/a
Reinvestment obligation funds 2,823 2,823 3,619 3,619
Financial Liabilities:
Loan from the Partnership 3,600 n/a 3,600 n/a
Long term debt 85,170 59,776 85,023 83,323
Deferred rent due to the Partnership 5,827 n/a 16,506 n/a
Contingent payment 19,000 n/a 19,000 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, 1998 and
1997, respectively.
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
F-24
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)
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 retained the law firm of Zelle and Larson LLP of
Minneapolis, Minnesota to assist in the recovery of certain expenses
incurred in reopening the self-parking garage and potential lost
profit claims. On July 22, 1997, New Claridge filed a Complaint and
Demand for Arbitration in the amount of $10 million against the general
contractor and the architect for the garage, alleging negligence,
breach of warranty and breach of contract in the design and
construction of the garage. In February 1999, the Corporation and New
Claridge entered into a settlement agreement of approximately $2.3
million in the arbitration proceedings.
A wrongful death action was commenced by the estates of the two patrons
who died in the July 1996 accident in the self-parking garage. New
Claridge is fully insured and indemnified for any financial liability
that may result due to either an award to or a negotiated settlement
with the plaintiffs in this action.
F-25
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
15. CONTINGENCIES (cont'd.)
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 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. Approximately 93% of the
Corporation's common stock is owned by persons who also own over 90%
of the limited partnership interests in the Partnership.
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
provided for the grant of the 273,938 shares of the Corporation's
Class A stock, which were held as treasury shares of the
Corporation, and for the issuance of 100 Equity Units. The aggregate
value of the 100 Equity Units is equal to 5.41 percent of certain
amounts as further defined in the Plan. Specified portions of the
awarded treasury shares and Equity Units held by participants vest
upon the attainment of specific goals as described in the Plan. The
treasury shares and Equity Units fully vest upon a further
restructuring or a change in control as defined in the Plan. Payment
with respect to the Equity Units will only be made (a) upon the
occurrence of a transaction in which substantially all of the assets
and business operations of the Claridge entities are transferred to
one or more entities in a merger, sale of assets or other
acquisition-type transaction, (b) upon termination of employment of
any participant in the Plan within one year after any change in
control of the Corporation occurs, as defined in the Plan, or (c) if
the Corporation pays dividends to its stockholders, if the
Partnership makes distributions to its partners, or if the
Corporation or the Partnership makes certain distributions under the
Restructuring Agreement. On April 15, 1992, the Commission approved
the Plan and the treasury shares were delivered to the participants.
Upon the issuance of the Notes and the repayment in full of the
Corporation's outstanding debt under the Loan Agreement, 25%
F-26
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
16. RELATED PARTY TRANSACTIONS (cont'd.)
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. The Plan was
further amended, on November 10, 1998, to modify the terms by which
the Additional Equity Units and Director Equity Units will vest. The
modification adjusts the value that must be received by the
Claimholders of the Claridge resulting from the occurance of a
Transaction, all as further defined and described in the Plan.
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, 1998 and 1997 include the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Cash $ -0- -0-
Investment in New Claridge 87,206 87,206
Other assets 12,138 12,631
------- ------
Total assets $99,344 99,837
======= ======
Long-term debt $85,000 85,000
Other liabilities 13,476 12,932
Stockholders' equity 868 1,905
------- ------
Total liabilities and stockholders' equity $99,344 99,837
======= ======
</TABLE>
For the years ended December 31, 1998, 1997, and 1996 the Corporation
recorded income of $9,987,500, $10,070,000 and $9,987,500, 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. In addition, in 1998 and 1997
the Corporation recorded interest income of $1,200 and $4,200,
respectively, on short-term
F-27
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
17. PARENT COMPANY INFORMATION (cont'd.)
investments. The Corporation's expenses for the years ended December
31, 1998, 1997 and 1996 amounted to $11,026,000, $9,909,000, and
$8,943,000, respectively, including income tax benefit of $31,000,
$2,751,000, and $1,868,000, 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, 1998, New Claridge had net income of $1,610,000, as
compared to net income of $3,925,000 for the year ended December 31,
1997 and a net loss of $6,446,000 for the year ended December 31, 1996.
Changes in the Corporation's financial position for the years ended
December 31, 1998, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,037) 166 1,045
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Amortization 524 524 496
Change in assets and liabilities:
Other assets (31) (2,751) (2,683)
Other liabilities 544 2,061 1,142
-------- ------ ------
Net cash flows used in operating activities -0- -0- -0-
-------- ------ ------
Decrease in cash and cash equivalents -0- -0- -0-
Cash and cash equivalents at beginning of period -0- -0- -0-
-------- ------ ------
Cash and cash equivalents at end of period $ -0- -0- -0-
======== ====== ======
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $9,988 10,075 8,918
======== ====== ======
Income taxes paid $ -0- -0- -0-
======== ====== ======
</TABLE>
F-28
<PAGE>
SCHEDULE II
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Valuation and
Qualifying Accounts
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
Balance Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
- ----------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1998
Allowance for
Uncollectible Accounts $ 758 1,128 -0- 547 (a) 1,339
Year ended
December 31, 1997
Allowance for
Uncollectible Accounts $ 899 218 -0- 359 (a) 758
Year ended
December 31, 1996
Allowance for
Uncollectible Accounts $ 987 238 -0- 326 (a) 899
</TABLE>
(a) Accounts written-off.
F-29
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
EX10(bt) Amended Employment Agreement between Robert M. Renneisen and
The Claridge at Park Place, Incorporated effective November 10, 1998.
EX10(bu) Amended Employment Agreement between Albert T. Britton and
The Claridge at Park Place, Incorporated effective November 10, 1998.
EX10(bv) Amended Employment Agreement between Jean I. Abbott and The Claridge
at Park Place, Incorporated effective November 10, 1998.
EX10(bw) Amended Employment Agreement between Frank A. Bellis, Jr. and
The Claridge at Park Place, Incorporated effective November 10, 1998.
EX10(bx) Amended Employment Agreement between Glenn Lillie and The Claridge at
Park Place, Incorporated effective November 10, 1998.
EX10(by) Sixth Amendment to Operating Lease Agreement and Fifth Amendment to
Expansion Operating Lease Agreement between The Claridge at Park
Place, Incorporated and Atlantic City Boardwalk Associates, L.P.
effective September 30, 1998.
EX10(bz) Amendment to Restructuring Agreement between The Claridge Hotel and
Casino Corporation, The Claridge at Park Place, Incorporated and
Atlantic City Boardwalk Associates, L.P. effective September 30, 1998.
EX10(ca) Amendment to Wraparound Mortgage Agreement and Note between The
Claridge at Park Place, Incorporated and Atlantic City Boardwalk
Associates, L.P. effective September 30, 1998.
EX10(cb) Amendment to Exhibit A to the Long-Term Management Incentive Plan of
The Claridge Hotel and Casino Corporation effective November 10, 1998.
EX12(b) Statement of Computation of Ratio of Earnings to Fixed Charges.
<PAGE>
EXHIBIT 10(bt)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is effective as of November 10, 1998 ("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, Jr., an individual residing at 802 E. Blue Teal Drive, Absecon, New
Jersey 08201-4222 ("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; and
WHEREAS, the Claridge and the Executive are parties to an existing
Employment Agreement; and
WHEREAS, the Claridge and the Executive have agreed upon new terms
and conditions of employment as provided in this Agreement; and
WHEREAS, the Claridge and the Executive recognize it is in their
mutual interests to void the existing Employment Agreement and enter into a new
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 and the Executive hereby agree
to void the existing Employment Agreement dated January 1, 1997 to which they
are a party and enter this Employment Agreement. Accordingly, the Claridge
employs the Executive as its 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, 2000 ("Initial Term") subject to
paragraphs 5 or 7. Thereafter, the Board may review and extend the Agreement
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
<PAGE>
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 or
she possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during 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; 5(f)
(diminished responsibilities) below; 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
<PAGE>
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 under circumstances other
than following a Change of Control as described in paragraph 7 below, 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
<PAGE>
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 (x) during the term of this Agreement: (a) a Change
of Control (as defined below) of the Claridge occurs; or (b) by any other
transaction this Agreement is assigned to an entity not controlled by the Board
of Directors of the Company as constituted on the date hereof, and (y) during
the period commencing on the date on which either (a) or (b) occurs and ending
on the second anniversary thereof, any of the following occurs: (a) the
Successor Company (as defined below) fails to employ the Executive in Atlantic
City, New Jersey or within 25 miles thereof, or (b) the Successor Company
terminates the employment of the Executive other than for Cause (as defined
below), or (c) the rate of compensation paid by the Successor Company to the
Executive (without giving effect to any element of Compensation attributable to
Supplemental Executive Retirement Plans or Long-Term Incentive Plans) is
diminished, or (d) the duties, responsibilities or title of the Executive with
the
<PAGE>
Successor Company are diminished in any material respect from the duties,
responsibilities and title of the Executive with the Claridge on the date
hereof, then the Executive shall, within seven days after any such occurrence of
(a), (b), (c) or (d) under Clause (y), receive a payment from the Successor
Company in cash of an amount equal to three (3) times the average of the
Executive's total compensation for the preceding five (5) years of employment at
the Claridge (the "Severance Payment"). For purposes of the foregoing, "Change
of Control" shall mean the occurrence of any of the following events: (i) the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of the assets of (x) The Claridge Hotel and Casino Corporation (the
"Company") and its subsidiaries or (y) Atlantic City Boardwalk Associates, LP
(the "Partnership"); (ii) the liquidation or dissolution of the Company or the
Claridge; (iii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice
or otherwise) the acquisition by any "person" or related group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934 (the "Exchange Act"), or any successor provisions to either of the
foregoing, including any "group" acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Company's existing management, in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combinations or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provisions) of 50% or more of the total voting power entitled to vote in the
election of the Board of Directors of the Company or such person surviving the
transaction; (iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors
together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously approved) cease for any reason to constitute a majority
of the Company's Board of Directors then in office; (v) the Company fails to
own, directly or indirectly, 100% of the capital stock of the Claridge or 100%
of the capital stock of any other person holding a gaming license to operate the
Claridge Casino Hotel in Atlantic City, New Jersey (the "Casino"); or (vi) the
ownership of the Casino by any entity other than the Partnership, the Company,
the Claridge or any successor entity or subsidiary or affiliate of any of them;
"Successor Company" shall mean the Claridge, or if a Change in Control occurs as
a result of a merger of the Claridge or the Company, the Successor Entity of
such merger, or if a Change of Control of the Claridge occurs as a result of a
sale of assets of the Claridge, the entity which purchases such assets, or if
the Employment Contract has been assigned by the Claridge to another entity,
such other entity; "Cause" shall have the meaning given to it in paragraph
5(a)(ii) hereof. In this event the Executive will be entitled to receive the
severance benefits provided for in this paragraph 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.
In the event the Executive receives a Severance Payment pursuant to this
paragraph 7, the Executive may not use the Severance Payment for the purpose of
investing in the securities of the Successor Company or otherwise exchanging the
Severance Payment for any such securities.
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
<PAGE>
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: Chairman of Human Resources
And Compensation Committee
If to the Executive:
Robert M. Renneisen, Jr.
802 E. Blue Teal Dr.
Absecon, New Jersey 08201-4222
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
______________________________ BY: /s/ Robert M. Renneisen, Jr.
--------------------------------
ROBERT M. RENNEISEN, JR.
ATTEST: THE CLARIDGE AT PARK PLACE,
INCORPORATED
/s/ Frank A.Bellis, Jr. BY: /s/ A. Bruce Crawley
- ------------------------------ --------------------------------
A. BRUCE CRAWLEY
CHAIRMAN OF THE
COMPENSATION COMMITTEE
<PAGE>
EXHIBIT 10(bu)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is effective as of November 10, 1998 ("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; and
WHEREAS, the Claridge and the Executive are parties to an existing
Employment Agreement; and
WHEREAS, the Claridge and the Executive have agreed upon new terms and
conditions of employment as provided in this Agreement; and
WHEREAS, the Claridge and the Executive recognize it is in their mutual
interests to void the existing Employment Agreement and enter into a new
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 and the Executive hereby agree to
void the existing Employment Agreement dated January 1, 1997 to which they are a
party and enter this Employment Agreement. Accordingly, the Claridge 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, 2000 ("Initial Term") subject to
paragraphs 5 or 7. Thereafter, the Board may review and extend the Agreement
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
<PAGE>
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 or she
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during 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.
<PAGE>
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; 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 under circumstances other than
following a Change of Control as described in paragraph 7 below, 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 (x) during the term of this Agreement:
(a) a Change of Control (as defined below) of the Claridge occurs; or (b) by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as constituted on the date hereof, and (y)
during the period commencing on the date on which either (a) or (b) occurs and
<PAGE>
ending on the second anniversary thereof, any of the following occurs: (a) the
Successor Company (as defined below) fails to employ the Executive in Atlantic
City, New Jersey or within 25 miles thereof, or (b) the Successor Company
terminates the employment of the Executive other than for Cause (as defined
below), or (c) the rate of compensation paid by the Successor Company to the
Executive (without giving effect to any element of Compensation attributable to
Supplemental Executive Retirement Plans or Long-Term Incentive Plans) is
diminished, or (d) the duties, responsibilities or title of the Executive with
the Successor Company are diminished in any material respect from the duties,
responsibilities and title of the Executive with the Claridge on the date
hereof, then the Executive shall, within seven days after any such occurrence of
(a), (b), (c) or (d) under Clause (y), receive a payment from the Successor
Company in cash of an amount equal to three (3) times the average of the
Executive's total compensation for the preceding five (5) years of employment at
the Claridge (the "Severance Payment"). For purposes of the foregoing, "Change
of Control" shall mean the occurrence of any of the following events: (i) the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of the assets of (x) The Claridge Hotel and Casino Corporation (the
"Company") and its subsidiaries or (y) Atlantic City Boardwalk Associates, LP
(the "Partnership"); (ii) the liquidation or dissolution of the Company or the
Claridge; (iii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice
or otherwise) the acquisition by any "person" or related group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934 (the "Exchange Act"), or any successor provisions to either of the
foregoing, including any "group" acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Company's existing management, in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combinations or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provisions) of 50% or more of the total voting power entitled to vote in the
election of the Board of Directors of the Company or such person surviving the
transaction; (iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors
together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously approved) cease for any reason to constitute a majority
of the Company's Board of Directors then in office; (v) the Company fails to
own, directly or indirectly, 100% of the capital stock of the Claridge or 100%
of the capital stock of any other person holding a gaming license to operate the
Claridge Casino Hotel in Atlantic City, New Jersey (the "Casino"); or (vi) the
ownership of the Casino by any entity other than the Partnership, the Company,
the Claridge or any successor entity or subsidiary or affiliate of any of them;
"Successor Company" shall mean the Claridge, or if a Change in Control occurs as
a result of a merger of the Claridge or the Company, the Successor Entity of
such merger, or if a Change of Control of the Claridge occurs as a result of a
sale of assets of the Claridge, the entity which purchases such assets, or if
the Employment Contract has been assigned by the Claridge to another entity,
such other entity; "Cause" shall have the meaning given to it in paragraph
5(a)(ii) hereof. In this event the Executive will be entitled to receive the
severance benefits provided for in this paragraph 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.
In the event the Executive receives a Severance Payment pursuant to this
paragraph 7, the Executive may not use the Severance Payment for the purpose of
investing in the securities of the Successor Company or otherwise exchanging the
Severance Payment for any such securities.
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
<PAGE>
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: Chairman 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.
(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.
<PAGE>
(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 A. Bellis, Jr. BY: /s/ Albert T. Britton
- ------------------------------ ---------------------------------
ALBERT T. BRITTON
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank A. Bellis, Jr. BY: /s/ A. Bruce Crawley
- ------------------------------ ---------------------------------
A. BRUCE CRAWLEY
CHAIRMAN OF THE
COMPENSATION COMMITTEE
<PAGE>
EXHIBIT 10(bv)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is effective as of November 10, 1998 ("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; and
WHEREAS, the Claridge and the Executive are parties to an existing
Employment Agreement; and
WHEREAS, the Claridge and the Executive have agreed upon new terms and
conditions of employment as provided in this Agreement; and
WHEREAS, the Claridge and the Executive recognize it is in their mutual
interests to void the existing Employment Agreement and enter into a new
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 and the Executive hereby agree to
void the existing Employment Agreement dated November 1, 1996 to which they are
a party and enter this Employment Agreement. Accordingly, the Claridge employs
the Executive as its Executive Vice President of Finance/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, 2000 ("Initial Term") subject to
paragraphs 5 or 7. Thereafter, the Board may review and extend the Agreement
upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base
annual salary of ONE HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($175,000), 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,
<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 or she
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during 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.
<PAGE>
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; 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 under circumstances other than
following a Change of Control as described in paragraph 7 below, 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 (x) during the term of this Agreement:
(a) a Change of Control (as defined below) of the Claridge occurs; or (b) by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as constituted on the date hereof, and (y)
during the period commencing on the date on which either (a) or (b) occurs and
<PAGE>
ending on the second anniversary thereof, any of the following occurs: (a) the
Successor Company (as defined below) fails to employ the Executive in Atlantic
City, New Jersey or within 25 miles thereof, or (b) the Successor Company
terminates the employment of the Executive other than for Cause (as defined
below), or (c) the rate of compensation paid by the Successor Company to the
Executive (without giving effect to any element of Compensation attributable to
Supplemental Executive Retirement Plans or Long-Term Incentive Plans) is
diminished, or (d) the duties, responsibilities or title of the Executive with
the Successor Company are diminished in any material respect from the duties,
responsibilities and title of the Executive with the Claridge on the date
hereof, then the Executive shall, within seven days after any such occurrence of
(a), (b), (c) or (d) under Clause (y), receive a payment from the Successor
Company in cash of an amount equal to three (3) times the average of the
Executive's total compensation for the preceding five (5) years of employment at
the Claridge (the "Severance Payment"). For purposes of the foregoing, "Change
of Control" shall mean the occurrence of any of the following events: (i) the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of the assets of (x) The Claridge Hotel and Casino Corporation (the
"Company") and its subsidiaries or (y) Atlantic City Boardwalk Associates, LP
(the "Partnership"); (ii) the liquidation or dissolution of the Company or the
Claridge; (iii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice
or otherwise) the acquisition by any "person" or related group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934 (the "Exchange Act"), or any successor provisions to either of the
foregoing, including any "group" acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Company's existing management, in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combinations or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provisions) of 50% or more of the total voting power entitled to vote in the
election of the Board of Directors of the Company or such person surviving the
transaction; (iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors
together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously approved) cease for any reason to constitute a majority
of the Company's Board of Directors then in office; (v) the Company fails to
own, directly or indirectly, 100% of the capital stock of the Claridge or 100%
of the capital stock of any other person holding a gaming license to operate the
Claridge Casino Hotel in Atlantic City, New Jersey (the "Casino"); or (vi) the
ownership of the Casino by any entity other than the Partnership, the Company,
the Claridge or any successor entity or subsidiary or affiliate of any of them;
"Successor Company" shall mean the Claridge, or if a Change in Control occurs as
a result of a merger of the Claridge or the Company, the Successor Entity of
such merger, or if a Change of Control of the Claridge occurs as a result of a
sale of assets of the Claridge, the entity which purchases such assets, or if
the Employment Contract has been assigned by the Claridge to another entity,
such other entity; "Cause" shall have the meaning given to it in paragraph
5(a)(ii) hereof. In this event the Executive will be entitled to receive the
severance benefits provided for in this paragraph 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.
In the event the Executive receives a Severance Payment pursuant to this
paragraph 7, the Executive may not use the Severance Payment for the purpose of
investing in the securities of the Successor Company or otherwise exchanging the
Severance Payment for any such securities.
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
<PAGE>
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: Chairman 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
<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/ Jane M. Laielli BY: /s/ Jean I. Abbott
------------------------ ----------------------------
JEAN I. ABBOTT
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank A. Bellis, Jr. BY: /s/ A. Bruce Crawley
- ------------------------- ----------------------------
A. BRUCE CRAWLEY
CHAIRMAN OF THE
COMPENSATION COMMITTEE
<PAGE>
EXHIBIT 10(bw)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is effective as of November 10, 1998 ("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; and
WHEREAS, the Claridge and the Executive are parties to an existing
Employment Agreement; and
WHEREAS, the Claridge and the Executive have agreed upon new terms and
conditions of employment as provided in this Agreement; and
WHEREAS, the Claridge and the Executive recognize it is in their mutual
interests to void the existing Employment Agreement and enter into a new
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 and the Executive hereby agree to
void the existing Employment Agreement dated November 1, 1996 to which they are
a party and enter this Employment Agreement. Accordingly, the Claridge 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, 2000 ("Initial Term") subject to
paragraphs 5 or 7. Thereafter, the Board may review and extend the Agreement
upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base
annual salary of ONE HUNDRED SIXTY THOUSAND DOLLARS ($160,000), 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
<PAGE>
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 or she
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during 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; 5(f)
<PAGE>
(diminished responsibilities) below; 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 under circumstances other than
following a Change of Control as described in paragraph 7 below, 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 (x) during the term of this
Agreement: (a) a Change of Control (as defined below) of the Claridge occurs; or
(b) by any other transaction this Agreement is assigned to an entity not
controlled by the Board of Directors of the Company as constituted on the date
hereof, and (y) during the period commencing on the date on which either (a) or
(b) occurs and
<PAGE>
ending on the second anniversary thereof, any of the following occurs: (a) the
Successor Company (as defined below) fails to employ the Executive in Atlantic
City, New Jersey or within 25 miles thereof, or (b) the Successor Company
terminates the employment of the Executive other than for Cause (as defined
below), or (c) the rate of compensation paid by the Successor Company to the
Executive (without giving effect to any element of Compensation attributable to
Supplemental Executive Retirement Plans or Long-Term Incentive Plans) is
diminished, or (d) the duties, responsibilities or title of the Executive with
the Successor Company are diminished in any material respect from the duties,
responsibilities and title of the Executive with the Claridge on the date
hereof, then the Executive shall, within seven days after any such occurrence of
(a), (b), (c) or (d) under Clause (y), receive a payment from the Successor
Company in cash of an amount equal to three (3) times the average of the
Executive's total compensation for the preceding five (5) years of employment at
the Claridge (the "Severance Payment"). For purposes of the foregoing, "Change
of Control" shall mean the occurrence of any of the following events: (i) the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of the assets of (x) The Claridge Hotel and Casino Corporation (the
"Company") and its subsidiaries or (y) Atlantic City Boardwalk Associates, LP
(the "Partnership"); (ii) the liquidation or dissolution of the Company or the
Claridge; (iii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice
or otherwise) the acquisition by any "person" or related group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934 (the "Exchange Act"), or any successor provisions to either of the
foregoing, including any "group" acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Company's existing management, in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combinations or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provisions) of 50% or more of the total voting power entitled to vote in the
election of the Board of Directors of the Company or such person surviving the
transaction; (iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors
together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously approved) cease for any reason to constitute a majority
of the Company's Board of Directors then in office; (v) the Company fails to
own, directly or indirectly, 100% of the capital stock of the Claridge or 100%
of the capital stock of any other person holding a gaming license to operate the
Claridge Casino Hotel in Atlantic City, New Jersey (the "Casino"); or (vi) the
ownership of the Casino by any entity other than the Partnership, the Company,
the Claridge or any successor entity or subsidiary or affiliate of any of them;
"Successor Company" shall mean the Claridge, or if a Change in Control occurs as
a result of a merger of the Claridge or the Company, the Successor Entity of
such merger, or if a Change of Control of the Claridge occurs as a result of a
sale of assets of the Claridge, the entity which purchases such assets, or if
the Employment Contract has been assigned by the Claridge to another entity,
such other entity; "Cause" shall have the meaning given to it in paragraph
5(a)(ii) hereof. In this event the Executive will be entitled to receive the
severance benefits provided for in this paragraph 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.
In the event the Executive receives a Severance Payment pursuant to this
paragraph 7, the Executive may not use the Severance Payment for the purpose of
investing in the securities of the Successor Company or otherwise exchanging the
Severance Payment for any such securities.
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
<PAGE>
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: Chairman 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
BY: /s/ Frank A. Bellis, Jr.
- ----------------------- ---------------------------------
FRANK A. BELLIS, JR.
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank A. Bellis, Jr. BY: /s/ A. Bruce Crawley
- ------------------------ ---------------------------------
A. BRUCE CRAWLEY
CHAIRMAN OF THE
COMPENSATION COMMITTEE
<PAGE>
EXHIBIT 10(bx)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is effective as of November 10, 1998 ("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; and
WHEREAS, the Claridge and the Executive are parties to an existing
Employment Agreement; and
WHEREAS, the Claridge and the Executive have agreed upon new terms and
conditions of employment as provided in this Agreement; and
WHEREAS, the Claridge and the Executive recognize it is in their mutual
interests to void the existing Employment Agreement and enter into a new
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 and the Executive hereby agree to
void the existing Employment Agreement dated February 1, 1997 to which they are
a party and enter this Employment Agreement. Accordingly, the Claridge 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 December 31, 2000 ("Initial Term") subject to
paragraphs 5 or 7. Thereafter, the Board may review and extend the Agreement
upon specific action by the Board.
3. COMPENSATION. (a) The Claridge shall pay the Executive a base
annual salary of ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($125,000), 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,
<PAGE>
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 or she
possesses a casino key employee license required by the New Jersey Casino
Control Commission. The Executive will maintain this license in good standing
during 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.
<PAGE>
(b) If the Executive's employment should be terminated under:
subparagraphs 5(a)(iv) (termination without cause) above; 5(f) (diminished
responsibilities) below; 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 under circumstances other than
following a Change of Control as described in paragraph 7 below, 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 (x) during the term of this Agreement:
(a) a Change of Control (as defined below) of the Claridge occurs; or (b) by any
other transaction this Agreement is assigned to an entity not controlled by the
Board of Directors of the Company as constituted on the date hereof, and (y)
during the period commencing on the date on which either (a) or (b) occurs and
ending on the second anniversary thereof, any of the following occurs: (a) the
Successor Company (as defined
<PAGE>
below) fails to employ the Executive in Atlantic City, New Jersey or within 25
miles thereof, or (b) the Successor Company terminates the employment of the
Executive other than for Cause (as defined below), or (c) the rate of
compensation paid by the Successor Company to the Executive (without giving
effect to any element of Compensation attributable to Supplemental Executive
Retirement Plans or Long-Term Incentive Plans) is diminished, or (d) the duties,
responsibilities or title of the Executive with the Successor Company are
diminished in any material respect from the duties, responsibilities and title
of the Executive with the Claridge on the date hereof, then the Executive shall,
within seven days after any such occurrence of (a), (b), (c) or (d) under Clause
(y), receive a payment from the Successor Company in cash of an amount equal to
three (3) times the average of the Executive's total compensation for the
preceding five (5) years of employment at the Claridge (the "Severance
Payment"). For purposes of the foregoing, "Change of Control" shall mean the
occurrence of any of the following events: (i) the sale, lease, transfer,
conveyance or other disposition of all or substantially all of the assets of (x)
The Claridge Hotel and Casino Corporation (the "Company") and its subsidiaries
or (y) Atlantic City Boardwalk Associates, LP (the "Partnership"); (ii) the
liquidation or dissolution of the Company or the Claridge; (iii) the Company
becomes aware of (by way of a report or any other filing pursuant to Section
13(d) of the Exchange Act, proxy vote, written notice or otherwise) the
acquisition by any "person" or related group (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), or any successor provisions to either of the foregoing,
including any "group" acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than the Company's existing management, in a single transaction or in a
related series of transactions, by way of merger, consolidation or other
business combinations or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provisions) of 50% or more
of the total voting power entitled to vote in the election of the Board of
Directors of the Company or such person surviving the transaction; (iv) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Company's Board of Directors together with any new
directors whose election or appointment by such board or whose nomination for
election by the shareholders of the Company was approved by a vote of a majority
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
approved) cease for any reason to constitute a majority of the Company's Board
of Directors then in office; (v) the Company fails to own, directly or
indirectly, 100% of the capital stock of the Claridge or 100% of the capital
stock of any other person holding a gaming license to operate the Claridge
Casino Hotel in Atlantic City, New Jersey (the "Casino"); or (vi) the ownership
of the Casino by any entity other than the Partnership, the Company, the
Claridge or any successor entity or subsidiary or affiliate of any of them;
"Successor Company" shall mean the Claridge, or if a Change in Control occurs as
a result of a merger of the Claridge or the Company, the Successor Entity of
such merger, or if a Change of Control of the Claridge occurs as a result of a
sale of assets of the Claridge, the entity which purchases such assets, or if
the Employment Contract has been assigned by the Claridge to another entity,
such other entity; "Cause" shall have the meaning given to it in paragraph
5(a)(ii) hereof. In this event the Executive will be entitled to receive the
severance benefits provided for in this paragraph 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.
In the event the Executive receives a Severance Payment pursuant to this
paragraph 7, the Executive may not use the Severance Payment for the purpose of
investing in the securities of the Successor Company or otherwise exchanging the
Severance Payment for any such securities.
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
<PAGE>
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: Chairman 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 by and construed
in accordance with the laws of the State of New Jersey.
<PAGE>
(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/ Frank A. Bellis, Jr. BY: /s/ Glenn Lillie
---------------------------- ---------------------------
GLENN LILLIE
ATTEST: THE CLARIDGE AT PARK
PLACE, INCORPORATED
/s/ Frank A. Bellis, Jr. BY: /s/ A. Bruce Crawley
---------------------------- ---------------------------
A. BRUCE CRAWLEY
CHAIRMAN OF THE
COMPENSATION
COMMITTEE
<PAGE>
EXHIBIT 10(by)
SIXTH AMENDMENT TO OPERATING
LEASE AGREEMENT AND FIFTH AMENDMENT TO
EXPANSION OPERATING LEASE AGREEMENT
-----------------------------------
THIS SIXTH AMENDMENT TO OPERATING LEASE AGREEMENT AND FIFTH
AMENDMENT TO EXPANSION OPERATING LEASE AGREEMENT (this "Sixth Amendment & Fifth
Expansion Amendment"), dated as of the 30th day of September, 1998, 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
<PAGE>
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, pursuant to that certain Fifth Amendment to Operating
Lease Agreement and Fourth Amendment to Expansion Operation Lease Agreement,
dated as of March 1, 1997, between Lessor and Lessee (the "Fifth Amendment"),
Lessor and Lessee further amended certain terms and provisions of the Operating
Lease; and
WHEREAS, Lessor and Lessee have entered into an Expandable
Wraparound Mortgage Agreement, dated October 31, 1983, and amended as of March
17, 1986 and as of June 15, 1989 (the Wraparound Mortgage Agreement, as so
amended, is hereinafter referred to as the "Wraparound Mortgage Agreement"),
which contemplated the execution and delivery by Lessor to Lessee 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; and
<PAGE>
WHEREAS, the Fifth Amendment provides "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 such award or
settlement not to exceed the outstanding balance of the Deferred Rent under
clause (ii) of Paragraph 1(b)" of the Fifth Amendment shall be paid to the
Lessor;
WHEREAS, the Lessee is considering a settlement offer in respect
of the claim described in the preceding Recital; however, Lessee may be
unwilling to enter into such settlement because after payment to the Lessor in
accordance with the provision quoted in the preceding Recital, the portion of
the proceeds of the settlement left to Lessee after such payment would not
provide a material benefit to the Lessee;
WHEREAS, the Lessor is willing to delete the provision described
in the second preceding recital as an inducement to the Lessee's entering into
such a settlement; 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,
Fourth Amendment and Fifth 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 Fifth
Amendment is hereby deleted in its entirety (but without thereby limiting the
effect of such language (i) to set forth the agreement of the parties from March
1, 1997 to the date hereof or (ii) to characterize $867,593 of reduction in
Basic Rent as a rent abatement):
"(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);
<PAGE>
(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 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>
(b) The following language is hereby inserted in
place of the language deleted pursuant to subparagraph (a) above:
"(i) (A) If all of the conditions set forth in
Sub-clauses (A) and (B) of Paragraph 4 hereof are
satisfied on February 1, 1999 (treating each reference to
"March 2, 1999" in those Sub-clauses as "February 1,
1999"), then the Basic, Additional and Expansion Rent
payable on February 1, 1999 shall be reduced to an amount
so that the total amount of Basic, Additional and
Expansion Rent payable on February 1, 1999 shall be
$684,123.03, and (B) if all of such conditions are not
satisfied on February 1, 1999 but are satisfied on or
before March 2, 1999, then the Basic, Additional and
Expansion Rent due on March 1, 1999 shall be reduced to
an amount so that the total amount of Basic, Additional
and Expansion Rent payable on March 1, 1999 shall be
$665,198.50.
(ii) The foregoing reduction, if any, in Basic,
Additional and Expansion Rent payable on February 1, 1999
or March 1, 1999 consists of $1,100,000, of Deferred Rent
(as that term is defined in the Third Amendment);
(iii) On the earlier of (x) the Maturity Date of
the Wraparound Mortgage Note, (y) such earlier date, if
any, as the entire principal amount of the Wraparound
Mortgage Note becomes due and payable or (z) the date on
which any merger, consolidation or similar transaction to
which the Lessee or The Claridge Hotel and Casino
Corporation ("CHCC") is a party or any sale of all or
substantially all of the assets of the Lessee or CHCC is
consummated or any change of control in the Lessee or
CHCC occurs, the Lessee shall pay the Lessor $3,500,000
in additional Basic Rent;
(iv) The $1,100,000 of Deferred Rent, if any,
referred to in clause (ii) above shall be paid by the
Lessee to the Lessor under the circumstances set forth in
clause (vii) below and as follows: $25,000 shall be
payable monthly commencing January 1, 2000 and thereafter
<PAGE>
until the foregoing rent deferral is paid in full;
(v) 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, 2004, 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, 2000 and ending on December 31, 2000; $130,000 for each month of
the calendar year 2001; $180,000 for each month of each calendar year thereafter
through and including the calendar year ending on December 31, 2003; and
$130,000 for each month of the period commencing on January 1, 2004 and ending
on December 31, 2004 (it being understood that it is the intention of the
parties that the purpose of this Sub-clause (B) is to permit the Lessor to
retain, out of the payments of Basic Rent made by the Lessee to the Lessor for
each month set forth in this Sub-clause and after payment by the Lessor of its
obligations for such month but before giving effect to any Deferred Rent payable
to the Lessor for such month under clause (ii) above and clause (vi) below or
otherwise, the amount for such month set forth in this Subclause);
(vi) The $1,300,000 of Deferred Rent referred to
in clause (ii) of Paragraph 1(b) of the Fifth Amendment
shall be paid by the Lessee to the Lessor under the
circumstances set
<PAGE>
forth in clause (vii) below 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; and
(vii) Any portion of the $1,100,000 of Deferred
Rent, if any, referred to in clause (ii) above or of the
$1,300,000 of Deferred Rent referred to in clause (vi)
above that at the time has not been paid shall become due
and payable (A) in full upon (x) the consummation of any
merger, consolidation or similar transaction to which the
Lessee or CHCC is a party or of any sale of all or
substantially all the assets of the Lessee or of CHCC, or
(y) any change of control of the Lessee or of CHCC, and
(B) in the event the Lessee is awarded a judgment or
receives a settlement in the connection with Lessee's
claim against the general contractor or any other parties
arising out of its self-parking garage accident in an
amount exceeding $4,000,000, in an amount up to 75% of
such excess (but not exceeding the aggregate amount of
such Deferred Rent that has not been paid).
2. This Sixth Amendment & Fifth 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.
3. This Sixth Amendment & Fifth Expansion Amendment shall not become
effective unless and until the Lessor and Lessee have entered into (a) an
amendment to the Restructuring Agreement, dated March 1, 1997, in the form
attached hereto as Exhibit A and (b) an amendment to the Wraparound Mortgage
Agreement and Wraparound Mortgage Note in the form attached hereto as Exhibit B.
4. This Agreement, other than clause (iii) of Paragraph 1(b), shall be
null and void ab initio unless (A) both of the following events have occurred on
or prior to March 2, 1999: (i) the Lessee shall have received at least
$2,200,000 (net of associated unpaid legal expenses) in connection with its
settlement of the parking garage litigation, and (ii) the Lessee or its parent
corporation shall have paid all amounts due to its public noteholders,
including, but not limited to, a payment of approximately $5,000,000 interest on
such notes due
<PAGE>
on February 1, 1999, and (B) no defaults shall exist under the notes or under
the first mortgage on the Lessee's premises at March 2, 1999 and no events, acts
or omissions have occurred (unless cured on or prior to March 2, 1999) or exist
at March 2, 1999 which, with the passage of time, the giving of notice or both,
could result in such a default.
5. 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, the Fourth
Amendment, and the Fifth Amendment, shall remain unchanged and in full force and
effect, except as specifically modified herein.
6. This Sixth Amendment & Fifth 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
Sixth Amendment & Fifth 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.
/s/ Barbara Constantine By:/s/ Anthony C. Atchley
- ------------------------------ ----------------------------------------
Name: Barbara Constantine 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/ Frank A. Bellis, Jr. By:/s/ Albert T. Britton
- ------------------------------ ----------------------------------------
Name: Frank A. Bellis, Jr. Name: Albert T. Britton
Senior Vice President and Title: President/Chief Operating Officer
General Counsel
<PAGE>
STATE OF NEVADA )
: ss.:
COUNTY OF CLARK )
BE IT REMEMBERED, that 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:
STATE OF NEW JERSEY)
: ss.:
COUNTY OF ATLANTIC )
BE IT REMEMBERED, that before me, the subscriber, a Notary Public
of the State of New Jersey, personally appeared Albert T. Britton 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:
<PAGE>
EXHIBIT A
---------
AMENDMENT TO RESTRUCTURING AGREEMENT
WHEREAS, 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"), entered into a Restructuring Agreement,
dated March 1, 1997 (the "Restructuring Agreement") (terms not defined in this
Amendment shall have the meanings given to them in the Restructuring Agreement).
WHEREAS, ACBA is considering entering into a Sixth Amendment to
the operating lease and a Fifth Amendment to the expansion operating lease,
dated as of September 30, 1998 (the "Sixth Amendment"); and
WHEREAS, CHCC and CPPI desire to amend certain provisions of the
Restructuring Agreement, as set forth below;
NOW, THEREFORE, as an inducement to ACBA's entering into the
Sixth Amendment, the parties hereto hereby agree as follows:
1. Amendments
The Restructuring Agreement is hereby amended in the following
respects:
(a) The language in subclauses (i) and (ii) of Section 2(b) of
the Restructuring Agreement shall be amended to read in their
entirety as follows:
(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, 2005".
(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, 2005".
(b) The language in Section 2(e) of the Restructuring
Agreement shall be amended to read in its entirety as
follows:
(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 or the $1,100,000
of Deferred Rent in accordance with the terms of the
Sixth Amendment to Operating Lease Agreement and Fifth
Amendment to Expansion Operating Lease Agreement, dated
as of the 30th day of September 1998, between ACBA and
CPPI.
2. 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
<PAGE>
amount owing to the Corporation or CPPI under the Restructuring Agreement (as
amended hereby), or (c) damages arising out of the failure to perform any
obligation under the Restructuring Agreement (as amended hereby), 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 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 the Restructuring Agreement (as
amended hereby), 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 the
Restructuring Agreement (as amended hereby).
3. Except as specifically amended herein, all of the obligations, terms
and conditions set forth in the Restructuring Agreement shall remain unchanged
and in full force and effect.
4. This Amendment to the Restructuring Agreement 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
Amendment to the Restructuring Agreement as of the 30th day of September, 1998.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Albert T. Britton
--------------------------------------
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Albert T. Britton
--------------------------------------
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
--------------------------------------
<PAGE>
EXHIBIT B
---------
AMENDMENT TO WRAPAROUND MORTGAGE AGREEMENT AND NOTE
WHEREAS, The Claridge at Park Place, Incorporated, a New Jersey
corporation ("CPPI"), and Atlantic City Boardwalk Associates, L.P., a New Jersey
limited partnership ("ACBA"), 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; and
WHEREAS, the parties are considering entering into a Sixth
Amendment to the operating lease and a Fifth Amendment to the expansion
operating lease, dated as of September 30, 1998 (the "Sixth Amendment"); and
WHEREAS, the parties desire to amend certain provisions of the
Wraparound Mortgage Note, as set forth below;
NOW, THEREFORE, as an inducement to ACBA's entering into the
Sixth Amendment, the parties hereto hereby agree as follows:
1. Amendments
The Wraparound Mortgage Agreement and Wraparound Mortgage Note
are hereby amended so that the payments of principal required to be made by ACBA
thereunder in October, November and December 1998 (an aggregate of $3,500,000 in
principal payments) shall be made on the earlier of (x) the Maturity Date of the
Wraparound Mortgage Agreement and Wraparound Mortgage Note, (y) such earlier
date, if any, as the entire principal amount of the Wraparound Mortgage Note
becomes due and payable or (z) the date on which any merger, consolidation or
similar transaction to which CPPI or The Claridge Hotel and Casino Corporation
("CHCC") is a party or any sale of all or substantially all of the assets of
CPPI or CHCC is consummated or any change of control in CPPI or CHCC occurs
2. Except as specifically amended herein, all of the obligations,
terms and conditions set forth in the Wraparound Mortgage Agreement and
Wraparound Mortgage Note shall remain unchanged and in full force and effect.
3. This Amendment to the Wraparound Mortgage Agreement and
Wraparound Mortgage Note 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
Amendment to the Wraparound Mortgage Agreement and Note as of the 30th day of
September, 1998.
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Albert T. Britton
--------------------------------------
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
--------------------------------------
<PAGE>
EXHIBIT 10(bz)
AMENDMENT TO RESTRUCTURING AGREEMENT
WHEREAS, 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"), entered into a Restructuring Agreement,
dated March 1, 1997 (the "Restructuring Agreement") (terms not defined in this
Amendment shall have the meanings given to them in the Restructuring Agreement).
WHEREAS, ACBA is considering entering into a Sixth Amendment to
the operating lease and a Fifth Amendment to the expansion operating lease,
dated as of September 30, 1998 (the "Sixth Amendment"); and
WHEREAS, CHCC and CPPI desire to amend certain provisions of the
Restructuring Agreement, as set forth below;
NOW, THEREFORE, as an inducement to ACBA's entering into the
Sixth Amendment, the parties hereto hereby agree as follows:
1. Amendments
The Restructuring Agreement is hereby amended in the following
respects:
(a) The language in subclauses (i) and (ii) of Section 2(b) of
the Restructuring Agreement shall be amended to read in their
entirety as follows:
(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, 2005".
(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, 2005".
(b) The language in Section 2(e) of the Restructuring
Agreement shall be amended to read in its entirety as
follows:
(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 or the $1,100,000
of Deferred Rent in accordance with the terms of the
Sixth Amendment to Operating Lease Agreement and Fifth
Amendment to Expansion Operating Lease Agreement, dated
as of the 30th day of September 1998, between ACBA and
CPPI.
2. 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
<PAGE>
amount owing to the Corporation or CPPI under the Restructuring Agreement (as
amended hereby), or (c) damages arising out of the failure to perform any
obligation under the Restructuring Agreement (as amended hereby), 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 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 the Restructuring Agreement (as
amended hereby), 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 the
Restructuring Agreement (as amended hereby).
3. Except as specifically amended herein, all of the obligations, terms
and conditions set forth in the Restructuring Agreement shall remain unchanged
and in full force and effect.
4. This Amendment to the Restructuring Agreement 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
Amendment to the Restructuring Agreement as of the 30th day of September, 1998.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Albert T. Britton
--------------------------------------
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Albert T. Britton
--------------------------------------
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
--------------------------------------
<PAGE>
EXHIBIT 10(ca)
AMENDMENT TO WRAPAROUND MORTGAGE AGREEMENT AND NOTE
WHEREAS, The Claridge at Park Place, Incorporated, a New Jersey
corporation ("CPPI"), and Atlantic City Boardwalk Associates, L.P., a New Jersey
limited partnership ("ACBA"), 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; and
WHEREAS, the parties are considering entering into a Sixth
Amendment to the operating lease and a Fifth Amendment to the expansion
operating lease, dated as of September 30, 1998 (the "Sixth Amendment"); and
WHEREAS, the parties desire to amend certain provisions of the
Wraparound Mortgage Note, as set forth below;
NOW, THEREFORE, as an inducement to ACBA's entering into the
Sixth Amendment, the parties hereto hereby agree as follows:
1. Amendments
The Wraparound Mortgage Agreement and Wraparound Mortgage Note
are hereby amended so that the payments of principal required to be made by ACBA
thereunder in October, November and December 1998 (an aggregate of $3,500,000 in
principal payments) shall be made on the earlier of (x) the Maturity Date of the
Wraparound Mortgage Agreement and Wraparound Mortgage Note, (y) such earlier
date, if any, as the entire principal amount of the Wraparound Mortgage Note
becomes due and payable or (z) the date on which any merger, consolidation or
similar transaction to which CPPI or The Claridge Hotel and Casino Corporation
("CHCC") is a party or any sale of all or substantially all of the assets of
CPPI or CHCC is consummated or any change of control in CPPI or CHCC occurs
2. Except as specifically amended herein, all of the obligations, terms
and conditions set forth in the Wraparound Mortgage Agreement and Wraparound
Mortgage Note shall remain unchanged and in full force and effect.
3. This Amendment to the Wraparound Mortgage Agreement and Wraparound
Mortgage Note 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
Amendment to the Wraparound Mortgage Agreement and Note as of the 30th day of
September, 1998.
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Albert T. Britton
--------------------------------------
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
--------------------------------------
<PAGE>
EXHIBIT 10(cb)
AMENDED EXHIBIT A
(First Amendment-June 5, 1995)
(Second Amendment-November 10, 1999)
TERMS AND CONDITIONS OF UNITS AND SHARES
AWARDED UNDER THE CLARIDGE LONG-TERM
MANAGEMENT INCENTIVE PLAN
Set forth below are the terms and conditions applicable to Units and
Shares awarded under the Claridge Long-Term Management Incentive Plan pursuant
to an Award Agreement. Any term used below which is not defined shall have the
meaning as defined in the Plan. Any questions regarding interpretation or
construction of the following terms and conditions should be directed to the
Human Resources and Compensation Committee (the "Committee") of the Board of
Directors of The Claridge Hotel and Casino Corporation. Determinations made by
the Committee, or at the request of the Compensation Committee by the Non-
Interested Members of the Board of Directors of The Claridge Hotel and Casino
Corporation, in interpreting, construing or otherwise administering the Plan
shall be final and conclusive and binding on all parties.
I. Treasury Stock Shares:
(1) Value: Number of shares awarded; shares may or may not have any
value.
(2) Vesting: Same as vesting of Original Equity Units.
(3) Payment: The Company will not make any Payment with respect to the
shares; however, vested shares may be disposed of in any manner desired by a
holder.
(4) Voting and Dividends:
(a) Participant may vote all awarded shares, whether or not
vested.
(b) Participants are entitled to dividends, if any, only on
shares which have vested.
(5) Legend: Certificates evidencing shares of Treasury Stock awarded
under the Plan will bear a legend referring to the restrictions on transfer of
shares which have not vested. Upon vesting of all or a portion of a
Participant's shares, the Participant may obtain a certificate evidencing such
vested shares upon surrender of the legend certificate. PARTICIPANTS ARE ADVISED
THAT ANY SALE, TRANSFER, OR OTHER
<PAGE>
DISPOSITION OF VESTED SHARES MUST BE MADE IN COMPLIANCE WITH ALL FEDERAL AND
STATE SECURITIES LAWS.
II. Equity Units, consisting of Original Equity Units, Additional Equity
Units and Director Equity Units:
(1) Value: Each Equity Unit equals its Percentage Share of (a) if the
Transaction occurs, the excess of (I) the sum of (w) the excess of (i) the
aggregate amount received, in cash, securities or otherwise, by all of the
Claridge Entities in connection with the Transaction (but excluding the amount
of any liabilities of the Claridge Entities assumed by the acquirer in the
Transaction), over (ii) any liabilities of the Claridge Entities immediately
following the Transaction, after eliminating any intra-entity liabilities, plus
(x) the aggregate amount, if any, paid by the Company and its subsidiaries to
the Partnership (A) as Deferred Rent (as defined below) under the Operating
Lease or (B) in excess of amounts which, at the time of payment, were required
to be paid to the Partnership pursuant to any agreement, between January 1, 1992
and the date of the Transaction, plus (y) the aggregate amount, if any, paid by
the Company and its subsidiaries on the loan made by the Partnership and
evidenced by the Note, dated June 16, 1989, plus (z) the aggregate amount of any
dividends declared on the Common Stock of the Company and distributions made by
the Company to the Distributing Trust under the Restructuring Agreement between
January 1, 1992 and the date of the Transaction over (II) the aggregate amount
paid to holders of Equity Units pursuant to clause (c) of this paragraph (1)
with respect to any such dividend or distribution or with respect to any
distribution made by the Partnership to its partners or to such Distributing
Trust, or (b) upon a Change in Control (defined below), the Appraised Value, or
(c) if the Company pays a dividend to its shareholders or makes a distribution
to the Distributing Trust under the Restructuring Agreement or if the
Partnership makes a distribution to its partners or to such Distributing Trust,
the amount of any such dividend or distribution; provided, however, that the
Committee shall reduce the number of Original Equity Units held by all
Participants on a pro rata basis if the Committee, in its sole discretion,
determines that the aggregate value of the Original Equity Units and the
Treasury Shares exceeds 5.41% of the aggregate equity value of the Claridge
Entities.
(2) Percentage Share: "Percentage Share" shall mean, for Original Equity
Units: 0.0541%; for Additional Equity Units: 0.0559%; and for Director Equity
Units: 0.04%.
<PAGE>
(3) Appraised Value: "Appraised Value" shall mean, as of the date upon
which a Change in Control occurs, the excess of (a) the value of the assets and
business owned by the Claridge Entities as shown in an updated appraisal letter
from Landauer Associates (or any successor to Landauer Associates) provided upon
such Change in Control, over (b) the aggregate liabilities of the Claridge
Entities as shown on the most recent financial statements filed by the Claridge
Entities with the Securities and Exchange Commission, after eliminating
intra-entity liabilities.
(4) Transaction: The Transaction is a transaction in which substantially
all of the assets and business operations of the Claridge Entities are
transferred to one or more entities in a merger, sale of assets, or other
acquisition-type transaction.
(5) Vesting:
(a) With respect to Original Equity Units:
(i) Refinancing of First Mortgage: 25% of the Original
Equity Units held by a Participant will vest upon a refinancing of the existing
First Mortgage, either with the existing lender group, with another group of
lenders or through the issuance, publicly or privately, of debt securities, on
terms that represent a material improvement over those of the existing First
Mortgage. The principal basis upon which it will be determined that any
refinancing constitutes a material improvement will consist of at least the
following, provided that material improvement in the following terms is not
coupled with significantly more onerous terms in other respects (such as a
significantly higher interest rate, the requirement of compensating cash
balances, or significant commitment fees): (1) extension of the term of the
mortgage from the then maturity to at least a five-year term, (2) mandatory
principal payments based on a minimum 10-year amortization schedule, and (3)
increase in the amount of available cash flow permitted to be used for capital
improvements in each year to at lease $5,000,000. As of January 31, 1994, 25% of
the Original Equity Units were vested on this basis.
(ii) Acquisition or Elimination of the United Way CPR:
25% of the Original Equity Units held by a Participant shall vest when all
rights under the Webb Payment, under the Restructuring Agreement, originally
held by Del Webb Corporation and now held by a trustee for the benefit of the
United Way of Phoenix, Arizona, are acquired by the Company, any Participating
Company or any other person or group of
<PAGE>
persons acting on behalf of the Company or any Participating Company or are
eliminated by agreement by the holder of the Webb Payment that such rights are
cancelled.
(iii) Further Restructuring or Change in Control: The
Original Equity Units of a Participant will vest fully upon the occurrence of
(a) a transaction, such as the Transaction, in which the financial and
operational structure of the Claridge Entities is simplified by the transfer of
substantially all of the assets and operations of the Claridge Entities to a
single entity and in which (whether occurring at the time of such transaction or
reasonably anticipated to occur some time thereafter) Claimholders in the
Claridge receive cash or marketable securities with respect to any claims they
may have with respect to the Claridge Entities, or (b) a Change in Control.
(b) With respect to Additional Equity Units: Additional Equity
Units will vest, if at all, only if a Transaction occurs which results in the
Claimholders in the Claridge receiving cash or marketable securities having a
value equal to at least $5,000,000.
(c) With respect to Director Equity Units:
(i) Vesting over Time: One-third of the total Director
Units held by a Participant will vest on December 31, of each of 1995, 1996, and
1997.
(ii) Occurrence of Transaction: One-half of the total
Director Equity Units will vest upon the occurrence of a Transaction which
results in the Claimholders of the Claridge receiving cash or marketable
securities having a value equal to at least $5,000,000.
(6) Claimholders in the Claridge: For purposes of this Plan,
"Claimholders in the Claridge" shall mean persons who are shareholders of the
Company or limited partners of the Partnership or who hold Contingent Payment
Rights with respect to any of the Claridge Entities.
(7) Change in Control: A "Change in Control" shall mean that any person
or group of persons (other than holders of Equity Units or Treasury Stock
Shares) acting in concert either (a) own in excess of 50% of the outstanding
shares of the Company, or (b) own in excess of 50% of the shares present and
voting at a meeting of shareholders of the Company. For this purpose, persons
owning shares of the Company who grant a proxy to vote such shares to any
person, other than a person designated by the Board, shall be deemed to be a
group
<PAGE>
of persons acting in concert.
(8) Payment: Payments with respect to the Equity Units shall only be
made (a) upon the occurrence of the Transaction, or (b) if (i) any Change in
Control of the Company occurs and (ii) within one year after such Change in
Control occurs, a holder of the Equity Units who is a Key Employee is no longer
employed by the Company or a Participating Company in the same capacity and with
at least the same responsibilities and compensation as immediately prior to such
Change in Control or a holder of Equity Units who was a Director at the time of
such Change in Control is no longer a Director, in which event such holder may
elect, by written notice to the Company given within 60 days of such change in
employment status or status as a Director, as the case may be, to require the
Company and the Participating Companies to make payment with respect to the
vested Equity Units of such holder, and such payment shall be made within 60
days after the making of such election, or (c) if the Company pays a dividend to
its shareholders or makes a distribution to the Distributing Trust under the
Restructuring Agreement or if the Partnership makes a distribution to its
partners or to such Distributing Trust, no late than the date of such payment or
distribution. Upon the occurrence of a Change in Control, the Company, at its
sole expense, shall request an updated appraisal letter from Landauer Associates
(or any successor to Landauer Associates). Payments will be made only with
respect to Equity Units which have vested at the time of payment. The payment to
a holder of Equity Units will be in an amount equal the Value represented by the
vested Equity Units of that holder, determined as of the time of such payment.
Payments must be made in cash or, if payment is to be made upon the occurrence
of the Transaction, payment may be made in such securities or other property as
is available to be distributed by the Company or the Participating Companies at
that time. Following payment to a holder of Equity Units upon occurrence of the
Transaction or a Change in Control, the Equity Units of such holder shall be
deemed to have been paid in full.
(9) Substitution: At its discretion, the Committee may substitute shares
of Common Stock of the Company, or of some other entity which has succeeded or
is expected to succeed to the assets and business of the Claridge Entities, for
Equity Units if the Committee determines that the shares to be issued with
respect to each Equity Unit have a value reasonable related to the Value of the
Equity Unit. Upon such substitution, the Equity Units shall be null and void.
(10) Deferred Rent: "Deferred Rent" shall have the same meaning as that
term is given in Paragraph 1 of the Amendment to the Operating Lease Agreement
and Expansion Operating Lease Agreement, dated June 15, 1989, between The
Claridge at Park Place, Incorporated and the Partnership.
<PAGE>
EXHIBIT 12(b)
THE CLARIDGE HOTEL AND CASINO CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Loss) income before income
taxes and extraordinary items $ (9,415) (5,979) (20,787) (2,278) (9,294)
Add:
One-third of rent expense to
Partnership deemed
representative of interest 8,791 10,185 12,854 12,546 12,073
Interest expense 10,519 10,567 9,350 9,516 9,956
Amortization of capitalized
interest 57 57 28 -0- -0-
-------- -------- -------- -------- --------
Income as adjusted $ 9,952 14,830 1,445 19,784 12,735
======== ======== ======== ======== ========
Fixed charges:
One-third of rent expense to
Partnership deemed
representative of interest $ 8,791 10,185 12,854 12,546 12,073
Interest expense 10,519 10,567 9,350 9,516 9,956
Capitalized interest -0- -0- 1,069 1,138 -0-
-------- -------- -------- -------- --------
Fixed charges $ 19,310 20,752 23,273 23,200 22,029
======== ======== ======== ======== ========
Ratio of earnings to fixed charges $ .52 .71 .06 .85 .58
======== ======== ======== ======== ========
</TABLE>
Earnings in 1998, 1997, 1996, 1995, and 1994 were insufficient to cover fixed
charges by $9,358,000, $5,922,000, $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 CORPORATIONS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000730409
<NAME> CLARIDGE HOTEL AND CASINO CORPORATION
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 9,798,000
<SECURITIES> 0
<RECEIVABLES> 6,900,000
<ALLOWANCES> 1,339,000
<INVENTORY> 309,000
<CURRENT-ASSETS> 18,403,000
<PP&E> 41,785,000
<DEPRECIATION> 12,408,000
<TOTAL-ASSETS> 131,776,000
<CURRENT-LIABILITIES> 42,088,000
<BONDS> 85,170,000
0
0
<COMMON> 5,000
<OTHER-SE> (25,233,000)
<TOTAL-LIABILITY-AND-EQUITY> 131,776,000
<SALES> 0
<TOTAL-REVENUES> 191,000,000
<CGS> 0
<TOTAL-COSTS> 115,257,000
<OTHER-EXPENSES> 73,511,000
<LOSS-PROVISION> 1,128,000
<INTEREST-EXPENSE> 10,519,000
<INCOME-PRETAX> (9,415,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,415,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,415,000)
<EPS-PRIMARY> (1.89)
<EPS-DILUTED> (1.89)
</TABLE>
