<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
[ ] 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
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 340-3400
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No ____
The number of shares outstanding of each class of the Registrant's Stock is as
follows:
Number of Shares Outstanding
May 12, 2000
------------
Class A Stock 5,062,500
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
----------------------------------------------------------
(Debtor-In-Possession effective August 16, 1999)
Index to Form 10-Q
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Notes to Consolidated
Financial Statements 3
Consolidated Balance Sheets at
March 31, 2000 (unaudited)
and December 31, 1999 4
Consolidated Statements of Operations
for the three months ended March 31,
2000 (unaudited) and 1999 (unaudited) 5
Consolidated Statements of Cash Flows
for the three months ended March 31, 2000
(unaudited) and 1999 (unaudited) 6
Notes to Consolidated Financial
Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
----------------------------------------------------------
(Debtor-In-Possession effective August 16, 1999)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Notes to Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared by
The Claridge Hotel and Casino Corporation ("Corporation") without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, these financial statements contain all adjustments
necessary to present fairly the consolidated financial position of The Claridge
Hotel and Casino Corporation and its wholly-owned subsidiaries, The Claridge at
Park Place, Incorporated ("New Claridge") and Claridge Gaming Incorporated
("CGI") at March 31, 2000 and December 31, 1999, and the results of its
operations for the three months ended March 31, 2000 and 1999 and its cash flows
for the three months ended March 31, 2000 and 1999. All adjustments made are of
a normal recurring nature.
Although management believes that the disclosures included herein are
adequate to make the information contained herein not misleading, certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. It is suggested that these financial statements be read in conjunction
with the financial statements and the related disclosures contained in the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1999
filed with the Securities and Exchange Commission.
As discussed in Note 1 to the consolidated financial statements, the
Corporation filed for reorganization under Chapter 11 of the United States
Bankruptcy Code on August 16, 1999. In addition, Atlantic City Boardwalk
Associates, L.P. (the "Partnership") filed for reorganization under Chapter 11
of the United States Bankruptcy Code on October 5, 1999. The accompanying
consolidated financial statements do not claim to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such consolidated
financial statements do not show (i) as to assets, their realizable value on a
liquidation basis or their availability to satisfy liabilities; (ii)
contingencies, or the status and priority thereof; or (iii) as to stockholder
accounts, the effect of any changes that may be made in the Corporation's
business. The eventual outcome of these matters is not presently determinable.
The results of operations for the three months ended March 31, 2000 and
1999 are not necessarily indicative of the operating results to be expected for
the full year. Historically, the gaming industry in Atlantic City, New Jersey
has been seasonal in nature with peak demand months occurring during the summer
season.
3
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 18,152 16,834
Receivables, net (including $5,719
at March 31, 2000 and $6,269 at December 31,
1999, due from the Partnership) 8,309 7,977
Other current assets 3,491 3,421
-------- --------
Total current assets 29,952 28,232
-------- --------
Property and equipment, net (note 4) 28,578 28,342
Long-term receivables due from the
Partnership (note 3) 41,516 41,831
Intangible assets and deferred charges 1,003 1,076
Other assets 3,356 3,041
-------- --------
$104,405 102,522
======== ========
LIABILITIES & STOCKHOLDERS' DEFICIENCY
- --------------------------------------
Current Liabilities Not Subject to Compromise:
Current maturities of long-term debt (note 7) $ 79 125
Accounts payable (note 10) 3,836 2,902
Loan from the Partnership (notes 5 and 10) -0- -0-
Other current liabilities (notes 6 and 10) 16,154 14,253
-------- --------
Total current liabilities not subject to compromise 20,069 17,280
-------- ---------
Liabilities Subject to Compromise (note 10) 145,470 145,259
Long-term debt (notes 7 and 10) -0- 1
Deferred rent due to the Partnership (note 10) -0- -0-
Deferred income taxes (notes 9 and 10) 2,046 2,046
Other noncurrent liabilities (notes 8 and 10) 1,379 1,354
Stockholders' deficiency:
Common stock 5 5
Additional paid in capital 5,048 5,048
Accumulated deficit (69,612) (68,471)
-------- ---------
Total stockholders' deficiency (64,559) (63,418)
-------- ---------
$104,405 102,522
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Consolidated Statements of Operations
For the Three Months Ended March 31, 2000 and 1999
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Revenues:
Casino $ 38,760 36,554
Hotel 2,152 1,994
Food and beverage 4,561 4,252
Interest from the Partnership 2,267 2,961
Interest, other 38 87
Other 704 2,875
-------- --------
48,482 48,723
Less promotional allowances (note 2) 5,096 4,870
-------- --------
Net revenues 43,386 43,853
-------- --------
Costs and expenses:
Casino 23,606 22,840
Hotel 637 629
Food and beverage 1,371 1,186
Other 983 622
Rent expense to the Partnership 6,740 6,264
Rent expense, other 284 304
General and administrative 6,157 6,777
Gaming taxes 3,088 2,909
Reinvestment obligation expense 175 150
Provision for uncollectible accounts 157 196
Depreciation and amortization 371 525
Interest expense (contractual interest of $3,212 in 2000) 27 2,699
-------- --------
Total costs and expenses 43,596 45,101
-------- --------
Loss before reorganization items (210) (1,248)
Reorganization items:
Professional fees (1,074) -0-
Interest earned from accumulated cash resulting
from Chapter 11 proceeding 143 -0-
-------- --------
(931) -0-
-------- --------
Net loss $ (1,141) (1,248)
======== ========
Net loss per share (based on 5,062,500
weighted average shares outstanding for the three months
ended March 31, 2000 and 1999) $ (.23) (.25)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,141) (1,248)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 371 525
Deferred rent to the Partnership 310 310
Deferred interest receivable and discount from the Partnership -0- (549)
Reinvestment obligation expenses 175 150
Gain on disposal of assets (32) (14)
Deferred gain on disposal of assets (26) (26)
Reorganization items 931 -0-
Change in assets and liabilities:
(Increase) decrease in receivables, net, excluding
current portion of long-term receivables (692) 696
(Increase) decrease in other current assets (70) 96
Increase in accounts payable 835 2,413
Increase (decrease) in other current liabilities 827 (543)
Increase (decrease) in other noncurrent liabilities 51 (5)
-------- ------
Net cash provided by operating activities
before reorganization items 1,539 1,805
Reorganization items:
Professional fees paid -0- -0-
Interest earned on accumulated cash resulting from
Chapter 11 proceeding 143 -0-
-------- ------
Net cash provided by operating activities 1,682 1,805
-------- ------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
6
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Consolidated Statements of Cash Flows (continued)
For the Three Months Ended March 31, 2000 and 1999
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
-------- -------
<S> <C> <C>
Cash flows from investment activities:
Increase in intangible assets and deferred charges (59) (22)
Additions to property and equipment (480) (29)
Increase in other assets (490) (475)
Proceeds from disposal of assets 36 -0-
Increase in long-term receivables -0- (76)
Receipt of long-term receivables 676 467
-------- -------
Net cash used in investment activities (317) (135)
-------- -------
Cash flows from financing activities -
Payment of long-term debt (47) (95)
-------- -------
Increase in cash and cash equivalents 1,318 1,575
Cash and cash equivalents at beginning of period 16,834 9,798
-------- -------
Cash and cash equivalents at end of period $ 18,152 11,373
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements
1. Significant Events and Basis of Presentation
The Corporation has experienced recurring losses and deterioration in
its cash flow since 1996, which has affected the Corporation's ability
to continue to meet its obligation to pay interest on its first mortgage
notes (the "Notes"). The Corporation did not pay the interest due on
August 2, 1999 on the Notes, and, on August 16, 1999, the Corporation
and New Claridge filed voluntary petitions under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"). The Corporation continues to operate the business, as set forth
in the Bankruptcy Code, under the supervision of the Bankruptcy Court,
as a debtor-in-possession.
Under the Bankruptcy Code, the Corporation had an exclusive period of
120 days to file a plan of reorganization with the Bankruptcy Court,
which would have expired on December 14, 1999. In November 1999, the
Corporation petitioned the Bankruptcy Court for, and was granted, an
extension of this exclusivity period to February 14, 2000; a further
extension was subsequently granted, extending the exclusivity period to
May 14, 2000. The Corporation has petitioned the Bankruptcy Court for an
extension of this exclusivity period to September 15, 2000. On January
27, 2000, the Corporation, New Claridge, and the Partnership filed a
joint plan of reorganization and disclosure statement (the "Plan") with
the Bankruptcy Court.
On April 5, 2000, in response to objections raised by the trustee for
the noteholders, the United States Trustee, and others, the Corporation,
New Claridge, and the Partnership filed a revised plan of reorganization
and disclosure statement (the "Amended Plan"). In summary, the Amended
Plan, as proposed jointly by the Corporation, New Claridge, and the
Partnership, calls for the following to occur, subject to certain
conditions contained in the Amended Plan:
(i) the existing Class A Stock of the Corporation will be
cancelled;
(ii) the holders of the existing Notes will be entitled to receive,
on a pro rata basis, (a) 100% of the equity of the reorganized
Corporation outstanding on the effective date, and (b) debt, in
an amount not to exceed $15 million in total. The new debt
("New Notes"), which will be issued by the reorganized
Corporation, will be guaranteed by New Claridge and secured by
the Hotel Assets. The New Notes will have a term of 10 years
and will bear interest at a rate of 8% per year;
(iii) the Partnership will transfer the Hotel Assets to New Claridge
in full satisfaction of its obligations under the Expandable
Wraparound Mortgage. All debts owed by New Claridge to the
Partnership will be forgiven, and the Partnership will
liquidate; and
(iv) the Contingent Payment and Contingent Payment Rights (see Note
8) would be extinguished, and the holders of the Contingent
Payment and Contingent Payment Rights would not receive any
distributions in respect of these items.
On May 9, 2000, the adequacy of the Amended Plan was approved by the
Bankruptcy Court, which allows for the Amended Plan to be submitted to
the Corporation's creditors for a vote.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles and in accordance with
Statement of Position 90-7, "Financial Reporting By Entities in
Reorganization under the Bankruptcy Code," and include disclosure of
liabilities subject to compromise (see Note 10). The
8
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements (continued)
1. Significant Events and Basis of Presentation (continued)
consolidated financial statements include the accounts of the
Corporation and its wholly-owned subsidiaries, New Claridge and CGI. All
material intercompany accounts and transactions have been eliminated in
consolidation. The accompanying consolidated 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 as a going concern.
2. Promotional Allowances
The retail value of complimentary rooms, food and beverages and other
complimentaries furnished to patrons is included in gross revenues and
then deducted as promotional allowances. The estimated cost of providing
such promotional allowances to casino patrons for the three months ended
March 31, 2000 and 1999 has been charged to casino operating expenses as
follows (in thousands):
2000 1999
------ -----
Hotel $ 992 1,018
Food and beverage 3,308 3,257
Other (Entertainment) 65 307
------ -----
Total $4,365 4,582
====== =====
3. Long-Term Receivables
Long-term receivables consist of the following amounts due from the
Partnership:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(in thousands)
<S> <C> <C>
Expandable Wraparound Mortgage 14%,
maturities through September 30, 2000
(net of $2,211,000 discount at March 31, 2000
and December 31, 1999) $ 48,289 48,289
Deferred Expandable Wraparound
Mortgage interest receivable, due
September 30, 2000 20,000 20,000
FF&E promissory notes, 14% 10,822 11,137
Allowance for impairment (37,595) (37,595)
-------- --------
$ 41,516 41,831
======== ========
</TABLE>
As a result of the Corporation's and New Claridge's filing for
reorganization under Chapter 11 on August 16, 1999, as well as the
Partnership's Chapter 11 filing on October 5, 1999, the realizable value
of the Expandable Wraparound Mortgage has become impaired. Therefore,
during the fourth quarter of 1999, the Corporation recorded an
adjustment to write-down the balance of the Expandable Wraparound
Mortgage receivable to an amount estimated to be the realizable value of
the Hotel Assets. (As previously noted, the Plan calls for the
Partnership to transfer the Hotel Assets to New Claridge in full
satisfaction of its obligations under the Expandable Wraparound
Mortgage.) The total amount of this write-down was $37.6 million.
9
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements (continued)
4. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(in thousands)
<S> <C> <C>
Gaming equipment $11,667 12,593
Land and land improvements 7,598 7,598
Self-parking garage facility 20,070 20,070
Leasehold improvements 745 745
Capital lease asset 822 822
Other furniture, fixtures, and equipment 690 213
------- -------
41,592 42,041
Less accumulated depreciation and amortization 13,014 13,699
------- -------
Net property and equipment $28,578 28,342
======= =======
</TABLE>
5. Loan from the Partnership
In accordance with the terms of the Restructuring Agreement, on June 16,
1989 the Partnership loaned to New Claridge $3.6 million, which
represented substantially all cash and cash equivalents remaining in the
Partnership other than funds needed to pay expenses incurred through the
closing of the restructuring. This loan is evidenced by an unsecured
promissory note and 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.
Interest, which contractually accrues at 12% per annum, is payable in
full upon maturity. Interest on this loan ceased to accrue as a result
of the Corporation's filing for reorganization under Chapter 11 (see
Note 1) on August 16, 1999. The loan and accrued interest through August
16, 1999 of $4,392,000 are included in "Liabilities Subject to
Compromise" (see Note 10) as of March 31, 2000 and December 31, 1999.
10
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements (continued)
6. Other Current Liabilities
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(in thousands)
<S> <C> <C>
Deferred rent $1,025 1,100
Accrued payroll and related benefits 8,719 8,232
Auto/general insurance reserves 378 228
Reorganization costs 1,887 813
Other current liabilities 4,145 3,880
-------- --------
$16,154 14,253
======== ========
</TABLE>
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"). The Sixth Amendment provided for the deferral
of $1.1 million of rent in either February 1999 or March 1999, dependent
upon certain conditions being met. These conditions were met, and the
$1.1 million of rent was deferred in March 1999. The $1.1 million of
basic rent deferred 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).
As of March 31, 2000 and December 31, 1999, deferred rent, current;
accrued interest, First Mortgage Notes; accrued interest due to
Partnership; and the auto and general liability reserves incurred prior
to August 16, 1999 are included in "Liabilities Subject to Compromise"
(see Note 10), as a result of the Corporation's filing for
reorganization under Chapter 11 (see Note 1) on August 16, 1999.
11
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements (continued)
7. Long-Term Debt
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. A portion of the net proceeds of $82.2 million was used to repay
in full the then 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. In conjunction with the full satisfaction of the Loan
Agreement, the Corporation's $7.5 million revolving credit line
arrangement was terminated.
As of March 31, 2000 and December 31, 1999, the principal amount due on
the Notes is included in "Liabilities Subject to Compromise" (see Note
10), as a result of the Corporation's filing for reorganization under
Chapter 11 (see Note 1) on August 16, 1999. In addition, interest on the
Notes ceased to accrue as of August 16, 1999. The interest payable on
the Notes, as accrued through August 16, 1999 of $5,440,000, is also
included in "Liabilities Subject to Compromise" (see Note 10).
8. Other Noncurrent Liabilities
Other noncurrent liabilities consist of the following:
March 31, December 31,
2000 1999
--------- ------------
(in thousands)
License agreement $ 1,275 1,294
Other 104 60
-------- -------
$ 1,379 1,354
======== =======
Pursuant to the Restructuring Agreement, Del Webb Corporation ("Webb")
retained an interest, which was assigned to a trustee for the benefit of
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
March 31, 2000, accrued interest would have amounted to approximately
$86.1 million.
12
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements (continued)
8. Other Noncurrent Liabilities (continued)
In connection with the restructuring, Webb agreed to grant those
investors in the Corporation and the Partnership ("Releasing
Investors"), from whom Webb had received written releases from all
liabilities, rights ("Contingent Payment Rights") to receive certain
amounts to the extent available for application to the Contingent
Payment. Approximately 84% in interest of the investors provided
releases and became Releasing Investors. Payments to Releasing Investors
are to be made in accordance with a schedule of priorities, as defined
in the Restructuring Agreement.
On February 23, 1996, the Corporation acquired an option to purchase, at
a discount from the carrying value, the Contingent Payment. The purchase
price of the option of $1 million was recorded as an offset to the
Contingent Payment liability which had been 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, the Corporation was not able to exercise this
Contingent Payment option, and it expired in accordance with its terms
on December 31, 1997.
As of March 31, 2000 and December 31, 1999, the Contingent Payment is
included in "Liabilities Subject to Compromise" (see Note 10), as a
result of the Corporation's filing for reorganization under Chapter 11
(see Note 1) on August 16, 1999. As proposed under the terms of the
Amended Plan, the Contingent Payment and the Contingent Payment Rights
would be extinguished, and the holders of the Contingent Payment and
Contingent Payment Rights would not receive any distributions in respect
of these items.
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 (which was subsequently extended to twenty-five 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 is being
recognized as income over the term of the agreement, commencing April
1997.
9. Income Taxes
As of March 31, 2000, the Corporation had net operating loss
carryforwards for federal income tax purposes of approximately $48
million; none expire before the year 2016. These net operating loss
carryforwards are available to offset future federal taxable income, if
any. The Corporation also has tax credit carryforwards for income tax
purposes of approximately $940,000, which are available to reduce future
federal income taxes, if any, through 2002. The availability of the net
operating loss and tax credit carryforwards will be further subject to
the tax consequences of a plan of reorganization approved by the
Bankruptcy Court.
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 tax returns have been settled with no
adverse impact to the Corporation's consolidated financial statements.
There was a remaining IRS asserted deficiency for the 1990 and 1991
taxable years. In January 1999, the Corporation reached a settlement
agreement with the IRS District Counsel, which was confirmed by the
United States Tax Court on March 4, 1999. This settlement agreement did
not have a material impact on the Corporation's consolidated financial
statements. As of March 31, 2000 and December 31, 1999, the amount of
this settlement, including interest, has been included in "Liabilities
Subject to Compromise" (see Note 10), as a result of the Corporation's
filing for reorganization under Chapter 11 (see Note 1) on August 16,
1999.
13
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
(Debtor-In-Possession effective August 16, 1999)
Notes to Consolidated Financial Statements (continued)
10. Liabilities Subject to Compromise
Liabilities subject to compromise are subject to future adjustments
depending on Bankruptcy Court actions and further developments with
respect to disputed claims. Payment of these liabilities may not be made
except pursuant to an approved plan of reorganization or under the order
of the Bankruptcy Court while the Corporation continues to operate as
debtor-in-possession. Liabilities subject to compromise consist of the
following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
Accounts payable and accrued expenses $ 3,152 3,251
11 3/4% Notes 85,000 85,000
Accrued interest 9,832 9,832
Loan from the Partnership 3,600 3,600
Deferred rent due to the Partnership 22,457 22,147
Contingent Payment 19,000 19,000
Auto and general liability reserves 1,086 1,086
Other 1,343 1,343
-------- -------
$145,470 145,259
======== =======
</TABLE>
Accrued interest as of March 31, 2000 and December 31, 1999 of
$9,832,000 consists of $5,440,000 of interest due on the Notes, and
$4,392,000 of interest due on the $3.6 million loan from the
Partnership. Interest on both of these items ceased to accrue as of
August 16, 1999.
11. Claridge License Renewal
On September 22, 1999, New Claridge was issued a one-year casino license
by the New Jersey Casino Control Commission (the "Commission") for the
period commencing September 30, 1999. Although New Claridge had
reapplied for a four-year casino license, the filing of the voluntary
petition under Chapter 11 of the United States Bankruptcy Code on August
16, 1999 prompted the Commission to renew New Claridge's license for the
reduced period of time. Additionally, the casino license renewal
contains certain financial reporting conditions and requirements
consistent with the manner in which the Commission has relicensed other
casino licensees who have filed voluntary petitions under Chapter 11 in
the past.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Three Months Ended March 31, 2000
The Corporation had a net loss of $511,000 for the three months ended
March 31, 2000, compared to a net loss of $1,248,000 for the three months ended
March 31, 1999. Results for the first quarter of 2000 included approximately
$1.1 million of professional fees incurred as a result of the Chapter 11
proceedings. Results for the first quarter of 1999 included income from the $2.3
million settlement received by New Claridge in February 1999 as a result of the
settlement of the self-parking garage arbitration proceedings.
Total Claridge casino revenue for the first quarter of 2000 was
$38,760,000, reflecting a 6.0% increase over the first quarter of 1999 revenues
of $36,554,000, resulting from increased slot machine revenues, as further
discussed below. Total citywide casino revenues, as reported, increased 7.2%
during the first quarter of 2000, as compared to prior year revenues.
Claridge table games drop (the amount of gaming chips purchased by
patrons) decreased 3.4% during the first quarter of 2000, as compared to the
first quarter of 1999. In addition, the "hold" percentage (the ratio of win to
drop) decreased to 13.5% during the first quarter of 2000, compared to 14.1%
during the first quarter of 1999. As a result, Claridge table games revenue for
the first three months of 2000 of $9,230,000 was 7.6% lower than 1999 revenue of
$9,990,000. Citywide table games drop for the first quarter of 2000, as
reported, increased 6.6% over the same period of 1999. However, the citywide
hold percentage during the first quarter of 2000 decreased from the prior year
level; as a result, citywide table games revenue, as reported, increased 3.0%
over the first quarter of 1999.
For the first three months of 2000, Claridge revenue from slot machines
totalled $29,530,000, reflecting an 11.2% increase over the first three months
of 1999. Citywide slot machine revenue, as reported, increased 9.1% during the
first quarter of 2000 as compared to the first quarter of 1999. The increase in
Claridge slot machine revenue was due in part to increased bus program volumes,
as further discussed below. In addition, the average number of slot machines
available citywide during the first quarter of 2000 declined 1.4% from the prior
year levels, primarily resulting from the closing of the Trump World's Fair
Casino during the fourth quarter of 1999; the average number of slot machines
available at the Claridge was consistent with prior year levels.
During late 1998 and early 1999, in response to increasing citywide
competition for attracting patrons who arrive in Atlantic City by bus (and the
resulting increases in coin incentives paid to these patrons), New Claridge
reduced its bus program volumes, and increased its direct promotions for
drive-in patrons and advertising. However, during the second half of 1999, while
the drive-in promotions continued, bus program volumes began to be increased,
although coin incentives paid to bus patrons remained in line with 1998 levels.
During the first quarter of 2000, this marketing strategy continued. For the
first three months of 2000, 160,000 bus patrons arrived at the Claridge, and
were issued a total of $2,980,000 in coin incentives (for an average of $19 per
passenger). This compares to 121,000 bus patrons who arrived at the Claridge
during the first quarter of 1999, who were issued a total of $2,245,000 in coin
incentives (also an average of $19 per passenger). In addition to the bus
program, New Claridge offers promotional incentives to its customers through its
direct marketing programs, based on their levels of gaming activity. Promotional
incentives issued through this program totalled $2,050,000 during the first
quarter of 2000, compared to $2,324,000 during the first quarter of 1999.
Hotel revenues during the first quarter of 2000 totalled $2,152,000, an
increase of 7.9% over the same period of 1999. Hotel occupancy during the first
three months of 2000 was 82.8%, lower than the 85.0% occupancy during the same
period of 1999. However, the average room rate during the first quarter of 2000
was $56, compared to $51 during the first quarter of 1999. Food and beverage
revenues increased 7.3% during the first quarter of 2000 as compared to the
prior year. The increase over 1999 was due primarily to the reductions in bus
program volumes during the first half of 1999, which resulted in the closing of
New Claridge's buffet, as
15
<PAGE>
well as an increase in complimentary beverages served to casino patrons. The
increase in complimentary beverages is offset by an increase in promotional
allowances, which represent the value of goods and services provided free of
charge to casino customers under various marketing programs. During the first
quarter of 2000, the total number of covers (meals served) was 211,000, in line
with 1999 covers of 210,000; in addition, the average price per cover in the
first quarter of 2000 was $13.75, an increase over the average price per cover
in the first quarter of 1999 of $13.29. Other income for the first quarter of
1999 includes the $2.3 million received by New Claridge in February 1999 as a
result of the settlement of the self-parking garage arbitration proceedings.
Total costs and expenses for the first quarter of 2000 were $43,596,000,
reflecting a 3.3% decrease from the same period of 1999, due primarily to lower
interest expense as a result of the Corporation's filing under Chapter 11 of the
Bankruptcy Code on August 16,1999. Casino operating expenses for the first three
months of 2000 increased 3.4% over the first quarter of 1999, primarily due to
increased coin incentives, as previously discussed. Food and beverage expenses
for the first three months of 2000 increased over the prior year levels,
primarily due to increased patron volumes. General and administrative expenses
for the first quarter of 2000 decreased from the prior year primarily due to
decreased legal fees, which in 1999 were related to the self-parking garage
arbitration proceedings.
Reorganization items of $931,000 for the first quarter of 2000 includes
professional fees incurred as a result of the Corporation's filing for
reorganization under Chapter 11 of $1,074,000, offset by interest earned from
the investment of accumulated cash resulting from the Chapter 11 filing.
Liquidity and Capital Resources
Financial Condition
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 New 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 the costs
attributable to building the garage facility); and (iv) to acquire the
Contingent Payment Option (see Note 8, "Other Noncurrent Liabilities") 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.
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
16
<PAGE>
a significant improvement in operating results in 1997 over 1996 levels in order
to meet its on-going obligations, including the interest due on the Notes.
Although 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, operating results in
1998 fell below 1997 levels due to increased citywide 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 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, and certain
financial transactions with PDS Financial Corporation ("PDS") and the Casino
Reinvestment Development Authority ("CRDA"). 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.
Operating results for the first half of 1999, however, continued to lag behind
prior year levels, which affected the Corporation's ability to continue to meet
its obligation to pay interest on the Notes. As a result, the Corporation did
not pay the interest due August 2, 1999 on the Notes and on August 16, 1999, the
Corporation and New Claridge filed voluntary petitions under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court"). The
Partnership filed a voluntary petition under Chapter 11 of the Bankruptcy Code
on October 5, 1999.
Management of the Corporation believes that this filing will permit the
Corporation to conserve its cash pending a restructuring of its financial
obligations in the Chapter 11 proceeding. As of March 31, 2000, the Corporation
had approximately $18.2 million of cash and cash equivalents, including
approximately $8.3 million of "bankroll" used in casino operations. Management
anticipates an increase in ongoing general and administrative expenses,
primarily for professional fees, during the pendency of the bankruptcy
proceeding. For the three months ended March 31, 2000, such expenses totalled
approximately $1,074,000; through December 31, 1999, such expenses totalled
$1,268,000.
The Corporation continues to operate the business, as set forth in the
Bankruptcy Code, under the supervision of the Bankruptcy Court, as a debtor-in-
possession. As debtor-in-possession, the Corporation is authorized to operate
its business, but may not engage in transactions outside of the normal course of
business without the approval of the Bankruptcy Court. Further, the Corporation
is subject to operating within certain weekly cash budgets which have been
approved by the Bankruptcy Court pursuant to certain orders authorizing the use
of its cash. As of the petition date, actions to collect prepetition
indebtedness are stayed, and other contractual obligations may not be enforced
against the Corporation. In addition, the Corporation may reject executory
contracts and lease obligations, and parties affected by these rejections may
file claims with the Bankruptcy Court in accordance with the reorganization
process. As part of the "first day orders," the Bankruptcy Court approved the
Corporation's payment of prepetition employee compensation, benefits and
reimbursable employee expenses, as well as to continue to honor all existing
employee benefit plans and policies. In addition, the Bankruptcy Court approved
the payment of certain prepetition vendor claims, certain prepetition
guest-related claims (such as outstanding direct mail coupons, progressive
jackpots, and safekeeping deposits) and prepetition payroll, gaming and other
taxes and fees.
While the Corporation and its subsidiaries have sustainable operations,
the cash generated by those operations are not sufficient to (i) permit the
Corporation to meet the debt service on the currently outstanding Notes; (ii) to
make significant capital improvements that management believes are necessary to
improve the Claridge's competitive position in the Atlantic City casino market;
and (iii) regularly make capital improvements in the future to maintain that
competitive position. Accordingly, management of the Corporation intends to
seek, in the Chapter 11 proceeding, to reduce the Corporation's debt obligations
to a level that it believes is consistent with the sustainable level of cash to
17
<PAGE>
be generated by the Claridge. At the same time, management will seek to simplify
the ownership structure of the Claridge as between the Corporation, New Claridge
and the Partnership. Any such restructuring of the financial obligations of the
Claridge and of its ownership structure will be subject to the outcome of the
Chapter 11 proceeding and, in particular, the approval of the holders of the
requisite percentage of the outstanding Notes, as to which there can be no
assurance.
Under the Bankruptcy Code, the Corporation had an exclusive period of
120 days to file a plan of reorganization with the Bankruptcy Court, which would
have expired on December 14, 1999. In November 1999, the Corporation petitioned
the Bankruptcy Court for, and was granted, an extension of this exclusivity
period to February 14, 2000; a further extension was subsequently granted,
extending the exclusivity period to May 14, 2000. The Corporation has petitioned
the Bankruptcy Court for an extension of this exclusivity period to September
15, 2000. On January 27, 2000, the Corporation, New Claridge, and the
Partnership filed a joint plan of reorganization and disclosure statement (the
"Plan") with the Bankruptcy Court.
On April 5, 2000, in response to objections raised by the trustee for
the noteholders, the United States Trustee, and others, the Corporation, New
Claridge, and the Partnership filed a revised plan of reorganization and
disclosure statement (the "Amended Plan"). In summary, the Amended Plan, as
proposed jointly by the Corporation, New Claridge, and the Partnership, calls
for the following to occur, subject to certain conditions contained in the
Amended Plan:
(i) the existing Class A Stock of the Corporation will be cancelled;
(ii) the holders of the existing Notes will be entitled to receive, on
a pro rata basis, (a) 100% of the equity of the reorganized
Corporation outstanding on the effective date, and (b) debt, in
an amount not to exceed $15 million in total. The new debt ("New
Notes"), which will be issued by the reorganized Corporation,
will be guaranteed by New Claridge and secured by the Hotel
Assets. The New Notes will have a term of 10 years and will bear
interest at a rate of 8% per year;
(iii) the Partnership will transfer the Hotel Assets to New Claridge in
full satisfaction of its obligations under the Expandable
Wraparound Mortgage. All debts owed by New Claridge to the
Partnership will be forgiven, and the Partnership will liquidate;
and
(iv) the Contingent Payment and Contingent Payment Rights would be
extinguished, and the holders of the Contingent Payment and
Contingent Payment Rights would not receive any distributions in
respect of these items.
On May 9, 2000, the adequacy of the Amended Plan was approved by the
Bankruptcy Court, which allows for the Amended Plan to be submitted to the
Corporation's creditors for a vote.
The consolidated financial statements do not show (i) as to assets,
their realizable value on a liquidation basis or their availability to satisfy
liabilities; (ii) contingencies, or the status and priority thereof; or (iii) as
to stockholder accounts, the effect of any changes that may be made in the
Corporation's business. The eventual outcome of these matters is not presently
determinable.
At March 31, 2000, the Corporation had working capital of $9,883,000 as
compared to working capital of $10,952,000 at December 31, 1999. The decrease in
working capital is principally attributable to an increase in reorganization
costs payable of $1,074,000, in accrued payroll and related benefits of
$487,000, in accounts payable of $934,000, and in other current liabilities of
$265,000, offset by increases in cash and cash equivalents of $1,318,000 and in
accounts receivable of $332,000.
18
<PAGE>
For the three months ended March 31, 2000, cash provided by operating
activities was $1,682,000, compared to $1,805,000 for the same period of 1999.
As a result of the Chapter 11 filing on August 16, 1999, the interest payment
due on the Notes on February 1, 2000 was not made; therefore, interest payments
for the three months ended March 31, 2000 were approximately $5 million lower
than in the same period of 1999. Cash provided by operating activities in 1999
was improved by the deferral of $1.1 million of basic rent payable to the
Partnership under the Operating Lease and Expansion Operating Lease, as well as
the $2.3 million received as a result of the settlement of the garage
arbitration proceedings. Cash used in investing activities for the three months
ended March 31, 2000 was $317,000, compared to $135,000 for the three months
ended March 31, 1999. Cash used in financing activities in 2000 and 1999 of
$47,000 and $95,000, respectively, represents payments of capital lease
obligations for certain gaming equipment.
For the three months ended March 31, 2000, the Corporation's "Adjusted
EBITDA" was $417,000, compared to $2,354,000 for the same period of 1999.
"Adjusted EBITDA" for the first quarter of 1999 includes $2.3 million of income
from the settlement of the garage arbitration proceedings. "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.
Relationship with the Partnership
The Hotel Assets are owned by the Partnership and leased by the
Partnership to New Claridge under the terms of the Operating Lease originally
entered into on October 31, 1983, and the Expansion Operating Lease, which
covered the expansion improvements made to the Claridge in 1986. The initial
terms of both leases expired on September 30, 1998 and each lease provided for
three ten-year renewal options at the election of New Claridge. New Claridge
exercised 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, was $24 million for the Operating Lease
and $2.5 million for the Expansion Operating Lease, and remained the same for
the lease year which commenced October 1, 1999.
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.
The terms of the Operating Lease and Expansion Operating Lease have been
amended from time to time. The most recent amendment (the "Sixth Amendment"),
which was effective September 30, 1998, allowed for the deferral
19
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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, included (i) New Claridge having received the proceeds in
connection with its settlement of the parking garage arbitration; 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. As a result of the
Corporation and New Claridge's Chapter 11 filing on August 16, 1999, under the
terms of the indenture governing the Notes (the "Indenture"), an "Event of
Default" has occurred (as defined in the Indenture). As a result of this Event
of Default, the Corporation and New Claridge are precluded from receiving any
further payments of principal or interest on the Expandable Wraparound Mortgage.
As a result, the Corporation and New Claridge have exercised this right of
offset against rental payments required to be made subsequent to August 16,
1999.
Prior to August 16, 1999, New Claridge was obligated under its Operating
Lease with the Partnership to lend the Partnership, at an annual interest rate
of 14%, any amounts necessary to fund the cost of furniture, fixtures and
equipment replacements. The 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 and facility maintenance and
engineering shortfalls. The advances to the Partnership were 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 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
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
to pay, as additional rent to the Partnership, the debt service on the FF&E
Loans.
As a result of the Corporation and New Claridge's Chapter 11 filing on
August 16, 1999, and the Partnership's Chapter 11 filing on October 5, 1999, the
Partnership no longer provides furniture, fixture, and equipment replacements to
the Claridge; rather, New Claridge has begun to provide such replacements.
The Expandable Wraparound Mortgage required monthly principal payments
to be made by the Partnership to New Claridge, commencing in the year 1988 and
continuing through the year 1998, in escalating amounts totaling $80
20
<PAGE>
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 Expandable Wraparound Mortgage has been amended from time to time.
In the most recent amendment, which was 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.
As a result of the Corporation's filing for reorganization under Chapter
11 on August 16, 1999, as well as the Partnership's Chapter 11 filing on October
5, 1999, the realizable value of the Expandable Wraparound Mortgage has become
impaired. Therefore, during the fourth quarter of 1999 the Corporation recorded
an adjustment to write-down the balance of the Expandable Wraparound Mortgage
receivable, to an amount estimated to be the realizable value of the Hotel
Assets. The total amount of this write-down was $37.6 million.
21
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits filed as part of the report.
2(a) First Amended Joint Chapter 11 Plan of Reorganization of The
Claridge Hotel and Casino Corporation, The Claridge at Park
Place, Incorporated, and Atlantic City Boardwalk Associates,
L.P.
99(a) First Amended Disclosure Statement Pursuant to 11 U.S.C. 1125
on Debtors' Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code.
(b) The Corporation filed no reports on Form 8-K during the quarter
ended March 31, 2000.
22
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Claridge Hotel and Casino Corporation
- -----------------------------------------
(Registrant)
By:/s/ Jean I. Abbott
------------------------------------------
Jean I. Abbott
Executive Vice President of Finance/
Chief Financial Officer
(Authorized Officer, Principal Financial Officer
and Principal Accounting Officer)
Dated: May 12, 2000
23
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
EX 2 (a) First Amended Joint Chapter 11 Plan of Reorganization of The
Claridge Hotel and Casino Corporation. The Claridge at Park
Place, Incorporated, and Atlantic City Boardwalk Associates,
L.P.
EX 99 (a) First Amended Disclosure Statement Pursuant to 11 U.S.C. 1125
on Debtors' Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code.
<PAGE>
EXHIBIT 2(a)
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
- - - - - - - - - - - - - - - - - - - - - x
In re:
: Chapter 11
THE CLARIDGE HOTEL AND CASINO : Jointly Administered
CORPORATION and THE CLARIDGE AT Case No. 99-17399
PARK PLACE, INCORPORATED, :
Debtors.
:
- - - - - - - - - - - - - - - - - - - - - x
In re: :
ATLANTIC CITY BOARDWALK :
ASSOCIATES, L.P., Chapter 11
: Case No. 99-18903
Debtor.
- - - - - - - - - - - - - - - - - - - - - x
--------------------------------------------------------
FIRST AMENDED JOINT CHAPTER 11 PLAN OF
REORGANIZATION OF (A) THE CLARIDGE HOTEL AND CASINO
CORPORATION AND THE CLARIDGE AT PARK PLACE,
INCORPORATED; AND (B) ATLANTIC CITY
BOARDWALK ASSOCIATES, L.P.
--------------------------------------------------------
May __, 2000
CLIFFORD CHANCE ROGERS & WELLS LLP LOWENSTEIN SANDLER PC
200 Park Avenue 65 Livingston Avenue
New York, NY 10166 Roseland, NJ 07068
(212) 878-8000 (973) 597-2500
Counsel for Atlantic City Boardwalk
Associates, L.P.
ARCHER & GREINER, P.C.
One Centennial Square
Haddonfield, NJ 08033
(856) 795-2121
Co-Counsel for The Claridge and
Casino Corporation and The Claridge
at Park Place, Incorporated
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS............................................................. 1
1.1 Definitions ......................................................... 1
1.2 Document References ................................................. 9
1.3 Other Definitions ................................................... 9
ARTICLE II ADMINISTRATIVE AND PRIORITY TAX CLAIMS ................................. 10
2.1 Administrative Expense Claims ....................................... 10
2.2 Source of Funding ................................................... 10
2.3 Bar Date for Administrative Expense Claims .......................... 10
2.4 Priority Tax Claims ................................................. 11
2.5 Indenture Trustee Fees and Expenses ................................. 11
ARTICLE III CLASSIFICATION OF CLAIMS AND INTERESTS ................................. 12
3.1 Classification of Claims ............................................ 12
3.2 Class 1: Priority Claims ........................................... 12
3.3 Class 2: Miscellaneous Secured Claims .............................. 12
3.4 Class 3: First Mortgage Note Claims ................................ 12
3.5 Class 4: General Corporation Claims ................................ 13
3.6 Class 5: General CPPI Claims ....................................... 13
3.7 Class 6: ACBA, CPPI and Corporation General
Convenience Class Claims............................................. 13
3.8 Class 7: General ACBA Claims ....................................... 13
3.9 Class 8: Intercompany Claims ....................................... 13
3.10 Class 9: Contingent Payment Rights Claims .......................... 13
3.11 Class 10: Contingent Payment Claims ................................. 13
3.12 Class 11: Corporation Interests ..................................... 13
3.13 Class 12: CPPI Interests ............................................ 13
3.14 Class 13: ACBA Interests ............................................ 13
3.15 Classification Rules ................................................ 13
ARTICLE IV IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND
NOT IMPAIRED BY THIS PLAN............................................... 14
4.1 Classes of Claims Impaired by this Plan and
Entitled to Vote..................................................... 14
4.2 Classes of Claims and Interests Impaired by this
Plan and Deemed to Reject this Plan ................................. 14
4.3 Classes of Claims and Interests Not Impaired by this Plan and
Conclusively Presumed to Accept this Plan ........................... 14
ARTICLE V PROVISIONS FOR TREATMENT OF CLAIMS AND INTEREST
5.1 Priority Claims (Class 1) ........................................... 14
5.2 Miscellaneous Secured Claims (Class 2) .............................. 14
5.3 First Mortgage Note Claims (Class 3) ................................ 14
5.4 General Corporation Claims (Class 4) ................................ 15
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5.5 General CPPI Claims (Class 5) ....................................... 16
5.6 Convenience Claims (Class 6) ........................................ 16
5.7 General ACBA Claims (Class 7) ....................................... 17
5.8 Intercompany Claims (Class 8) ....................................... 18
5.9 Contingent Payment Rights Claims (Class 9) .......................... 18
5.10 Contingent Payment Claims (Class 10) ................................ 18
5.11 Corporation Interests (Class 11) .................................... 18
5.12 CPPI Interests (Class 12) ........................................... 18
5.13 ACBA Interests (Class 13) ........................................... 19
ARTICLE VI UNEXPIRED LEASES AND EXECUTORY CONTRACTS................................ 19
6.1 Generally ........................................................... 19
6.2 Particular Contracts ................................................ 19
6.3 Assumption and Assignment ........................................... 19
6.4 Rejection ........................................................... 19
6.5 Officers', Directors' and General Partners'
Indemnification Rights .............................................. 19
6.6 Compensation and Benefit Programs ................................... 20
ARTICLE VII DIRECTORS AND OFFICERS ................................................. 20
7.1 Board of Directors .................................................. 20
7.2 No Corporate or Partnership Action Required ......................... 20
7.3 Powers and Duties of the Reorganized Claridge Debtors................ 21
7.4 Officers' Incentive Plan ............................................ 21
ARTICLE VIII IMPLEMENTATION OF THIS PLAN ............................................ 21
8.1 Vesting of Property ................................................. 21
8.2 Issuance of New Common Stock and New Notes .......................... 21
8.3 Fractional Interests ................................................ 22
8.4 Dissolution of ACBA ................................................. 22
8.5 Cancellation of Securities, Notes or Other Instruments;
Discharge of Indenture Obligations................................... 22
8.6 Surrender of Securities ............................................. 22
8.7 Restated Certificate of Incorporation and Restated Bylaws............ 23
8.8 Nonvoting Stock ..................................................... 23
8.9 Authorization of Corporate Action ................................... 23
ARTICLE IX DISCHARGE AND INJUNCTION ............................................... 23
9.1 Discharge of Debtors ................................................ 23
9.2 Injunction .......................................................... 24
9.3 Exculpation ......................................................... 24
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ARTICLE X PROVISIONS COVERING DISTRIBUTIONS ...................................... 25
10.1 Time of Distributions Under this Plan ............................... 25
10.2 Compliance With Tax Requirement ..................................... 25
10.3 Distribution of Unclaimed Property .................................. 25
10.4 Saturday, Sunday or Legal Holiday ................................... 25
10.5 Distribution Record Date ............................................ 25
ARTICLE XI PROCEDURES FOR RESOLVING DISPUTED CLAIMS ............................... 25
11.1 Objections to Claims ................................................ 25
11.2 Procedures For Resolving Disputed Claims ............................ 26
11.3 Timing of Payments and Distributions With Respect to
Disputed Claims...................................................... 26
11.4 Disputed Claim Reserve .............................................. 26
11.5 Estimation of Claim ................................................. 26
11.6 No Recourse to Reorganized Claridge Debtors ......................... 27
11.7 Application of Article 11 to Indenture Trustee
and Noteholders' Claims.............................................. 27
ARTICLE XII CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE .......................... 27
12.1 Condition Precedent to Confirmation Date ............................ 27
12.2 Conditions to Effective Date ........................................ 28
ARTICLE XIII MODIFICATION, REVOCATION OR WITHDRAWAL OF THE PLAN...................... 28
13.1 Modification of Plan ................................................ 28
13.2 Revocation or Withdrawal of Plan .................................... 29
13.3 Nonconsensual Confirmation .......................................... 29
ARTICLE XIV MISCELLANEOUS PROVISIONS ............................................... 29
14.1 Bankruptcy Court to Retain Jurisdiction ............................. 29
14.2 Binding Effect of this Plan ......................................... 29
14.3 Retiree Benefits .................................................... 30
14.4 The Debtors' Causes of Action ....................................... 30
14.5 Setoffs ............................................................. 30
14.6 Captions ............................................................ 30
14.7 Method of Notice .................................................... 30
14.8 Dissolution of any Committee ........................................ 31
14.9 Governing Law ....................................................... 31
14.10 Time ................................................................ 31
14.11 Section 1146 Exemption .............................................. 32
14.12 Severability ........................................................ 32
14.13 Subordination Rights ................................................ 32
14.14 Satisfaction of Actions Taken ....................................... 32
14.15 Registration and Listing of New Notes and New
Common Stock......................................................... 32
14.16 No Multiple Satisfactions ........................................... 32
14.17 Plan Controls ....................................................... 34
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DEBTORS' JOINT CHAPTER 11 PLAN
THE CLARIDGE HOTEL AND CASINO CORPORATION and THE CLARIDGE AT
PARK PLACE, INCORPORATED, two of the above-captioned debtors and
debtors-in-possession (the "Claridge Debtors") and ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P., the third above-referenced debtor, as debtor-in-possession
("ACBA"; collectively, with the Claridge Debtors, the "Debtors" or the
"Proponents"), propose the following chapter 11 plan of reorganization pursuant
to Section 1121(a) of the Bankruptcy Code. If the Plan is not confirmed as to
each of the Debtors, it may not be confirmed as to any of the Debtors.
ARTICLE I
DEFINITIONS
1.1 Definitions: Whenever from the context it appears appropriate, each
term stated in either the singular or the plural shall include the singular and
the plural, and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, the feminine and the neuter. Unless the context
requires otherwise, the following words and phrases shall have the meanings set
forth below when used in fully-or-initially-capitalized form in this Plan:
ACBA: Atlantic City Boardwalk Associates, L.P., a New Jersey
limited partnership.
ACBA Interests: The equity interests in ACBA including, but
not limited to, those represented by any limited partnership, general
partnership or other ownership interests or rights with respect to ACBA, any
options, warrants, calls, subscriptions or other similar rights or other
agreements, commitments or outstanding securities obligating ACBA to issue,
transfer or sell any interests in or to ACBA.
Administrative Expense Claims: Collectively, with respect to
ACBA, CPPI or the Corporation, as the case may be, (a) any cost or expense of
administration of the Chapter 11 Case of ACBA, CPPI or the Corporation, as the
case may be, with priority under Section 507(a)(1) of the Bankruptcy Code,
including, without limitation, costs and expenses allowed under Section 503(b)
of the Bankruptcy Code, (b) any fees or charges assessed against the Estate of
ACBA, CPPI or the Corporation, as the case may be, under title 28, United States
Code, Section 1930; and (c) any Claims against ACBA arising following the
Effective Date in connection with or relating to the liquidation,
administration, winding up or dissolution of ACBA or its affairs, including the
filing of any tax returns.
Administrative Office Building: means the real property and
the improvements thereon owned by CPPI and located at 123 Indiana Avenue,
Atlantic City, New Jersey and which by order dated April 5, 2000 of the
Bankruptcy Court was sold to Greate Bay Hotel and Casino, Inc.
Affiliates: As defined in Section 101 of the Bankruptcy Code.
Allowed: With respect to Claims and Interests, (a) any Claim
against or Interest in the Debtors, proof of which is timely filed or by order
of the Bankruptcy Court is not or will not be required to be filed, (b) any
Claim or Interest that has been or is hereafter listed in the schedules of
liabilities filed by the Debtors as liquidated in amount and not disputed or
contingent or (c) any Claim allowed pursuant to this Plan; provided that, in
each such case in (a) and (b) above, either (i) no objection to the allowance
thereof
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shall have been interposed within the applicable period of time fixed by this
Plan, the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court or (ii)
if such an objection shall have been so interposed, the Claim or Interest shall
have been allowed by a Final Order (but only to the extent so allowed).
AOB Escrow Account: means that certain interest bearing escrow
account maintained at the Summit Bank for the benefit of the Indenture Trustee
in which was deposited the sum of $1,500,000 which represented the initial
purchase price paid for the Administrative Office Building.
Assets: means all property of the Estate of each of the
Debtors, and includes the Hotel Assets but excludes the Administrative Office
Building.
Avoiding Power Causes of Action: means rights and remedies
accruing to the Debtors pursuant to Chapter 5 of the Bankruptcy Code, including
11 U.S.C.ss.ss.544(b), 546, 547, 548, 549, 550 or 553(b).
Ballot: The form distributed, together with the Disclosure
Statement, to holders of Claims entitled to vote for the purpose of acceptance
or rejection of this Plan.
Bankruptcy Code: Title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Cases.
Bankruptcy Court: The United States Bankruptcy Court for the
District of New Jersey with jurisdiction over the Chapter 11 Cases and, to the
extent of any reference made pursuant to 28 U.S.C. ss. 157, the United States
Bankruptcy Court for the District of New Jersey, or any court having competent
jurisdiction to enter the Confirmation Order.
Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure,
as amended, promulgated under section 2075 of title 28 of the United States Code
and the Local Rules of the Bankruptcy Court, as applicable from time to time
during the Chapter 11 Cases.
Bar Date: is the last date for filing Claims as fixed by the
Bankruptcy Court.
Business Day: Any day other than a Saturday, Sunday or "legal
holiday" as defined in Bankruptcy Rule 9006 (a).
Causes of Action: means all legal and equitable claims,
demands, or causes of action held by the Debtors against any person, including
Avoiding Power Causes of Action.
Chapter 11 Cases: means the respective cases under chapter 11
of the Bankruptcy Code concerning the Debtors which were commenced on the Filing
Date.
Claim: Any right to (a) payment from any of the Debtors,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (b) an equitable remedy for breach of performance if
such breach gives rise to a right to payment from either of the Debtors, whether
or not such equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
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Claridge Debtors: means CPPI and Corporation.
Class: means a class of Claims or Interests as classified in
the Plan.
Collateral: means any property of an Estate that secures an
Allowed Secured Claim.
Collateral Trust Agreement: means that certain Collateral
Trust Agreement by and among the Company, CPPI, the ACBA and the Collateral
Trustee, dated as of January 31, 1994, as amended, supplemented or modified from
time to time as permitted thereby and by this Indenture.
Committee: Any committee appointed pursuant to Section 1102(a)
of the Bankruptcy Code in the Chapter 11 Cases.
Confirmation: The entry by the Bankruptcy Court of an order
confirming this Plan.
Confirmation Date: The date on which the Confirmation Order
shall be entered on the docket maintained by the Clerk of the Bankruptcy Court
with respect to the Chapter 11 Cases.
Confirmation Hearing means the hearing before the Bankruptcy
Court to consider confirmation of the Plan.
Confirmation Order: The order of the Bankruptcy Court
confirming this Plan and approving the transactions contemplated herein.
Contingent Payment: means a Claim held by Webb or United Way,
or their designees, equal to $20 million plus interest from December 1, 1988, at
the rate of 15% per annum, compounded quarterly, in any proceeds ultimately
recovered from the operations and/or the sale or refinancing of the Debtors or
their assets in excess of the First Mortgage and other liabilities.
Contingent Payment Right: means any Claim held by a Releasing
Investor (as defined in the Restructuring Agreement) to payment of any amount by
either of the Claridge Debtors or ACBA, as the case may be, under the
Restructuring Agreement.
Corporation: The Claridge Hotel & Casino Corporation, a New
York corporation.
Corporation Interests: The equity interests in the Corporation
including, but not limited to, those represented by shares of capital stock of
the Corporation and any options, warrants, calls, subscriptions or other similar
rights or other agreements, commitments or outstanding securities obligating the
Corporation to issue, transfer or sell any shares of capital stock of the
Corporation.
CPPI: means the Claridge at Park Place, Incorporated, a New
Jersey corporation.
CPPI Guaranty: means that certain guaranty executed by CPPI on
January 31, 1994 evidencing CPPI's guarantee of the Corporation's obligations
under the First Mortgage Notes Indenture and the First Mortgage Notes and all
amendments thereto prior to the date hereof.
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CPPI Interests: The equity interests in CPPI including, but
not limited to, those represented by shares of capital stock of CPPI and any
options, warrants, calls, subscriptions or other similar rights or other
agreements, commitments or outstanding securities obligating CPPI to issue,
transfer or sell any shares of capital stock of CPPI, all of which are owned by
the Corporation.
Creditor: means any Person that is the Holder of a Claim
against any of the Debtors that arose on or before the Filing Date or through
and including the Effective Date or a Claim against any of the Estates of the
kind specified in Section 502(g), 502(h) or 502(i) of the Bankruptcy Code.
Debtors: means collectively, the Corporation, CPPI and ACBA.
Deficiency Claim: means the amount by which a Creditor's Claim
exceeds the value of the Collateral that secures such Claim.
DEWNJ: means Del E. Webb New Jersey, Inc., a New Jersey
corporation and a wholly-owned subsidiary of Webb.
Disbursing Agent means the Reorganized Corporation.
Disclosure Statement: means the disclosure statement
distributed to holders of Claims entitled to vote for the purpose of accepting
or rejecting this Plan in accordance with Section 1126(b)(1) of the Bankruptcy
Code.
Disputed: means with respect to Claims, any Claim that is not
Allowed.
Distribution Record Date: means the date on which the
Confirmation Order is signed.
Effective Date: means the first Business Day:
(a) that is at least 11 days after the Confirmation Date;
(b) on which no stay of the Confirmation Order is in effect;
and
(c) on which all conditions in Article XII of the Plan have
been satisfied or have been waived as provided in the
Plan.
Employee Claim: means an Unsecured Claim based on salaries,
wages, sales commissions, expense reimbursements, accrued vacation pay,
health-related benefits, incentive programs, employee compensation guarantees,
severance or similar employee benefits.
Estate: means the estate created upon the commencement of each
Case as to each Debtor by Section 541 of the Bankruptcy Code.
Exempt Tax: means any stamp, recording or similar tax or
charge (including any penalties, interest or additions thereto) within the
meaning of Section 1146(c) of the Bankruptcy Code that may be imposed by the
laws of any state upon the transactions contemplated under, or necessary for the
success of, the Plan, including without limitation, any mortgage recording,
securities transfer, deed, realty transfer, documentary transfer or gains taxes.
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Expansion Wraparound Note: means the promissory note in the
original principal amount of $17,000,000, dated as of March 17, 1986, given by
ACBA to CPPI, and all amendments thereto prior to the date hereof.
Fee Application: an application of a professional Person under
Section 330, 503 or 506(b) of the Bankruptcy Code for allowance of compensation
and reimbursement of expenses in any Chapter 11 Case.
Fee Claim: a Claim under Section 330, 503 or 506(b) of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses in
any Chapter 11 Case.
FF&E Notes: means those certain promissory notes of various
dates given by ACBA to CPPI evidencing loans made by CPPI to ACBA under the
Wraparound Mortgage to fund the purchase of certain furniture, fixtures,
equipment and other capital items.
Filing Date: means with respect to the Corporation and CPPI,
August 16, 1999, and with respect to ACBA, October 5, 1999.
Final Order: means an order, ruling or judgment that is no
longer subject to review, modification or amendment by appeal or writ of
certiorari.
First Mortgage means the non-recourse first mortgage upon the
Hotel Assets and all related security agreements and assignments granted by ACBA
to or for the benefit of the holders of the First Mortgage Notes, and all
amendments thereto prior to the date hereof.
First Mortgage Notes: means the 11-3/4% First Mortgage Notes
Due 2002, issued and outstanding under the First Mortgage Notes Indenture.
First Mortgage Note Claim: means any Claim against the Debtors
by any Holder of a First Mortgage Note, including pursuant to or arising under
the First Mortgage Notes, the First Mortgage, the CPPI Guaranty, the First
Mortgage Notes Indenture, the Collateral Trust Agreement and the Security
Documents.
First Mortgage Notes Indenture: means that certain Indenture,
dated as of January 31, 1994, among the Corporation, CPPI and the Indenture
Trustee, pursuant to which the First Mortgage Notes were issued, and all
amendments thereto prior to the date hereof.
General ACBA Claim: means any unsecured claim against ACBA,
other than an Intercompany Claim.
General Corporation Claim: means any Unsecured Claim against
the Corporation other than an Intercompany Claim.
General CPPI Claim: means any Unsecured Claim against CPPI
other than an Intercompany Claim.
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Holder: means the beneficial owner of any Claim or Interest.
Hotel Assets: means the buildings, valet parking facility, and
non-gaming, depreciable, tangible personal property and the underlying land of
the Claridge Hotel and Casino, which are owned by ACBA and leased to CPPI
pursuant to the Operating Leases.
Impaired: means any Claim or Interest that is impaired within
the meaning of section 1124 of the Bankruptcy Code.
Indenture Trustee: Bank of New York, in its capacity as
successor trustee and IBJ Whitehall Bank & Trust Company, in its capacity as
indenture trustee under the First Mortgage Notes Indenture.
Intercompany Claim: means any Claim against one Debtor held by
any other Debtor.
Interests: means the collective reference to the ACBA
Interests, the Corporation Interests and the CPPI Interests.
Local Rules: means the Local Bankruptcy Rules of the District
of New Jersey, as applicable to the Chapter 11 Cases.
Maximum Unsecured Claim Limit: shall have the meaning ascribed
to such terms in Section 5.4 of the Plan.
Miscellaneous Secured Claim: means any Claim, other than a
First Mortgage Note Claim, that is a Secured Claim.
New Collateral Trust Agreement: means the new collateral trust
agreement to be executed by the Reorganized Claridge Debtors and the New Notes
Indenture Trustee under the New Notes Indenture.
New Common Stock: means the shares of Common Stock of the
Reorganized Corporation to be issued pursuant to the terms of the Plan and
having the relative rights as set forth in the Restated Certificate of
Incorporation, in accordance with the exemption from registration under Section
1145 of the Bankruptcy Code.
New CPPI Guaranty: means the new guaranty to be issued by the
Reorganized CPPI to the holders of the New Notes, to the extent Class 3, as a
class votes to accept the Plan.
New Notes: means the notes in the principal face amount of
$15,000,000 that shall be issued by the Reorganized Corporation to the holders
of the First Mortgage Notes, on the Effective Date pursuant to this Plan and
pursuant to the exemption from registration under Bankruptcy Code Section 1145,
to the extent Class 3, as a class, votes to accept the Plan.
New Notes Collateral: means all of the Debtors' Assets,
including the Hotel Assets, the Self-Parking Garage and the Reorganized CPPI
Common Stock.
New Notes Indenture: means the trust indenture in accordance
with which the New Notes will be issued, to the extent Class 3, as a class,
votes to accept the Plan.
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New Notes Mortgage: means the mortgage and security agreement
from the Reorganized CPPI to the New Notes Trustee upon the New Notes Collateral
that constitutes real property to secure the New Notes, to the extent Class 3,
as a class, votes to accept the Plan.
New Notes Security Documents: means, collectively, the New
Collateral Trust Agreement, the New Notes Mortgage, the Reorganized Corporation
Pledge Agreement, the Reorganized CPPI Pledge Agreement, the Reorganized CPPI
Cash Collateral Pledge Agreement, the Reorganized CPPI Security Agreement, the
Reorganized CPPI Trademark Security Agreement, the Reorganized Corporation
Security Agreement, the Reorganized Corporation Cash Collateral Pledge
Agreement, the Reorganized CPPI Assignment of Leases and Rents and Other
Contracts, and any and all pledges, security agreements, guaranties, financing
statements, filings, instruments or other agreements or assignments executed by
the Reorganized Corporation, or Reorganized CPPI in order to evidence, secure,
perfect, notice or guaranty the New Notes or the New CPPI Guaranty.
New Notes Trustee: means the financial institution which will
serve as trustee under the New Notes Indenture, to the extent Class 3, as a
class, votes to accept the Plan.
NJCCC: means the New Jersey Casino Control Commission.
Operating Leases: means the collective reference to the
Operating Lease Agreement between ACBA, as lessor, and CPPI, as lessee, dated as
of October 31, 1993, and the Expansion Operating Lease Agreement between ACBA,
as lessor, and CPPI, as lessee, dated as of March 17, 1986 and, in each case,
all amendments thereto prior to the date hereof.
Person: means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, limited liability
company, estate, person, trust, trustee, United States trustee, unincorporated
organization, government, governmental unit (as defined in the Bankruptcy Code)
or political subdivision thereof, agency, or other person.
Plan: means this Joint Chapter 11 Plan, as altered, amended or
modified from time to time by the Proponents in accordance with the Bankruptcy
Code, the Bankruptcy Rules and this Plan.
Plan Securities: means the New Notes and the New Common Stock.
Priority Claim: means any Claim, other than a Priority Tax
Claim or an Administrative Expense Claim, which is entitled to priority in
payment under section 507(a) of the Bankruptcy Code.
Priority Tax Claim: Any Claim which is entitled to priority in
payment under section 507(a)(8) of the Bankruptcy Code.
Record Date means the date on which Creditors entitled to vote
on the Plan are determined by their record ownership of Claims, which date shall
be the date of entry of an Order of the Bankruptcy Court approving the
Disclosure Statement.
Related Documents: means the Collateral Trust Agreement and
the Security Documents.
Reorganized Claridge Debtors: means Reorganized CPPI and
Reorganized Corporation.
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Reorganized Corporation: Corporation, from and after the
Effective Date.
Reorganized CPPI: CPPI, from and after the Effective Date.
Reorganized CPPI Interests: means the stock of Reorganized
CPPI pledged by the Reorganized Corporation to the New Notes Trustee to secure
the obligations under the New Notes.
Restated Bylaws: The Bylaws of the Reorganized Corporation, as
amended and restated pursuant to this Plan.
Restated Certificate of Incorporation: The certificate of
incorporation of the Reorganized Corporation, as amended and restated pursuant
to this Plan.
Restructuring Agreement: means the agreement, dated October
27, 1988, among the Corporation, CPPI, DEWNJ, ACBA, Robert Swanson, Everett
Mangam, T. Edward Plant, Anthony Atchley, Gerald Heetland, AC Boardwalk Partners
Corp. and First Fidelity Bank, National Association, New Jersey, to restructure
the financial obligations of the Corporation and CPPI.
Schedules: means the schedules of assets and liabilities and
statement of financial affairs, as may have been amended from time to time,
filed by each of the Debtors pursuant to Bankruptcy Rule 1007.
Secured Claim: A Claim under Bankruptcy Code ss. 506 arising
on or before the relevant Filing Date that is secured by a valid, perfected,
enforceable and non-avoidable lien on property of a Debtor or that is subject to
setoff under Bankruptcy Code ss. 553, to the extent of the value of the interest
of the Holder of such Claim in the Debtor's interest in the property, or to the
extent of the amount of the setoff, as applicable, provided, however, that if
the Holder's Class timely elects application of Bankruptcy Code ss. 1111(b)(2),
each Holder's Claim in such Class shall be a Secured Claim in the full amount of
the Holder's Allowed Claim.
Security Documents: means all other documents, pledges,
agreements, guarantees, subordination agreements, assignments or other documents
between the Debtors, the Indenture Trustee or the First Mortgage Note holders
which grant or evidence any legal, contractual or equitable right or remedy of
the holders of the First Mortgage Notes or the Indenture Trustee in, to or
against the Debtors or their property, including the CPPI Cash Collateral
Pledge, the CPPI Security Agreement, the Corporation Pledge Agreement, the
Partnership Cash Collateral Pledge and the Partnership Security Agreement as
such terms are defined in the First Mortgage Notes Indenture.
Self-Parking Garage: means that certain parcel of real
property together with the improvements thereon owned by CPPI on which is
operated a 24-hour self-parking garage.
Trade Claim: An Unsecured Claim of any Person against any of
the Debtors for goods provided and/or services rendered in the ordinary course
by such Person to such Debtor.
United Way: means the Valley of the Sun United Way.
Webb: means Del Webb Corporation, an Arizona corporation.
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Unsecured Claim: Any Claim other than a Miscellaneous Secured
Claim, an Administrative Expense, a Priority Claim or a Priority Tax Claim.
Wraparound Mortgage: The Expandable Wraparound Mortgage and
Security Agreement between ACBA, as Mortgagor, and CPPI, as Mortgagee, dated as
of October 31, 1983, and all amendments thereto prior to the date hereof.
Wraparound Note: The promissory note in the original principal
amount of $127,000,000 dated as of October 31, 1983, given by ACBA to CPPI, and
all amendments thereto prior to the date hereof, that matures on September 30,
2005.
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1.2 Document References. All references to documents shall include all
addenda, exhibits and schedules attached thereto or referred to therein.
1.3 Other Definitions. A term used and not defined herein, but that is
defined in the Bankruptcy Code, shall have the meaning set forth therein. The
words "herein," "hereof," "hereto," "hereunder," and others of similar import
refer to the Plan as a whole and not to any particular section, subsection, or
clause contained in the Plan. The word "including" shall mean "including,
without limitation." The singular shall include the plural and vice versa unless
the context otherwise requires.
ARTICLE II
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
2.1 Administrative Expense Claims. Except as set forth in section 2.3
below, Allowed Administrative Expense Claims (other than Claims for compensation
and reimbursement of expenses of Professionals) will be paid in full, in Cash,
on the Effective Date, or, if such Claim becomes Allowed after the Effective
Date, within five (5) days after such Claim becomes Allowed. Any fees due and
owing to the United States Trustee shall be paid in full on the Effective Date,
or as soon thereafter as practicable. All requests by Professionals for final
allowance of compensation and reimbursement of expenses accrued as of the
Confirmation Date must be filed with the Court within sixty (60) days of the
Confirmation Date and will be paid within five (5) days after such Claims become
Allowed. For the period arising from and after the Effective Date, including
with respect to ACBA through its dissolution date and the completion of its
windingup, fees or expenses incurred by ACBA or the Reorganized Claridge
Debtors, as the case may be, shall be paid by ACBA or the Reorganized Claridge
Debtors, as the case may be, when and to the extent such fees or expenses become
due and payable without further order of the Bankruptcy Court. The estimated
amount of unpaid fees and expenses of Professionals as of the Effective Date
will be deposited by the Debtors in one or more segregated accounts on the
Confirmation Date. Such escrowed funds shall be used to pay Allowed
Administrative Expense Claims of Professionals and any funds remaining after
making all such payments shall revest in the Reorganized CPPI. The Reorganized
Claridge Debtors shall also assume the expense and cost (but not any underlying
tax liability owed by a general partner or a limited partner) related to any tax
inquiry, audit or appeal of any tax liability of a general partner or ACBA.
Notwithstanding anything in the Plan to the contrary, Administrative Claims of
the United States Trustee for fees pursuant to 11 U.S.C. ss. 1930(a)(6) shall be
paid in accordance with the applicable schedule for payment of such fees.
2.2 Source of Funding. The source of funding to satisfy Administrative
Expense Claims shall be from cash on hand as of the Effective Date or, to the
extent such Claim is not due and payable until after the Effective Date, from
cash on hand of the Reorganized Claridge Debtors.
2.3 Bar Date for Administrative Expense Claims.
(a) In General. Unless the payment date is otherwise established by an
Order of the Bankruptcy Court, and other than Administrative Expense Claims of
Professionals, requests for payment of Administrative Expense Claims must be
filed and served on the Debtors no later than thirty (30) days after the
Effective Date. Any Person that is required to file and serve a request for
payment of an Administrative Expense Claim and that fails to timely file and
serve such request, shall be forever barred, estopped and enjoined from
asserting such Claim against the Debtors, the Estates of the Debtors or their
respective property. The administrative bar date shall not apply to fees payable
to the United States Trustee pursuant to 11 U.S.C.ss. 1930(a)(6).
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(b) Professionals. Professionals or other Persons requesting
compensation or reimbursement of expenses pursuant to sections 327, 328, 330,
331, 503(b) and 1103 of the Bankruptcy Code for services rendered before the
Confirmation Date shall file an application for final allowance of compensation
and reimbursement of expenses no later than sixty (60) days after the
Confirmation Date. Objections to applications of professionals or other Persons
for compensation or reimbursement of expenses must be filed no later than ninety
(90) days after the Confirmation Date.
(c) Ordinary Course Liabilities. Holders of Administrative Expense
Claims arising in the ordinary course of the Debtor's Chapter 11 Case and
holders of Claims and obligations assumed by the Reorganized Claridge Debtors
under this Plan shall not be required to file any request for payment of such
Claims. All Administrative Operating Expense Claims which are not due and
payable by their terms as of the Confirmation Date shall be assumed by the
Reorganized Claridge Debtors, and paid in accordance with their terms, subject
to all applicable offsets and defenses which the Debtors may hold to payment of
such Claims.
2.4 Priority Tax Claims. At the option of the Debtors, each holder of
an Allowed Priority Tax Claim asserted against the Debtors arising in the
ordinary course of the Debtors' Chapter 11 Cases shall be paid the full amount
of the Allowed Priority Tax Claim, (a) in Cash, on the later of (i) the
Effective Date (or as soon thereafter as is practicable), or (ii) the first
Business Day after such Claim becomes an Allowed Claim (or as soon thereafter as
is practicable); or (b) in equal quarterly installments of principal and
interest at the applicable legal rate over a period not to exceed six (6) years
from the date of assessment of such Priority Tax Claim. The source of funding
for Allowed Priority Tax Claims against the Debtors' Estates shall be from cash
on hand of the Reorganized Claridge Debtors.
2.5 Indenture Trustee Fees and Expenses. On or prior to the Effective
Date, the Indenture Trustee shall furnish to the Debtors a certification stating
(i) the aggregate amount of its previously invoiced but then unpaid fees and
unreimbursed expenses (including the fees and expenses of its counsel and
advisors), and (ii) an estimate of such fees and expenses from the latest date
covered by its last invoice to and including the Effective Date and an estimate
of any part-Effective Date fees and expenses. On the Effective Date, in
satisfaction of the Indenture Trustee's unpaid fees and expenses, the Indenture
Trustee shall retain from cash held by the Indenture Trustee an amount of cash
equal to the aggregate amount stated in its aforementioned certification. Such
amount shall be in addition to the amount previously retained by the Indenture
Trustee in payment of its fees and expenses incurred both prior to and after the
Petition Date. The Indenture Trustee shall not be required to file an
application with respect to its fees and expenses and the fees and expenses of
its retained professionals unless the Bankruptcy Court shall have entered a
Final Order requiring that such application be made. The Indenture Trustee shall
reserve its rights to assert that it is not required to obtain Bankruptcy Court
approval of such fees and expenses. If a Final Order requires the filing of an
application by the Indenture Trustee and its retained professionals in
connection with the fees and expenses of the Indenture Trustee, the Indenture
Trustee and its professionals shall be entitled to retain all monies received in
payment of their respective fees and expenses unless the Bankruptcy Court by
Final Order shall award a lesser amount, in connection with any such fee
application. In the event that the cash held by the Trustee is insufficient to
pay its unpaid invoiced fees and expenses, the Debtors shall pay to the
Indenture Trustee such shortfall in cash on the Effective Date.
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The amount of any estimated fees and expenses not covered by an invoice
on the Effective Date including the estimated costs related to any fee
application(s) and any appeals relating to any disposition thereof will be held
in trust, in a segregated interest bearing money market account (the "Segregated
Account") by the Indenture Trustee, if the cash held by the Indenture Trustee is
sufficient or by Reorganized CPPI, if additional cash is required to pay the
estimated unpaid fees and expenses of the Indenture Trustee, until final
invoices are presented to the Debtors and until any fee application and any
appeals relating to any disposition thereof have been determined. The Indenture
Trustee and Reorganized CPPI, to the extent to which each is entitled to the
funds so held in the Segregated Account, shall also be entitled to interest and
income earned on the portion of the funds payable to the Indenture Trust and
Reorganized CPPI, respectively. Upon receipt of certification of such final
invoices and approval by the Bankruptcy Court, if so required, such amount shall
be paid to the Indenture Trustee from the Segregated Account together with
interest thereon and the balance shall be released to Reorganized CPPI. Except
for those funds held in the Segregated Account as provided above, any excess
cash remaining within the possession, custody or control of the Indenture
Trustee, including funds held in the AOB Escrow Account, shall be deemed
exclusively to be the property of Reorganized CPPI and shall be remitted to CPPI
within ten days of the Effective Date.
Distributions made to the holders of First Mortgage Note Claims
pursuant to the Plan will be subject to the lien rights of the Indenture Trustee
until the Indenture Trustee's fees and expenses are paid in full. The
Confirmation Order shall provide that the Indenture Trustee charging lien shall
attach to all cash to be distributed to it under the Plan and all distributions
to the Holders of the First Mortgage Notes until the aggregate amount stated in
its certifications has been paid in full and, if a fee application is required
to be filed, any and all fees and expenses related thereto including any appeals
from the disposition thereof. The Indenture Trustee charging lien shall remain
on the funds in the Segregated Account until the final invoice is paid in full.
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ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS
3.1 Classification of Claims. Pursuant to section 1122 of the
Bankruptcy Code, set forth below is a designation of classes of Claims and
Interests.
(a) Administrative Expense Claims and Priority Tax Claims of the kinds
specified in Sections 507(a)(1) and 507(a)(8) of the Bankruptcy Code (set forth
in Article IV, below) have not been classified and are excluded from the
following classes in accordance with Section 1123(a)(1) of the Bankruptcy Code.
3.2 Class 1: Priority Claims. This class consists of all Priority
Claims that are not claims of the type referred to in Section 2.4 hereof.
3.3 Class 2: Miscellaneous Secured Claims. This class consists of all
Miscellaneous Secured Claims.
3.4 Class 3: First Mortgage Note Claims. This class consists of all
First Mortgage Note Claims, including any Claim held by the holders of the First
Mortgage Notes against any of the Debtors under the First Mortgage Notes, the
First Mortgage Notes Indenture, the First Mortgage or the CPPI Guaranty,
including any Deficiency Claim.
3.5 Class 4: General Corporation Claims. This class consists of all
General Corporation Claims against the Corporation, other than claims that elect
to be treated as a Class 6 Convenience Class Claim.
3.6 Class 5: General CPPI Claims. This class consists of all General
CPPI Claims (including Trade Claims against CPPI and Employee Claims) other than
claims that elect to be treated as a Class 6 Convenience Class Claim.
3.7 Class 6: ACBA, CPPI and Corporation General Convenience Class
Claims. This class consists of all General CPPI Claims, General Corporation
Claims and General ACBA Claims that elect to be treated as Convenience Class
Claims.
3.8 Class 7: General ACBA Claims. This class consists of General ACBA
Claims.
3.9 Class 8: Intercompany Claims. This class consists of all
Intercompany Claims.
3.10 Class 9: Contingent Payment Rights Claims. This class consists of
all Allowed Contingent Payment Rights Claims.
3.11 Class 10: Contingent Payment Claims. This class consists of all
Allowed Contingent Payment Claims.
3.12 Class 11: Corporation Interests. This class consists of all
Corporation Interests.
3.13 Class 12: CPPI Interests. This class consists of all CPPI
Interests.
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3.14 Class 13: ACBA Interests. This class consists of all ACBA
Interests.
3.15 Classification Rules. A Claim is in a particular Class only to the
extent that the Claim qualifies within the description of Claims of that Class,
and such Claim is in a different Class to the extent that the remainder of the
Claim qualifies within the description of the different Class. Pursuant to
section 1123(a)(4) of the Bankruptcy Code, all Allowed Claims of a particular
Class shall receive the same treatment unless the Holder of a particular Allowed
Claim agrees to a less favorable treatment for such Allowed Claim. For purposes
of the Plan, and pursuant to section 510(a) of the Bankruptcy Code, the Plan
shall give effect to subordination agreements which are enforceable under
applicable non-bankruptcy law, except to the extent the beneficiary or
beneficiaries thereof agree to less favorable treatment. The Plan shall also
give effect to the subordination rules of sections 510(b) and (c) of the
Bankruptcy Code. The inclusion of a Creditor by name in any Class is for
purposes of general description only, and includes all Persons claiming as
beneficial interest holders, assignees, heirs, devisees, transferees or
successors in interest of any kind of the Creditor named.
ARTICLE IV
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND NOT IMPAIRED BY
THIS PLAN
4.1 Classes of Claims Impaired by this Plan and Entitled to Vote. First
Mortgage Note Claims (Class 3), General Corporation Claims (Class 4), General
CPPI Claims (Class 5), General ACBA Claims (Class 7), and Intercompany Claims
(Class 8) are Impaired by this Plan, are receiving distributions under the Plan
and, therefore, the holders of Allowed Claims in Classes 3, 4, 5, 7 and 8 are
entitled to vote to accept or reject this Plan.
4.2 Classes of Claims and Interests Impaired by this Plan and Deemed to
Reject this Plan. Holders of Allowed Contingent Payment Rights Claims (Class 9),
Allowed Contingent Payment Claims (Class 10), Corporation Interests (Class 11)
and ACBA Interests (Class 13) are Impaired and do not receive or retain any
property under this Plan. Under section 1126(g) of the Bankruptcy Code, the
holders of such Claims and Interests are deemed to reject this Plan and the
votes of such holders will not be solicited.
4.3 Classes of Claims and Interests Not Impaired by this Plan and
Conclusively Presumed to Accept this Plan. Priority Claims (Class 1),
Miscellaneous Secured Claims (Class 2), Convenience Class Claims (Class 6) and
CPPI Interests (Class 12) are not Impaired by this Plan. Under section 1126(f)
of the Bankruptcy Code, the holders of such Claims and Interests are
conclusively presumed to accept this Plan, and the votes of such holders will
not be solicited.
ARTICLE V
PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS
5.1 Priority Claims (Class 1). Each holder of an Allowed Priority Claim
shall be paid the Allowed amount of such Claim, including all applicable
interest and other charges to which the Holder of such Allowed Priority Claim
may be entitled under applicable law or contract, to the extent permitted under
the applicable provision of section 507(a), in Cash, on the later of: (a) the
Effective Date (or as soon thereafter as is practicable) or (b) the first
Business Day after such Claim becomes an Allowed Claim (or as soon thereafter as
is practicable).
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5.2 Miscellaneous Secured Claims (Class 2). With respect to an Allowed
Miscellaneous Secured Claim, the Holder of such Allowed Claim shall receive, at
the sole option of the Reorganized Corporation, (a) the unaltered legal,
equitable and contractual rights to which the Miscellaneous Secured Claim
entitles the Holder of such Claim, (b) such other treatment that will render
such Miscellaneous Secured Claim unimpaired under section 1124 of the Bankruptcy
Code, (c) the transfer and surrender of all collateral securing such Claim to
such Holder, without representation or warranty by or recourse against either
Debtor, or (d) will be treated in accordance with an agreement between the
Proponents and the Holder of such Claim. In the event that the treatment
provided in subparagraphs (a), (b) or (c) above results in payment to such
Creditor of less than the Allowed amount of its Claim, it shall be entitled to
assert a General Unsecured Claim against the Debtors that it remains liable
thereon for any deficiency.
5.3 First Mortgage Note Claims (Class 3). Upon the Effective Date, any
Claim held or asserted by the holders of the First Mortgage Notes against the
Claridge Debtors and ACBA, including any Deficiency Claim, and including any
Claim evidenced by or under the First Mortgage Notes, the Security Documents,
the CPPI Guaranty, the First Mortgage or the First Mortgage Notes Indenture,
shall be extinguished, discharged and released and any mortgage, lien or
encumbrance securing such Claim, including any interest in the funds held in the
AOB Escrow Account, shall be discharged, waived and released upon receipt of the
distributions provided under paragraph (a) or (b) of this Section 5.3, as
applicable. Under the Plan, holders of Allowed Class 3 Claims will receive one
of the following two treatments depending upon whether holders of Allowed Class
3 Claims, as a class, vote to accept or reject the Plan.
(a) Acceptance by Class 3 of the Plan. Provided holders of
Allowed Class 3 claims vote, as a class, to accept the Plan, each holder of a
First Mortgage Note Claim in full, complete and final satisfaction thereof,
shall receive pari passu and pro rata one hundred percent (100%) of the New
Common Stock and one hundred (100%) percent of the New Notes. As a result of the
effectuation of the Plan, holders of the First Mortgage Notes shall not share or
receive any distribution from any of the Debtors' Assets upon any alleged
deficiency claim, if such exists, with holders of Allowed Claims in Classes 4,
5, 6 and 7 or otherwise from the Reorganized Claridge Debtors or their assets.
The New Notes shall (i) accrue and pay interest at the rate of eight percent
(8%) per annum; (ii) constitute an obligation of the Reorganized Corporation
which obligation shall be guaranteed by CPPI pursuant to the New CPPI Guaranty;
(iii) be secured by a trust lien and security interest in the New Notes
Collateral, pursuant to the New Notes Mortgage and the New Notes Security
Documents and by a pledge by Reorganized Corporation of its Interests in the
Reorganized CPPI; (iv) mature upon the tenth (10th) anniversary date of the
Effective Date; (v) be pre-payable, in whole or in part, at any time without
penalty; (vi) commence paying interest six (6) months from the Effective Date
and, thereafter, pay interest in arrears every six (6) months until the maturity
date of the New Notes; and (vii) contain other usual and customary terms and
provisions. A copy of the New Note, the New CPPI Guaranty, the New Notes
Mortgage are attached hereto as Exhibits "A", "B" and "C."
(b) Rejection by Class 3 of the Plan. Notwithstanding anything
in this Plan to the contrary, if Class 3, as a class, does not vote to accept
the Plan, the Debtors will ask that the Bankruptcy Court confirm the Plan over
the rejection of the Plan by Class 3, as a class. In full, complete and final
satisfaction of any and all Claims held by the holders of Class 3 Claims,
including any Deficiency Claims, to the extent such a claim exists, against the
Debtors or their property, holders of Allowed Class 3 claims will no longer have
the option to receive the New Notes but instead will receive pari passu and pro
rata the New Common Stock.
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5.4 General Corporation Claims (Class 4). Subject to the Maximum
Unsecured Claim Limit, each Holder of an Allowed General Corporation Claim shall
receive the lesser of (a) the pro rata share of the Maximum Unsecured Claim
Limit determined by dividing the Holder's Allowed Classes 4, 5 or 7 Claim by the
sum of (i) all Allowed Claims in Classes 4, 5 and 7 and (ii) until all Disputed
Claims in Classes 4, 5 and 7 have been allowed or disallowed, all Disputed
Claims, and (b) one hundred percent (100%) of such holder's Claim, without
interest, payable in six (6) equal, annual installments over five (5) years
commencing upon the Effective Date. The balance of any amount owed to the
holders of Allowed General Corporation Claims, once all Disputed Claims in
Classes 4, 5 and 7 have been resolved or reserved for in accordance with the
Plan, can be paid in full at any time by the Reorganized Corporation without
penalty up to the Maximum Unsecured Claim Limit. The Reorganized Claridge
Debtors shall covenant and agree that the balance of any amount then outstanding
and owed to holders of Class 4, 5 and 7 Allowed Claims shall be satisfied in
full upon a sale of substantially all of the New Notes Collateral or, to the
extent issued under the Plan, a refinance and payment in full of the New Notes.
The maximum aggregate obligation that the Reorganized Claridge Debtors
shall have to holders of Allowed Class 4, 5 and 7 Claims is $5,500,000 (the
"Maximum Unsecured Claim Limit"). The Reorganized Claridge Debtors' obligation
under the Plan to make any further or additional payment or payments to holders
of Allowed Class 4, 5 and 7 Claims shall terminate and be deemed satisfied when
the aggregate of all prior payments to holders of Allowed Class 4, 5, and 7
Claims equals the Maximum Unsecured Claim Limit.
5.5 General CPPI Claims (Class 5). Subject to the Maximum Unsecured
Claim Limit, each holder of an Allowed General CPPI Claim shall receive the
lesser, of (a) the pro rata share of the Maximum Unsecured Claim Limit
determined by dividing the Holder's Allowed Classes, 4, 5 or 7 Claim by the sum
of (i) all Allowed Claims in Classes 4, 5 and 7 and (ii) until all Disputed
Claims in Classes 4, 5 and 7 have been allowed or disallowed, all Disputed
Claims, and (b) one hundred percent (100%) of such holder's claim, without
interest, payable in six (6) equal, annual installments over five (5) years
commencing upon the Effective Date. The balance of any amount owed to the
holders of Allowed General CPPI Claims, once all Disputed Claims in Classes 4, 5
and 7 have been resolved or reserved for in accordance with the Plan, can be
paid in full at any time by Reorganized CPPI, without penalty up to the Maximum
Unsecured Claim Limit. The Reorganized Claridge Debtors shall covenant and agree
that the balance of any amount then outstanding and owed to holders of Class 4,
5 and 7 Allowed Claims shall be satisfied in full upon a sale of substantially
all of the New Notes Collateral or, to the extent issued under the Plan, a
refinance and payment in full of the New Notes.
The maximum aggregate obligation that the Reorganized Claridge Debtors
shall have to holders of Allowed Class 4, 5 and 7 Claims is the Maximum
Unsecured Claim Limit. The Reorganized Claridge Debtors' obligation under the
Plan to make any further or additional payment or payments to holders of Allowed
Class 4, 5 and 7 Claims shall terminate and be deemed satisfied when the
aggregate of all prior payments to holders of Allowed Class 4, 5, and 7 Claims
equals the Maximum Unsecured Claim Limit.
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5.6 Convenience Claims (Class 6).
(a) Eligibility. Certain creditors that otherwise would be classified
as General Corporation Claims (Class 4), General CPPI Claims (Class 5) or
General ACBA Claims (Class 7) shall be deemed to be a Class 6 Convenience Claim,
if such holder's Allowed Claim is $2,500 or less or, subject to the eligibility
requirements set forth below, a holder of an Allowed Class 4, 5 or 7 Claim is
greater than $2,500 and such holder elects upon the Ballot to be classified as
and receive the treatment provided for Class 6 Convenience Claims. Only those
Class 4, Class 5 or Class 7 Creditors that meet the following eligibility
requirement shall be permitted to be Class 6 Convenience Claims Creditors: (i)
those Holders of Allowed Class 4, Class 5 or Class 7 Claims whose claim is
$2,500.00 or less; or (ii) those Holders of Allowed Class 4, Class 5 or Class 7
Claims that elect to reduce voluntarily the amount of such creditor's claim to
$2,500.00 upon the Holders' Ballot.
(b) Distributions. As an alternative treatment, holders of Allowed
Class 4, Class 5 or Class 7 Claims that elect to be treated as holders of
Allowed Convenience Claims and/or which meet the eligibility requirement set
forth herein, shall receive cash in an amount equal to 100% of such Allowed
Convenience Claim on the later of the Effective Date and the date such
Convenience Claim becomes an Allowed Convenience Claim.
(c) Impairment and Voting. Due to the voluntary election to be treated
as a Class 6 Creditor, holders of Allowed Class 6 Claims shall be unimpaired
under the Plan. The holders of Allowed Claims in Class 6 are presumed to accept
the Plan and are not entitled to vote to accept or reject the Plan.
(d) Election to be Treated as a Convenience Claim. By checking the
appropriate box on a timely cast Ballot, the holder of an Allowed General
Corporation Claim or an Allowed General CPPI Claim or an Allowed General ACBA
Claim in an amount greater than $2,500 may elect to reduce the amount of such
holder's Allowed General Claim to $2,500 and to receive a distribution thereupon
as an Allowed Class 6 Convenience Claim. By making such election, the holder of
an Allowed General CPPI Claim, an Allowed General Corporation Claim or an
Allowed General ACBA Claim shall thereby be deemed to waive and release
Corporation or CPPI or ACBA, as the case may be, and their Estates and their
property from any and all liability for such excess amount. The holder of an
Allowed General CPPI Claim, an Allowed General Corporation Claim or an Allowed
General ACBA Claim which timely elects to reduce the amount of its Allowed Claim
shall be deemed to be the holder of an Allowed Class 6 Convenience Claim for
classification, voting and all other purposes under the Plan.
5.7 General ACBA Claims (Class 7). Subject to the Maximum Unsecured
Claim Limit, to the extent any such Claims exist, each holder of an Allowed
General ACBA Claim shall receive the lesser, of (a) the pro rata share of the
Maximum Unsecured Claim Limit determined by dividing the Holder's Allowed
Classes, 4, 5 or 7 Claim by the sum of (i) all Allowed Claims in Classes 4, 5
and 7 and (ii) until all Disputed Claims in Classes 4, 5 and 7 have been allowed
or disallowed, all Disputed Claims, and (b) one hundred percent (100%) of such
holder's Claim, without interest, payable in six (6) equal, annual installments
over five (5) years commencing upon the Effective Date. The balance of any
amount owed to the holders of Allowed General ACBA Claims, once all Disputed
Claims in Classes 4, 5 and 7 have been resolved or reserved for in accordance
with the Plan, can be paid in full at any time by the Reorganized Claridge
Debtors without penalty up to the Maximum Unsecured Claim Limit. The Reorganized
Claridge Debtors shall covenant and agree that the balance of any amount then
outstanding and owed to holders of Class 4, 5 and 7 Allowed Claims shall be
satisfied in full upon a sale of substantially all of the New Notes Collateral
or, to the extent issued under the Plan, a refinance and payment in full of the
New Notes.
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The maximum aggregate obligation that the Reorganized Claridge Debtors
shall have to holders of Allowed Class 4, 5 and 7 Claims is the Maximum
Unsecured Claim Limit. The Reorganized Claridge Debtors' obligation under the
Plan to make any further or additional payment or payments to holders of Allowed
Class 4, 5 and 7 Claims shall terminate and be deemed satisfied when the
aggregate of all prior payments to holders of Allowed Class 4, 5, and 7 Claims
equals the Maximum Unsecured Claim Limit
5.8 Intercompany Claims (Class 8). Allowed Intercompany Claims shall be
satisfied in full as follows: On the Effective Date, all Intercompany Claims
held by ACBA against the Claridge Debtors shall be extinguished and no
distribution shall be made in respect of such Claims. On the Effective Date,
ACBA will sell, transfer, convey and assign, without recourse, all of its right,
title and interest in and to its Assets, including, without limitation, the
Hotel Assets, to CPPI free and clear of any liens, claims, or encumbrances or
interests (except with respect to any liens or encumbrances classified in Class
2 or Class 3 or otherwise expressly assumed pursuant to this Plan by the
Reorganized Claridge Debtors or by CPPI in writing prior to the Effective Date)
in complete and full satisfaction of ACBA's obligations to CPPI, and CPPI's
Claims against ACBA, including arising under Wraparound Note, the FF&E Notes and
any other obligations of ACBA to CPPI, in proportion to the unpaid balances of
such obligations. The transfer by ACBA to CPPI of its Assets shall be subject to
the liens, mortgage and security interests held by the Indenture Trustee for the
benefit of the holders of Class 3 First Mortgage Note Claims pursuant to the
Security Documents to which ACBA is a party; provided, however, that any such
lien shall be extinguished and discharged under the Plan in accordance with the
treatment provided holders of Allowed Class 3 Claims under the Plan. The
Operating Leases shall terminate without liability. All other Intercompany
Claims between the Claridge Debtors and ACBA shall be deemed satisfied and
released. In addition, the Reorganized Claridge Debtors shall assume all Claims
against ACBA (i) asserted or held by any Person; and (ii) asserted or held by a
general or limited partner of ACBA based upon a claim other than a general or
limited partner of ACBA indemnification or contribution.
Any Claim held by CPPI against Corporation shall not be affected by the
Plan except that CPPI shall subordinate its Claims against Corporation to
payment in full of all other Allowed Claims against Corporation, including
Claims in Class 4.
5.9 Contingent Payment Rights Claims (Class 9). On the Effective Date,
all Allowed Contingent Payment Rights Claims shall be extinguished and no
distribution will be made in respect of such Allowed Contingent Payment Rights
Claims, including any Allowed Claims arising out of or in connection with the
Debtors' rejection of the Restructuring Agreement.
5.10 Contingent Payment Claims (Class 10). On the Effective Date, all
Allowed Contingent Payment Claims shall be extinguished and no distributions
will be made in respect of such Allowed Contingent Payment claims, including any
Allowed Claims arising out of or in connection with the Debtors' rejection of
the Restructuring Agreement.
5.11 Corporation Interests (Class 11). The Holders of Allowed
Corporation Interests will not receive or retain any property under the Plan on
account of such Interests and, on the Effective Date, all such Interests shall
be extinguished and cancelled.
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5.12 CPPI Interests (Class 12). On the Effective Date, the Corporation
will continue to own 100% of the CPPI Interests, which will revest free and
clear of any liens, claims, interests or encumbrances, subject to the pledge by
Reorganized Corporation of such Interests to holders of the New Notes in
accordance with the terms of the Plan.
5.13 ACBA Interests (Class 13). The Holders of Allowed ACBA Interests
will not receive or retain any property under the Plan on account of such
Interests and, on the Effective Date, all such Interests shall be extinguished
and cancelled.
ARTICLE VI
UNEXPIRED LEASES AND EXECUTORY CONTRACTS
6.1 Generally. Effective on and as of the Effective Date, all executory
contracts and unexpired leases that exist between the Debtors and any Person are
hereby rejected, except for any executory contracts and unexpired leases that
have been specifically assumed by the Debtors with the approval of the
Bankruptcy Court on or before the Effective Date or in respect of which a motion
for rejection has been filed on or before the Effective Date.
6.2 Particular Contracts.
(a) As of the Effective Date, (i) CPPI will reject the Operating Leases
as extended and amended pursuant to this Plan; and (ii) the Debtors will reject
the Restructuring Agreement, and any and all agreements, contracts or other
arrangements entered into in connection herewith to the extent executory as of
the Effective Date.
(b) As of the Effective Date, CPPI and the Corporation will assume (i)
all employment agreements to which they are a signatory in effect as of the
Effective Date; (ii) any and all collective bargaining agreements to which they
are a signatory in effect as of the Effective Date; and (iii) all employee
benefit plans to which they are a signatory in effect as of the Effective Date.
(c) As of the Effective Date, the Debtors shall assume all other
contracts, agreements or leases identified on Exhibit "D" hereto. All contracts
or leases identified on such exhibit with ACBA shall be assigned on the
Effective Date to the Reorganized CPPI.
6.3 Assumption and Assignment. Entry of the Confirmation Order by the
Clerk of the Bankruptcy Court shall constitute approval of all executory
contracts and unexpired leases to be assumed by the Debtors and, as the case may
be, assigned by ACBA to the Reorganized CPPI in accordance with Section 6.1 and
6.2 hereof pursuant to section 365(a) and (k) of the Bankruptcy Code.
6.4 Rejection. Claims created by or arising in connection with the
rejection of executory contracts and unexpired leases of the Debtors must be
filed no later 30 days after receipt of notice of the entry of a Final Order
authorizing such rejection. Any such Claims not filed within such time shall be
forever barred from assertion against the Debtors, the Reorganized Corporation
and the Reorganized CPPI and their property and estates. Each Claim resulting
from such rejection shall constitute a Class 2 Claim if secured or a Class 4, 5,
6 or 7 Claim, as the case may be, if unsecured.
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6.5 Officers', Directors' and General Partners' Indemnification Rights.
The obligations of the Debtors to indemnify their present or former directors,
officers, general partners, and employees pursuant to their respective
certificates of incorporation, by-laws, limited partnership agreement,
contractual obligations or any applicable laws in respect of all past, present
and future actions, suits and proceedings against any of such directors,
officers, agents, employees and representatives based upon any act or omission
related to service with, for or on behalf of any of the Debtors shall not be
discharged or impaired by confirmation or consummation of this Plan, but shall
survive unaffected by the reorganization contemplated by this Plan and shall be
performed and honored in full by the Reorganized Claridge Debtors pursuant to
the Debtors' or the Reorganized Claridge Debtors', as the case may be, by-laws,
certificates of incorporation, limited partnership agreement, contractual
obligations or applicable laws regardless of such confirmation, consummation and
reorganization. Notwithstanding anything in the Plan to the contrary, (i) the
Reorganized Claridge Debtors shall also indemnify the general partners of ACBA
against any Claims asserted against ACBA by any Person other than a general or
limited partner of ACBA; and (ii) on the Effective Date, any Claim held by a
general partner or a limited partner of ACBA against another general partner or
limited partner or against ACBA shall be deemed waived and released. The
Reorganized Claridge Debtors shall also assume the expense and cost (but not any
underlying tax liability owed by a general partner or a limited partner),
related to any tax inquiry, audit or appeal of any tax liability of a general
partner or ACBA.
6.6 Compensation and Benefit Programs. All employee compensation and
benefit plans, policies and programs of the Claridge Debtors applicable
generally to their employees, as in effect on the Effective Date, including,
without limitation, all savings plans, retirement plans, health care plans,
disability plans, and life, accidental death and dismemberment insurance plans,
shall continue in full force and effect, without prejudice to the Reorganized
Claridge Debtors' rights under applicable non-bankruptcy law to modify, amend or
terminate any of the foregoing arrangements.
ARTICLE VII
DIRECTORS AND OFFICERS
7.1 Board of Directors. The Boards of Directors of the Corporation and
CPPI shall continue in place after the Effective Date until the first meeting of
Holders of New Common Stock and shall be vested with activities over the
Reorganized Claridge Debtors. The first meeting of Holders of New Common Stock
shall occur as soon as reasonably practicable following the Effective Date,
after a total of not less than fifty (50%) percent of the New Common Stock have
been issued in accordance with Section 8.2 of this Plan, provided that at least
one Creditor entitled to receive New Common Stock under the Plan has been
qualified by the NJCC to receive its distribution of the New Common Stock or the
necessity for such qualification has been waived.
At the first meeting, Holders of New Common Stock shall be entitled to
elect the Board of Directors of the Reorganized Corporation. The Board of
Directors of Reorganized Corporation shall appoint the Board of Directors of the
Reorganized CPPI.
7.2 No Corporate or Partnership Action Required. As of the Effective
Date, the issuance of New Notes and New Common Stock, the adoption, execution,
delivery and implementation of all contracts, leases, documents, instruments,
and other agreements related to or contemplated by the Plan, and the other
matters provided for, under or in furtherance of the Plan involving action to be
taken by or required of the Debtors
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shall be deemed to have occurred and be effective as provided herein, and shall
be authorized and approved in all respects without further order of the
Bankruptcy Court or any requirement of further action by stockholders or
directors or the partners of the Debtors. All documents or instruments which
must be executed and delivered by the Debtors under this Plan shall be deemed
appropriately executed if signed by either of the President, Chief Executive
Officer, Executive Vice President or any Vice President, or any General Partner,
of the Debtors. The power of attorney in favor of the General Partners in the
ACBA limited partnership agreement shall be deemed to permit the General
Partners to effect the transfer of all partnership interest to Reorganized CPPI
to effectuate this Plan.
7.3 Powers and Duties of the Reorganized Claridge Debtors. From and
after the Effective Date, the Reorganized Claridge Debtors shall have the powers
and exercise the duties, as set forth in section 1123(b)(3) of the Bankruptcy
Code, to retain, enforce, settle and prosecute all Causes of Action.
7.4 Officers' Incentive Plan. Upon the Effective Date, the Reorganized
Corporation shall, without any further approval of or order from the Bankruptcy
Court, issue warrants (the "Warrants") based upon 5,000,000 shares (including
officer's shares) being issued under the Plan to holders of Allowed Class 3
Claims, to CPPI's officers, to whom and in such amount and manner that the
Corporation's Board of Directors shall approve on or prior to the Effective
Date. If executed, the Warrants shall constitute five (5%) percent of the New
Common Stock of the Reorganized Corporation on a fully diluted basis. The
Warrants shall have an exercise price to be determined prior to the Effective
Date equal to a proportional share of the enterprise value of the Reorganized
Corporation on the Confirmation Date based upon, among other things, whether the
New Notes are issued under the Plan. The Warrants cannot be exercised until the
one (1) year anniversary date of the Effective Date but must be exercised within
five (5) years from the Effective Date.
ARTICLE VIII
IMPLEMENTATION OF THIS PLAN
8.1 Vesting of Property. Except as otherwise expressly provided in this
Plan, on the Effective Date, title to all property of each Debtor's estate shall
vest in the Reorganized Corporation and Reorganized CPPI, as the case may be,
free and clear of all Claims, liens, encumbrances, charges and Interests arising
on or before the Effective Date, and the Reorganized Corporation and Reorganized
CPPI may operate their respective businesses, from and after the Effective Date,
free of any restrictions imposed by the Bankruptcy Code or the Bankruptcy Rules.
8.2 Issuance of New Common Stock and New Notes. On the Effective Date,
the Reorganized Corporation will issue the New Common Stock, which New Common
Stock will represent 100% of the ownership and voting interest in the
Reorganized Corporation. In addition, provided holders of Allowed Class 3
Claims, as a Class, vote to accept the Plan, on the Effective Date the
Reorganized Corporation shall issue the New Notes.
8.3 Fractional Interests. The calculation of the percentage
distribution of the New Notes or the New Common Stock to be made to holders of
Class 3 Claims may mathematically entitle the holder of such a Class 3 Claim to
a fractional interest in such New Notes or the New Common Stock. For purposes of
applying this section, the holders of Class 3 Claims under or evidenced by the
First Mortgage Notes shall, in the case of the First Mortgage Notes held in
street name, mean the beneficial holders thereof as of the Record Date.
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The number of shares of the New Notes and the New Common Stock to be
received by a holder of a Class 3 Claim shall be rounded to the next lower whole
number of shares. The total number of shares of the New Notes and the New Common
Stock to be distributed to Class 3 Claims shall be adjusted as necessary to
account for the rounding provided for in this Section. No consideration shall be
provided in lieu of the fractional shares that are rounded down and not issued.
8.4 Dissolution of ACBA. On the Effective Date, ACBA will be dissolved
and shall cease to operate its business and affairs, other than (1) those
actions which AC Boardwalk Partners, Inc., as general partner of ACBA, and (2)
the condition of such business by the Reorganized Claridge Debtors as provided
in this Plan may need take to wind-up the affairs of ACBA, including the
preparation of final tax returns. AC Boardwalk Partners Inc. shall also serve as
tax matter partner for the final tax returns and shall be substituted for Gerald
Heetland as tax matters partner for all prior years. The Reorganized Claridge
Debtors shall also assume the expense and cost (but not any underlying tax
liability owed by a general partner or ACBA) related to any tax inquiry, audit
or appeal of any tax liability of a general partner or ACBA.
8.5 Cancellation of Securities, Notes or Other Instruments; Discharge
of Indenture Obligations.
(a) As of the Effective Date, any security, note or instrument
evidencing a Claim or Interest that is impaired by this Plan, including without
limitation the First Mortgage Notes, shall be deemed cancelled and terminated,
and the obligations of the Debtors relating to, arising under, in respect of or
in connection with such securities, instruments and agreements shall be
discharged; provided, however, that except as otherwise provided herein, notes
and other evidence of Claims shall, effective upon the Effective Date, represent
the right to participate, to the extent such claims are Allowed, in the
distributions contemplated by this Plan.
(b) The First Mortgage Notes Indenture, and the obligations of the
Indenture Trustee thereunder, shall be cancelled and discharged on the Effective
Date, provided that nothing shall affect the Indenture Trustee's lien rights in
respect of its fees and expenses.
8.6 Surrender of Securities. Each Holder of a promissory note or other
instrument evidencing a Claim impaired hereby shall surrender the same to the
Reorganized Corporation and the Reorganized Corporation shall distribute or
shall cause to be distributed to the Holders thereof the appropriate
distribution of property hereunder. No distribution of property hereunder shall
be made to or on behalf of any such Holder unless and until such promissory note
or other instrument is received by the Debtors or the Reorganized Corporation,
or the unavailability of such note or other instrument is established to the
satisfaction of the Debtors or the Reorganized Corporation. Any such Holder that
fails to surrender or cause to be surrendered such promissory note or other
instrument, or to execute and deliver an affidavit of loss and indemnity
satisfactory to the Debtors or the Reorganized Corporation, and, in the event
that the Debtors or the Reorganized Corporation so request with respect to the
First Mortgage Notes, fails to furnish a bond in form and substance (including,
without limitation, with respect to amount) reasonably satisfactory to the
Debtors or the Reorganized Corporation, within two years after the Confirmation
Date, shall be deemed to have forfeited all Claims against the Debtor
represented by such note or other instrument and shall not participate in any
distribution hereunder in respect of such note or other instrument and all
property in respect of such forfeited distribution, including (if applicable)
interest accrued thereon, shall revert to the
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Reorganized Corporation. Notwithstanding the foregoing, all Claims shall be
discharged and all Interests shall be terminated by this Plan to the extent
provided herein regardless of whether and when any surrender, indemnity or bond
required by this Section is provided and regardless of whether the Reorganized
Corporation makes a distribution hereunder in the absence of compliance by any
holder of a Claim with the requirements of this Section. The Debtors or the
Reorganized Corporation may waive the requirements of this Section.
8.7 Restated Certificate of Incorporation and Restated Bylaws. On
or prior to the Effective Date, the Corporation and CPPI shall execute and
deliver, and file with the Secretary of State of cash of the States of New York
and New Jersey, respectively, the Plan and the Confirmation Order and the
Corporation shall amend its Certificate of Incorporation and Bylaws by filing
with the Secretary of State of New York the Restated Certificate of
Incorporation and Restated Bylaws consistent with the Plan and the requirements
of the Code. Except to the extent prohibited by this Plan, after the Effective
Date, the Reorganized Corporation may amend the Restated Certificate of
Incorporation and may amend the Restated Bylaws in accordance with the Restated
Certificate of Incorporation, such Restated By-laws or applicable state law.
8.8 Nonvoting Stock. In accordance with section 1123 (a)(6) of the
Bankruptcy Code, the certificate of incorporation of the Reorganized Corporation
shall contain a provision prohibiting the issuance of nonvoting equity
securities by the Reorganized Corporation.
8.9 Authorization of Corporate Action. The entry of the
Confirmation Order shall constitute a direction and authorization to and of the
Debtors and the Reorganized Claridge Debtors to take or cause to be taken any
corporate or partnership action necessary or appropriate to consummate the
provisions of this Plan prior to and through the Effective Date without any
requirement of further action by the stockholders, partners or directors of the
Debtors and/or the Reorganized Claridge Debtors, (including, without limitation,
the filing of or amending or restating the certificates of incorporation of the
Reorganized Claridge Debtors), and all such actions taken or caused to be taken
shall be deemed to have been authorized and approved by the Bankruptcy Court.
ARTICLE IX
DISCHARGE AND INJUNCTION
9.1 Discharge of Debtors. Except as otherwise expressly provided
herein, the confirmation of this Plan shall, provided that the Effective Date
shall have occurred, discharge all Claims against and Interests in the Debtors,
to the fullest extent authorized or provided for by the Bankruptcy Code,
including, without limitation, to the extent authorized or provided for by
section 1141 thereof.
9.2 Injunction. Except as otherwise expressly provided herein, the
entry of the Confirmation Order shall, provided that the Effective Date shall
have occurred, permanently enjoin all Persons that have held, currently hold or
may hold a Claim, or other debt or liability receiving treatment pursuant to
this Plan or who have held, currently hold or may hold an Interest, in any
Debtor from taking any of the following actions in respect of such Claim, debt
or liability or such Interest: (a) commencing, conducting or continuing in any
manner, directly or indirectly, any suit, action or other proceeding of any kind
against the Debtors, the Reorganized Claridge Debtors, their property or their
respective officers, directors, employees or the General Partners of ACBA; (b)
enforcing, levying, attaching, collecting or otherwise recovering in any manner
or by
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any means, whether directly or indirectly, any judgment, award, decree or order
against the Debtors, the Reorganized Claridge Debtors, their property or their
respective officers, directors, employees or the General Partners of ACBA; (c)
creating, perfecting or enforcing in any manner, directly or indirectly, any
lien or encumbrance of any kind against the Debtors, the Reorganized Claridge
Debtors, their property or their respective officers, directors, employees or
the General Partners of ACBA; (d) asserting any setoff, right of subrogation or
recoupment of any kind, directly or indirectly, against any debt, liability or
obligation due to the Debtors, the Reorganized Claridge Debtors, their property
or their respective officers, directors, employees or the General Partners of
ACBA; and (e) proceeding in any manner in any place whatsoever that does not
conform to or comply with or is inconsistent with the provisions of this Plan.
In addition, in consideration of the treatment provided to ACBA, its estate,
creditors and Interest holders, the occurrence of the Effective Date shall
constitute a release, waiver and discharge of any and all Claims the general
partners and the limited partners of ACBA may have against one another in
connection with or relating to ACBA, the operation of its business and the
discharge and execution of any duties or obligations owed by a general partner
or a limited partner to any other general partner or limited partner.
9.3 Exculpation. Neither the Reorganized Claridge Debtors, nor any
creditors' committee, the General Partners of ACBA, nor any of their respective
members, officers, directors, shareholders, employees, agents, attorneys,
accountants or other advisors shall have or incur any liability to any Holder of
a Claim or Interest for any act or failure to act in connection with, or arising
out of, the pursuit of confirmation of this Plan, the consummation of this Plan
or the administration of this Plan or the property to be distributed under this
Plan, except for any act or failure to act that constitutes willful misconduct
or recklessness as determined pursuant to a Final Order, and in all respects,
such Persons (a) shall be entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under this Plan, and shall be fully
protected from liability in acting or in refraining from action in accordance
with such advice and (b) shall be fully protected from liability with respect to
any act or failure to act that is approved or ratified by the Bankruptcy Court.
ARTICLE X
PROVISIONS COVERING DISTRIBUTIONS
10.1 Time of Distributions Under this Plan. Except as otherwise
provided in this Plan, payments and distributions in respect of Allowed Claims
shall be made by the Reorganized Claridge Debtors or ACBA, as the case may be,
on or as promptly as practicable after the Effective Date.
10.2 Compliance With Tax Requirement. With respect to the Claridge
Debtors in connection with each distribution with respect to which the filing of
an information return (such as an Internal Revenue Service Form 1099 or 1042)
and/or withholding is required, the Reorganized Claridge Debtors shall file such
information return with the Internal Revenue Service and provide any required
statements in connection therewith to the recipients of such distribution,
and/or effect any such withholding and deposit all moneys so withheld as
required by law. With respect to any Person from whom a tax identification
number, certified tax identification number or other tax information required by
law to avoid withholding has not been received by the Reorganized Claridge
Debtors, the Reorganized Claridge Debtors shall withhold the amount required and
distribute the balance to such Person.
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With respect to ACBA, the Plan contemplates that following the
Effective Date ACBA will be dissolved under applicable non-bankruptcy law. In
connection therewith, AC Boardwalk Partners, Inc. shall have the power and
authority to wind-up ACBA, including causing ACBA to file all necessary tax
returns.
10.3 Distribution of Unclaimed Property. Any distribution of
property under the Plan which is unclaimed after two years following the
Effective Date shall irrevocably revert to the Reorganized Claridge Debtors.
10.4 Saturday, Sunday or Legal Holiday. If any payment or act
under this Plan is required to be made or performed on a date that is not a
Business Day, then the making of such payment or the performance of such act may
be completed on the next succeeding Business Day, but shall be deemed to have
been completed as of the required date.
10.5 Distribution Record Date. The Reorganized Claridge Debtors
shall distribute, or cause to be distributed, all distributions of property to
be made pursuant to this Plan to the record holders of Allowed First Mortgage
Note Claims as of the Record Date. As of the close of business on the Record
Date, the transfer ledgers with respect to the First Mortgage Notes shall be
closed and the Reorganized Claridge Debtors and ACBA and the Indenture Trustee
shall have no obligation to recognize any transfer of the First Mortgage Notes
occurring thereafter.
ARTICLE XI
PROCEDURES FOR RESOLVING DISPUTED CLAIMS
11.1 Objections to Claims. Only Claims that are Allowed shall be
entitled to distributions under the Plan. The Reorganized Claridge Debtors
reserve the sole and absolute right to contest and object to any Claims filed or
asserted against ACBA, Corporation or CPPI, including, without limitation, those
Claims that are not listed in the Schedules, are listed therein as disputed,
contingent and/or unliquidated in amount, or are listed therein at a lesser
amount than asserted by the Holder of such Claim filed or asserted against ACBA,
Corporation or CPPI. Unless otherwise ordered by the Bankruptcy Court, all
objections to Claims (other than Administrative Expense Claims) shall be filed
and served upon counsel to the Debtors, counsel to any Committee and the Holder
of the Claim objected to on or before the later of (a) 90 days after the
Effective Date and (b) 90 days after the date (if any) on which a proof of claim
is filed in respect of such Claim, or such other date determined by the
Bankruptcy Court upon motion to the Bankruptcy Court without further notice or
hearing.
11.2 Procedures For Resolving Disputed Claims. Unless otherwise ordered
by the Bankruptcy Court or agreed to by written stipulation of the Reorganized
Claridge Debtors or until the Reorganized Claridge Debtors' objection thereto is
withdrawn, the Reorganized Claridge Debtors shall litigate the merits of each
Disputed Claim until determined by a Final Order; provided, however, that (a)
prior to the Effective Date, the Debtors, subject to the approval of the
Bankruptcy Court, and (b) after the Effective Date, the Reorganized Claridge
Debtors, subject to the approval of the Bankruptcy Court, may compromise and
settle any objection to any Claim.
11.3 Timing of Payments and Distributions With Respect to Disputed
Claims. Subject to the provisions of this Plan, payments and distributions with
respect to each Disputed Claim that becomes an Allowed Claim, and that would
have otherwise been made had the Allowed Claim been an Allowed Claim on the
Effective Date, shall be made within thirty days after the date that such
Disputed Claim becomes an Allowed Claim. Holders of Disputed Claims that become
Allowed Claims shall be bound, obligated and governed in all respects by the
provisions of this Plan.
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11.4 Disputed Claim Reserve. In determining the amount of Distributions
to be made under the Plan to holders of Allowed Claims in Classes 4, 5 and 7 the
appropriate Distribution required by the Plan shall be made according to
estimates and subject to the provisions of the Plan. The Disputed Claim Reserve
in an amount that reasonably approximates the ratable distribution that would
otherwise be made to such Claimholder assuming such claim were to be Allowed in
the amount set forth on the Claimholder's proof of Claim or as estimated
pursuant to agreement with the Claimholder or order of the Bankruptcy Court. In
the case of the Holders of the First Mortgage Notes to the extent that it is
determined that the Noteholders are entitled to Claims in Classes 4, 5 and 7
whether in respect of any Deficiency Claims or Claims under the Operating Leases
or otherwise, the Disputed Claim Reserve in respect thereof shall be established
based upon the proofs of claim filed by the Indenture Trustee against the
respective Debtors and (a) in the case of any Deficiency Claims the value of the
Collateral that secured the claims of the Indenture Trustee and the Noteholders
as stipulated by the Debtors and the Indenture Trustee or determined by Final
Order of the Court and (b) in the case of any rejection damages under the
Operating Lease, any proof of claim relating thereto.
11.5 Estimation of Claim. The Reorganized Claridge Debtors may, at any
time, request that the Bankruptcy Court, on proper notice estimate any Disputed
Claim pursuant to Section 502(c) of the Bankruptcy Code and the Bankruptcy Court
will retain jurisdiction to estimate any Claim at any time during litigation
concerning any objection to any Claim, including during the pendency of any
appeal relating to any such objection. If the Bankruptcy Court estimates any
Disputed Claim, that estimated amount will constitute either the Allowed amount
of such Claim or a maximum limitation on such Claim, as determined by the
Bankruptcy Court. If the estimated amount constitutes a maximum limitation on
such Claim, the Reorganized Claridge Debtors may elect to pursue any
supplemental proceedings to object to any ultimate Distribution to such Claim.
All of the objection, estimation, settlement and resolution procedures set forth
in the Plan are cumulative and not necessarily exclusive of one another. Claims
may be estimated and subsequently compromised, settled, withdrawn or resolved by
any mechanism approved by the Bankruptcy Court
11.6 No Recourse to Reorganized Claridge Debtors. Notwithstanding that
the Allowed amount of any particular Disputed Claim is reconsidered under the
applicable provisions of the Bankruptcy Court and Bankruptcy Rules or is Allowed
in an amount for which there is insufficient Cash in the relevant account to
provide a recovery equal to that received by other holders of Allowed Claims in
the relevant Class, no Claim holder shall have recourse to the Debtors or the
Reorganized Claridge Debtors, their respective property or any of their
respective professionals, or their successors or assigns, or the holder of an
other Claim, or any of their respective property. However, nothing in the Plan
shall modify any right of a holder of a Claim under Section 502(j) of the
Bankruptcy Code. THUS, THE BANKRUPTCY COURT'S ENTRY OF AN ESTIMATION ORDER MAY
LIMIT THE DISTRIBUTION TO BE MADE ON INDIVIDUAL DISPUTED CLAIMS, REGARDLESS OF
THE AMOUNT FINALLY ALLOWED ON ACCOUNT OF SUCH DISPUTED CLAIMS.
11.7 Application of Article 11 to Indenture Trustee and Noteholders'
Claims. The provisions of Section 11.5 and 11.6 shall not apply to the Claims of
the Noteholders or the Indenture Trustee for its fees and expenses provided for
in Section 2.5 of the Plan, or the claims of the Noteholders and the Indenture
Trustee, to the extent it is determined that they are entitled to claims in any
of Classes 4, 5 and 7.
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ARTICLE XII
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE
12.1 Condition Precedent to Confirmation Date.
(a) the Bankruptcy Court has entered the Confirmation Order containing
findings, supported by evidence to be introduced by the Debtors at the
Confirmation Hearing, that the issuance of all Plan Securities and the execution
of any required indenture and security documents in respect thereto, shall have
been duly and validly authorized by all necessary corporation action; that the
lien, title or another interest in collateral created by such indenture and
instruments shall be valid and binding and enforceable against the Reorganized
Debtors, as the case may be, and such collateral shall be subject to no prior,
pari passu or subordinate encumbrances or claims except as provided for in such
documents; and all other documents required under the Plan are in form and
substance reasonably satisfactory to the Proponents;
(b) the Debtors have been authorized to assume all leases and executory
contracts which they may seek to assume; and
(c) the Debtors have received the consent of any governmental units
whose consent is required for confirmation;
(d) the Bankruptcy Court shall have determined that all obligation of
the Debtors are discharged pursuant to Section 1141(d) of the Code, except to
the extent that such Claims and obligations are provided for in the Plan or
assumed by the Reorganized Claridge Debtors hereunder.
12.2 Conditions to Effective Date. The following conditions must occur
and be satisfied on or before the Effective Date for this Plan to be effective
on the Effective Date:
(a) Confirmation Order. The Confirmation Order, in form and substance
acceptable to the Debtors, shall have been signed by the Bankruptcy Court and
duly entered and shall have become a Final Order.
(b) Regulatory Approval. The NJCCC shall have issued any necessary
approvals of this Plan and of the Exhibits hereto.
(c) Timeliness. The Effective Date shall be not later than June 1,
2000.
(d) New Notes Indenture. The New Notes Indenture shall have been
qualified under the Trust Indenture Act of 1939, as amended.
(e) Waiver of Conditions. The Proponents shall have the right to waive
any of the foregoing conditions (a) to the Confirmation Date, or (b) to the
Effective Date. Notwithstanding the foregoing, the Debtors may not waive
conditions (b) and (d) to the Effective Date without the prior consent of the
Indenture Trustee. Without limiting the foregoing, the effective Date may occur
notwithstanding the pendency of an appeal of the Confirmation Order or any order
related thereto so long as there is no stay in effect. The Effective Date may
occur before the expiration of time to take an appeal to seek reconsideration of
the Confirmation Order without the giving of any notice to any objecting party.
In the event of any such appeal, the Proponents may seek the dismissal of such
appeal as moot as following the Effective Date of the Plan.
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ARTICLE XIII
MODIFICATION, REVOCATION OR WITHDRAWAL OF THE PLAN
13.1 Modification of Plan. The Debtors may alter, amend or modify this
Plan pursuant to section 1127 of the Bankruptcy Code at any time prior to the
time that the Bankruptcy Court has signed the Confirmation Order. After such
time and prior to the substantial consummation of this Plan, the Debtors may, so
long as the treatment of holders of Claims and Interests under this Plan is not
adversely affected, institute proceedings in Bankruptcy Court to remedy any
defect or omission or to reconcile any inconsistencies in this Plan, the
Disclosure Statement or the Confirmation Order and any other matters as may be
necessary to carry out the purposes and effects of this Plan; provided, however,
that prior notice of such proceedings shall be served in accordance with
Bankruptcy Rule 2002.
13.2 Revocation or Withdrawal of Plan.
(a) Right to Revoke. The Debtors reserve the right to revoke or
withdraw this Plan at any time prior to the Confirmation Date.
(b) Effect of Withdrawal or Revocation. If the Debtors revoke or
withdraw this Plan prior to the Confirmation Date, then this Plan shall be
deemed null and void. In such event, nothing contained herein shall be deemed to
constitute a waiver or release of any Claims by or against the Debtors or any
other Person or to prejudice in any manner the rights of the Debtors or any
Person in any further proceedings involving the Debtors.
13.3 Nonconsensual Confirmation. The Debtors shall request that the
Bankruptcy Court confirm this Plan pursuant to section 1129(b) of the Bankruptcy
Code with respect to Classes 3, 4, 5, 7, 9, 10, 11 and 13 on the basis that this
Plan is fair and equitable and does not discriminate unfairly with respect to
such Classes.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Bankruptcy Court to Retain Jurisdiction. The business and assets
of the Debtors shall remain subject to the jurisdiction of the Bankruptcy Court
until the Effective Date. From and after the Effective Date, the Bankruptcy
Court shall retain and have exclusive jurisdiction over the Reorganized
Corporation and the Chapter 11 Cases to the fullest extent permissible by law,
including, without limitation, for the purposes of determining all disputes and
other issues presented by or arising under this Plan, including, without
limitation, exclusive jurisdiction to (a) determine any and all disputes
relating to Claims and the allowance and amount thereof, (b) determine any and
all disputes among Creditors with respect to their Claims, (c) consider and
allow any and all applications for compensation for professional services
rendered and disbursements incurred in connection therewith, (d) determine any
and all applications, motions, adversary proceedings and contested or litigated
matters pending on the Effective Date and arising in or
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related to the Chapter 11 Cases or this Plan, (e) remedy any defect or omission
or reconcile any inconsistency in the Confirmation order, (f) enforce the
provisions of this Plan relating to the distributions to be made hereunder, (g)
issue such orders, consistent with section 1142 of the Bankruptcy Code, as may
be necessary to effectuate the consummation and full and complete implementation
of this Plan, (h) enforce and interpret any provisions of this Plan, (i)
determine such other matters as may be set forth in the Confirmation Order or
that may arise in connection with the implementation of this Plan, and (j)
determine the final amounts allowable as compensation or reimbursement of
expenses pursuant to section 503(b) of the Bankruptcy Code.
14.2 Binding Effect of this Plan. The provisions of this Plan shall be
binding upon and inure to the benefit of the Debtors, the Reorganized Claridge
Debtors, any holder of a Claim or Interest, their respective predecessors,
successors, assigns, agents, officers and directors and any other Person
affected by this Plan whether or not such Person or Holder of a Claim or
Interest has accepted the Plan.
14.3 Retiree Benefits. Except as otherwise provided in the Plan, any
obligations of the Debtors to any Person for the purpose of providing or
reimbursing payments for retired employees and their spouses and dependents for
medical, surgical, or hospital care benefits, or benefits in the event of
sickness, accident, disability, or death under any plan, fund or program
(through the purchase of insurance or otherwise) maintained or established in
whole or in part by the Debtors prior to the Petition Date, if any, shall be
continued by the Reorganized Claridge Debtors.
14.4 The Debtors' Causes of Action. Pursuant to section 1123(b)(3) of
the Bankruptcy Code, the Reorganized Corporation and Reorganized CPPI shall
retain, with the exclusive right to enforce in their sole discretion, any and
all rights and causes of action of any of the Debtors, including all rights and
causes of action which may exist under sections 510, 544 through 550 and 553 of
the Bankruptcy Code or under similar state laws, if any, and all other rights
and causes of action of a trustee and debtor-in-possession under the Bankruptcy
Code (except for claims or rights which must under tax law be enforced by the
tax matters partner of ACBA). Any Debtor Action Claims of ACBA will be
transferred to the Reorganized CPPI under the Plan and the Reorganized CPPI
shall have the exclusive right to prosecute and settle any such claims.
Notwithstanding the foregoing, on the Effective Date, the Reorganized Claridge
Debtors and ACBA shall each release any claim they and their respective debtor
Estates may have against any of the officers and directors of the Claridge
Debtors and/or against the general partners of ACBA, including any claims for
indemnity or contribution.
14.5 Setoffs. Except as otherwise provided in the Plan with respect to
Intercompany Claims, the Debtors may, but shall not be required to, set off
against any Claim and the distributions to be made pursuant to this Plan in
respect of such Claim, any claims of any nature whatsoever which the Debtors may
have against the Holder of such Claim, but neither the failure to do so nor the
allowance of any Claim hereunder shall constitute a waiver or release of any
such Claim the Debtors may have against such Holder.
14.6 Captions. Article and Section captions used in this Plan are for
convenience only and will not affect the construction of this Plan.
29
<PAGE>
14.7 Method of Notice. All notices required to be given under this
Plan, if any, shall be in writing and shall be sent by first class mail, postage
prepaid, or by overnight courier:
If to the Claridge Debtors to:
The Claridge Hotel and Casino Corporation
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attn.: Frank A. Bellis, Jr.
with copies to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 1016
Attn.: Dennis J. Drebsky, Esq.
If to ACBA to:
c/o AC Boardwalk Partners, Inc.
2880 West Meade Avenue
Suite 204
Las Vegas, NV 89102
Attn: Anthony Atchley, President
with copies to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Attn: William S. Katchen, Esq.
Any of the above may, from time to time, change its address for future notices
and other communications hereunder by filing a notice of the change of address
with the Bankruptcy Court. Any and all notices given under this Plan shall be
effective when received.
30
<PAGE>
14.8 Dissolution of any Committee. On the Effective Date, any Committee
shall cease to exist and its members and employees or agents (including, without
limitation, attorneys, investment bankers, financial advisors, accountants and
other Professionals) shall be released and discharged from all further
authority, duties, responsibilities and obligations relating to and arising from
and in connection with the Chapter 11 Cases.
14.9 Governing Law. Except to the extent that the Bankruptcy Code, the
Bankruptcy Rules or other federal laws are applicable, the laws of the State of
New Jersey shall govern the construction and implementation of, this Plan and
all rights and obligations arising under this Plan.
14.10 Time. Unless otherwise specified herein, in computing any period
of time prescribed or allowed by this Plan, the day of the act or event from
which the designated period begins to run shall not be included. The last day of
the period so computed shall be included, unless it is not a Business Day, in
which event the period runs until the end of the next succeeding day which is a
Business Day.
14.11 Section 1146 Exemption. Pursuant to section 1146(c) of the
Bankruptcy Code, the issuance, transfer or exchange of any security under this
Plan, or the execution, delivery or recording of an instrument of transfer
pursuant to, in implementation of, or as contemplated by this Plan, or the
revesting, transfer or sale of any real property of the Debtors pursuant to, in
implementation of or as contemplated by this Plan shall not be taxed under any
state or local law imposing a stamp tax, transfer tax or similar tax or fee.
Consistent with the foregoing, each recorder of deeds or similar official for
any county, city or governmental unit in which any instrument hereunder is to be
recorded shall, pursuant to the Confirmation Order, be ordered and directed to
accept such instrument, without requiring the payment of any documentary stamp
tax, deed stamps, stamp tax, transfer tax, intangible tax or similar tax.
14.12 Severability. In the event that any provision of this Plan is
determined to be unenforceable, such determination shall not limit or affect the
enforceability and operative effect of any other provisions of this Plan. To the
extent that any provision of this Plan would, by its inclusion in this Plan,
prevent or preclude the Bankruptcy Court from entering the Confirmation Order,
the Bankruptcy Court, on the request of the Debtor, may modify or amend such
provision, in whole or in part as necessary to cure any defect or remove any
impediment to the confirmation of this Plan existing by reason of such
provision; provided, however, that such modification shall not be effected
except in compliance with Section 14.01 of this Plan.
14.13 Subordination Rights. The classification and treatment of all
Claims and Interests under the Plan shall be in full settlement and satisfaction
of any contractual, legal and equitable subordination rights, whether arising
under general principles of equitable subordination, section 510(c) of the
Bankruptcy Code or otherwise, that a Holder of a Claim or Interest may have
against other Claim Holders with respect to any distribution made pursuant to
the Plan
14.14 Satisfaction of Actions Taken. Entry of the Confirmation Order
shall ratify all transactions effected by the Debtors from and including the
Filing Date through the Confirmation Date. After entry of the Confirmation
Order, all Creditors and Interest Holders shall be enjoined and restrained from
commencing or continuing any action or proceeding arising out of or related to
the consummation of the transactions contemplated by the Plan.
31
<PAGE>
14.15 Registration and Listing of New Notes and New Common Stock. After
the Effective Date, the Reorganized Debtors will use their reasonable good faith
best efforts to register the New Notes and New Common Stock in accordance with
applicable law and to cause such securities to be listed on a national exchange;
however, such securities shall be issued under this Plan in reliance on the
exemption from registration provided in Section 1145 of the Bankruptcy Code,
subject to the approval of the NJCC.
14.16 No Multiple Satisfactions. Any Person that holds a Claim against
more than one Debtor that arises from the same right to payment or equitable
remedy that gives rise to a right to payment, such as a Holder of a Claim for a
loan given to one Debtor, which loan is guaranteed by another Debtor, shall only
receive a distribution as if the Person was the Holder of a Claim against one
Debtor. Such distribution shall be deemed to be in full satisfaction of the
Person's Claims against all Debtors.
32
<PAGE>
14.17 Plan Controls. In the event and to the extent that any provision
of this Plan is inconsistent with the provisions of the Disclosure Statement, or
any other instrument or agreement contemplated to be executed pursuant to this
Plan, the provisions of this Plan shall control and take precedence.
Dated: Camden, New Jersey
May __, 2000
Respectfully submitted,
THE CLARIDGE HOTEL AND
CASINO CORPORATION
By:_______________________________
Frank A. Bellis, Jr.
President and Chief Executive
Officer
THE CLARIDGE AT PARK PLACE,
INCORPORATED
By:_______________________________
Frank A. Bellis, Jr.
Chief Executive Officer
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By: AC Boardwalk Partners, Inc.
By:_______________________________
Name: Anthony Atchley
Title: President
33
<PAGE>
CLIFFORD CHANCE ROGERS & WELLS LLP
Co-counsel for Claridge Debtors
200 Park Avenue
New York, New York 10166
(212) 878-8000
By:__________________________________
Dennis J. Drebsky
A Member of the Firm
- and
ARCHER & GREINER, P.C.
Co-counsel for Claridge Debtors
One Centennial Square
Haddonfield, NJ 08033
(856) 795-2121
By:__________________________________
John Fiorella
A Member of the Firm
LOWENSTEIN SANDLER PC
Counsel to ACBA
65 Livingston Avenue
Roseland, NJ 07068
(973) 597-2500
By:__________________________________
Alan Wovsaniker
A Member of the Firm
34
<PAGE>
EXHIBIT 99(a)
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
- ---------------------------------------------------
In re: :
:
THE CLARIDGE HOTEL AND CASINO : Chapter 11
CORPORATION and THE CLARIDGE : Jointly Administered
AT PARK PLACE, INCORPORATED, : Case No. 99-17399
:
Debtors. :
:
- ---------------------------------------------------
- ---------------------------------------------------
In re: :
:
ATLANTIC CITY BOARDWALK : Chapter 11
ASSOCIATES, L.P., : Case No. 99-18903
:
Debtor. :
- ---------------------------------------------------
FIRST AMENDED DISCLOSURE STATEMENT PURSUANT TO
11 U.S.C. ss. 1125 ON DEBTORS' JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE ("THE PLAN")
----------------------------------------------------------
Solicitation of Votes with Respect to the Plan
CLIFFORD CHANCE ROGERS & WELLS LLP LOWENSTEIN SANDLER PC
200 Park Avenue 65 Livingston Avenue
New York, New York 10166 Roseland, NJ 07068
Phone: (212) 878-8000 Phone: (973) 597-2500
Counsel for Atlantic City
Boardwalk Associates, L. P.
ARCHER & GREINER
One Centennial Center
Haddonfield, New Jersey 08033
Phone: (856) 795-2121
Co-Counsel for the Claridge Hotel and Casino
Corporation and The Claridge at Park Place,
Incorporated
<PAGE>
SUMMARY ..................................................................... 1
Overview .................................................................... 1
The Solicitation ............................................................ 2
The Plan .................................................................... 2
Summary of Treatment of Claims and Interests Relating to the
Debtors.................................................................. 5
BACKGROUND .................................................................. 11
The Claridge Debtors and ACBA ............................................... 11
History and Structure ....................................................... 11
Events Preceding Commencement of the Chapter 11 Cases ....................... 15
REASONS FOR THE SOLICITATION; RECOMMENDATION ................................ 17
THE BANKRUPTCY PLAN -- VOTING INSTRUCTIONS AND PROCEDURES ................... 17
General ..................................................................... 17
Voting Deadline ............................................................. 17
Voting Procedures Particular to Noteholders ................................. 18
DESCRIPTION OF CHAPTER 11 CASES OF THE CLARIDGE DEBTORS ..................... 20
Chapter 11 Filings .......................................................... 20
First Day Orders ............................................................ 20
Use of Cash Collateral ...................................................... 21
Administrative Office Building/People Mover Motion .......................... 23
Bar Dates and Notice Thereof ................................................ 23
DESCRIPTION OF CHAPTER 11 CASE OF ACBA ...................................... 23
Chapter 11 Filings ......................................................... 23
First Day Orders ............................................................ 24
Bar Dates and Notice Thereof ................................................ 24
SUMMARY OF THE PLAN ......................................................... 25
General ..................................................................... 25
Voting on the Plan .......................................................... 25
Waiver of Section 1111(b) Election by Icahn Interests ....................... 26
Classification and Treatment of Claims and Interests Under The
Plan..................................................................... 27
Description of New Notes .................................................... 36
Regulatory Condition ........................................................ 38
Summary of Other Provisions of the Plan ..................................... 39
ACCEPTANCE AND CONFIRMATION OF THE PLAN ..................................... 45
<PAGE>
Solicitation of Acceptance ...................................................45
Confirmation Hearing .........................................................45
Requirements for Confirmation of the Plan ....................................45
Confirmation of the Plan Under Section 1129(b) ...............................46
Best Interests Test ..........................................................47
Feasibility ..................................................................48
Consummation .................................................................48
Securities Issued Under Section 1145 Exemption From
Registration..............................................................49
CREDITORS COMMITTEE ..........................................................50
ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN ....................51
Alternative Plan .............................................................51
Liquidation Under Chapter 7 ..................................................52
SELECTED HISTORICAL FINANCIAL DATA ...........................................52
CERTAIN INFORMATION CONCERNING THE DEBTORS ...................................53
General ......................................................................53
The Claridge .................................................................53
Business Strategy ............................................................54
Competition ..................................................................54
Gaming Regulation and Licensing ..............................................55
Employees ....................................................................56
Properties ...................................................................57
Legal Proceedings ............................................................57
Executive Officers and Directors .............................................58
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ......................................60
FINANCIAL AND LEGAL ADVISORS; FEES AND EXPENSES ..............................60
CONCLUSION; RECOMMENDATION ...................................................62
<PAGE>
APPENDICES
Appendix A -- First Amended Joint Plan of Reorganization of The Claridge Hotel
and Casino Corporation, The Claridge at Park Place, Incorporated
and Atlantic City Boardwalk Associates, L.P.
Appendix B -- Audited Consolidated Financia Statements for year of 1998, and
Unaudited Consolidated Financial Statements for the nine month
ended September 30, 1999
Appendix C -- Liquidation Analysis
Appendix D -- Effective Date Fresh Start Balance Sheet
Appendix E -- Summary of Enterprise Valuation
Appendix F -- Unaudited Projections for the Period 1999-2004
Appendix G -- Tax Basis Pro Forma Presentation of the Effects of the Plan
Appendix H -- Summary Pages of GVA Marquett Advisors Appraisal Dated
March 14, 2000
<PAGE>
SUMMARY
The following introduction and summary is qualified in its entirety by,
and should be read in conjunction with, the more detailed information and
consolidated financial statements and notes thereto appearing elsewhere in this
Disclosure Statement. References to the "Claridge Debtors" will mean The
Claridge Hotel and Casino Corporation (the "Corporation") and The Claridge at
Park Place, Incorporated ("CPPI"). References to "ACBA" will mean Atlantic City
Boardwalk Associates, L.P. References to the "Debtors" will mean the
Corporation, CPPI and ACBA. Certain capitalized terms used in this Disclosure
Statement are defined in the Debtor's Joint Chapter 11 Plan of Reorganization
(the "Plan"), a copy of which is attached as Appendix A hereto.
Overview
On August 16, 1999, the Corporation and CPPI filed separate voluntary
petitions for relief under Chapter 11, Title 11, United States Code, 11 U.S.C.
ss.ss. 101 et seq. (the "Bankruptcy Code"). On October 5, 1999, ACBA filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The
Debtors continue to operate their businesses and manage their properties
pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code as debtors-in-
possession.
On ___________, 2000 (the "Approval Date"), after notice to the
Debtors' creditors and other parties in interest and a hearing, the Bankruptcy
Court approved this Disclosure Statement for use in connection with solicitation
of acceptances of the Plan. The Bankruptcy Court found that the Disclosure
Statement contains adequate information to enable a reasonable investor typical
of members of each class being solicited, to make an informed judgment as to
whether to accept or reject the Plan. The Bankruptcy Court's approval of this
Disclosure Statement, however, does not constitute a recommendation by the
Bankruptcy Court either for or against the Plan. The Approval Date is the record
date for purposes of determining holders of claims entitled to vote on the Plan.
This Disclosure Statement describes the Plan. The Plan provides, among
other things, that holders of First Mortgage Notes shall receive a pro rata
amount of 100% of the common stock of the Reorganized Corporation outstanding as
of the Effective Date (the "New Common Stock") and, provided that Class 3, as a
class, votes to accept the Plan, holders of First Mortgage Notes shall also
receive a pro rata and pari passu amount of the New Notes or $176.47 in
principal amount of the New Notes for each $1,000 in principal amount of the
First Mortgage Notes. "New Notes" mean the Reorganized Corporation's 8% Secured
Notes due 2010 in the principal face amount of $15,000,000, which will be
guaranteed by CPPI and will be secured by a first priority lien and security
interest in the New Notes Collateral. To the extent Class 3, as a class, votes
to reject the Plan, holders of the First Mortgage Notes will not receive the New
Notes but will only receive the New Common Stock in full satisfaction of their
Claims. The trade and other unsecured creditors of the Debtors will generally be
paid the amount of their Claims, without interest, over five years in six (6)
installments from the Effective Date subject to a cap of $5.5 million for all
such claims.
IN MANAGEMENT'S OPINION BECAUSE OF LIMITED EXCESS CASH FLOW, UNCERTAIN
ECONOMIC CONDITIONS AND THE NEED FOR RENOVATIONS AND CAPITAL IMPROVEMENTS TO
REMAIN COMPETITIVE MANAGEMENT DOES NOT BELIEVE THAT IT WOULD BE PRUDENT TO
BURDEN THE REORGANIZED CLARIDGE DEBTORS WITH ADDITIONAL DEBT. FOR THIS REASON,
THE DEBTORS HAVE CONCLUDED THAT THE REORGANIZED CLARIDGE DEBTORS CAN NOT SUPPORT
DEBT SERVICE PAYMENTS UPON GREATER THAN $15,000,000 OF NEW NOTES AT 8% PER ANNUM
INTEREST. NOTHING IN THE PLAN, HOWEVER, WILL PREVENT THE REORGANIZED CLARIDGE
DEBTORS, WITH A BOARD ELECTED BY THE NOTEHOLDERS FROM RE-ASSESSING THE
REORGANIZED CLARIDGE DEBTORS' ABILITY TO SERVICE GREATER DEBT AND TO RE-ADJUST
THE DEBT/EQUITY RATIOS. THE INDENTURE TRUSTEE DISAGREES WITH THIS JUDGMENT.
<PAGE>
The Solicitation
The Debtors are hereby soliciting votes for acceptance of the Plan
under Chapter 11 of the Bankruptcy Code from their respective creditors
including the holders of the Corporation's outstanding 11 3/4% Notes due 2002
(the "First Mortgage Notes"). The Debtors believe that the Plan has the most
favorable terms available to such creditors, equity security holders and the
First Mortgage Noteholders and each of the Debtors recommend that its creditors
and equity security holders vote to accept the Plan. The Indenture Trustee has
prepared a letter (the "Indenture Trustee's Letter") to the First Mortgage
Noteholders that sets forth, inter alia, why the Indenture Trustee believes the
Plan is not confirmable if the First Mortgage Noteholders do not vote, as a
class, to accept the Plan. The Debtors dispute the Indenture Trustee's position.
The Indenture Trustee's Letter sets forth information relative to the treatment
of the First Mortgage Noteholders' Claims under the Plan and the rights in its
opinion of the First Mortgage Noteholders under the Bankruptcy Code if the First
Mortgage Noteholders do not vote to accept the Plan as a class. Specifically in
this regard, the Indenture Trustee's Letter explains why, in such event, the
Bankruptcy Code would require that in order to be confirmed the Plan must
provide to the Noteholders a greater portion of their recovery in secured notes.
The Plan
If the Plan is confirmed by the Bankruptcy Court, then subject to the
conditions contained in the Plan, the following transactions, among others, will
occur as soon as practicable on or after the Effective Date in the following
order:
(i) On the Effective Date, all Corporation Interests, including the
Class A Stock, par value $.001 per share, of the Corporation (the
"Existing Common Stock") outstanding immediately prior to the
Effective Date will be cancelled.
(ii) Each holder of First Mortgage Note Claim shall be entitled to
receive a pro rata amount of the New Common Stock and, to the
extent the holders of the First Mortgage Notes, as a class, vote
to accept the Plan, a pro rata and pari passu amount of the $15
million of the New Notes, which will be guaranteed by CPPI and
secured by a first priority lien and security interest in the New
Notes Collateral. The New Notes Collateral includes all of the
Assets of the Debtors that heretofore secured the obligation to
the holders of the First Mortgage Notes, other than the
Administrative Office Building which was previously sold by ACBA
to Greate Bay Hotel and Casino, Inc. ("GBHC"), the owner of the
Sands Casino, pursuant to an order of the Bankruptcy Court dated
April 5, 2000. In addition, on the Effective Date, the First
Mortgage Notes will be cancelled, the First Mortgage will be
discharged and the existing guarantee of the First Mortgage Notes
by CPPI will be extinguished. The holders of the New Notes will
no longer have the benefit of the Collateral Assignment of
Lessor's Interest in the Operating Leases granted by ACBA, which
gave the Indenture Trustee rights in and to the Operating Leases
and the rent therefrom, since under the Plan the New Notes
Collateral that is the subject of the Operating Leases will be
owned by Reorganized CPPI. In addition, the Plan provides that
the Reorganized Corporation will pledge its interest in
Reorganized CPPI to secure the New Notes. You should be aware
that in the event the Plan is not accepted by holders of Allowed
Class 3 Claims, as a class, the holders of the First Mortgage
Notes will receive only the New Common Stock and the Debtors will
seek to confirm the Plan pursuant to Section 1129(b) of the
Bankruptcy Code. You should also be aware that the Plan provides
that all of the ownership interests in the Reorganized
Corporation will be transferred to the holders of the First
Mortgage Notes in full satisfaction thereof. Because of this
treatment, the Debtors assert that the holders of the First
Mortgage Notes will not have any deficiency claim against the
Debtors to the extent the value of the Debtors' Assets is less
than the amount of indebtedness owed by the Debtors to the
holders of the First Mortgage Notes. The Indenture Trustee
disputes the Debtors' position and maintains that if the
Noteholders vote as a class to reject the Plan, the Noteholders
will be entitled to receive in respect of their secured claims
new notes, secured by the same liens as the First Mortgage Notes
having a principal amount equal to the value of their
2
<PAGE>
secured claims. While the Debtors claim that the liquidation
value of the Debtors' assets (other than cash) taken as a whole
is at least $27 million, the Indenture Trustee maintains the
amount of its secured claims would exceed $40 million (exclusive
of cash) based on the appraisal by GVA Marquette Advisors which
concludes that the value of the real estate assets of ACBA and
CPPI (including the hotel, the valet parking garage, furniture,
fixtures and equipment owned by ACBA, the Self-Parking Garage,
and gaming equipment owned by CPPI and the land on which the
hotel, valet parking garage and self-parking garage sit) is $40
million, since the appraisal does not take into account other
property on which the Indenture Trustee holds liens, including
but not limited to accounts receivable, inventory and cash of
CPPI. Moreover, based on the advice of its financial advisor the
Indenture Trustee believes it will be able to prove that the
Debtors' enterprise value exceeds $52-60 million. Accordingly,
assuming arguendo that the Indenture Trustee did not have a lien
on the Debtors' cash, the Trustee's secured claim, even based on
the Debtors' enterprise value, would be between $36 million to
$44 million. In addition, in the Indenture Trustee's opinion, the
Noteholders' unsecured deficiency clams would be entitled to
share ratably in the $5.5 million in cash available to pay
unsecured creditors of the Debtors and to receive their ratable
share of 100% of the common stock of the Reorganized Debtors.
For illustration purposes only, if the value of the Indenture
Trustee's secured claim against CPPI alone were $45 million then,
the Indenture Trustee asserts, it would be entitled to a
deficiency claim of over $45 million against CPPI or
approximately 90% of such unsecured claims. If the value of the
collateral that secures the Noteholders' claims against each
Debtor were less, the recovery to the Noteholders on their
unsecured deficiency claims as a percentage of all unsecured
claims against such Debtor would be greater. If the value of the
collateral that secures the Noteholders' claims were greater, the
Noteholders would receive a greater principal amount of New Notes
and a smaller percentage of New Common Stock, if all unsecured
creditors shared in such New Common stock ratably.
The Indenture Trustee further maintains that it is entitled to
separate deficiency claims against each Debtor since none of the
cases has been substantively consolidated. The Debtors dispute
this assertion.
In the alternative, the Debtors believe that even if the holders
of the First Mortgage Notes, because of 11 U.S.C. ss. 1111, were
to have a deficiency claim, legitimate and valid legal and
factual bases exist to separately classify any such deficiency
claim, to the extent holders of such claim would have recourse
against the Debtors' unencumbered assets, separate and apart from
claims classified in Classes 4, 5, 6 and 7 of the Plan. By voting
to accept the Plan, holders of Class 3 Claims, as a class, will
be deemed to waive any right to assert that they have a
deficiency claim which should share in distributions pro rata and
pari passu with the Debtors' other unsecured creditors. The
Indenture Trustee disputes that the deficiency claims of the
First Mortgage Noteholders can be separately classified from
other unsecured claims. The Indenture Trustee has further
asserted claims on behalf of the Noteholders in respect of the
Operating Leases, the Wraparound Note and FF&E Notes and certain
accounts receivable owing by CPPI to ACBA and ACBA to CPPI that
are pledged to the Indenture Trustee by ACBA and CPPI under the
Partnership Security Agreement and CPPI Security Agreement,
respectively. If holders of Class 3 Claims, as a class, vote to
reject the Plan, the Debtors believe that the treatment afforded
holders of Allowed Class 3 Claims satisfies the cram-down
requirements under 11 U.S.C. ss. 1129(b) and that holders of
Allowed Class 3 Claim will not be entitled to any distribution
other than a pro rata and pari passu distribution of the New
Common Stock. The Indenture Trustee maintains that in a
"cramdown" of the Noteholders' claims the Noteholders will be
entitled to new notes that far exceed the $15 million in
principal amount of New Notes proposed by the Debtors. Moreover,
the Indenture Trustee also maintains that the New Notes must be
secured by all the collateral that currently secures the First
Mortgage Notes, with the balance of their unsecured deficiency
claims payable in cash and common stock of the Reorganized
Debtors. The Debtors dispute this position.
3
<PAGE>
(iii) On the Effective Date, (a) the ACBA Interests outstanding
immediately prior to the Effective Date will be cancelled; (b)
ACBA will transfer all of its Assets, including the Hotel Assets
and any monies held in the escrow accounts, to Reorganized CPPI
in full, complete and final satisfaction of ACBA's obligation to
CPPI and any Claims CPPI may have against ACBA, arising under the
Wraparound Note, the FF&E Notes or otherwise, will be
extinguished and terminated; and (c) Reorganized CPPI will pledge
the New Notes Collateral to secure any New Notes. On the
Effective Date, all other outstanding claims, interests and
agreements between the Claridge Debtors and ACBA will be deemed
satisfied and discharged in full. Certain agreements
(particularly any equipment leases) between ACBA and third
parties relating to the New Notes Collateral will be assumed by
the Reorganized CPPI, as the owner of the Hotel Assets following
the Effective Date.
(iv) On the Effective Date, the Reorganized Claridge Debtors shall
assume all Claims against ACBA asserted by any Person other than
a general or limited partner of ACBA. The Plan also provides for
the Reorganized Claridge Debtors to assume all indemnification
obligations of the Debtors to the Debtors' respective officers,
or directors and general partners. Under the Plan, all Claims
held by any limited partners or general partners against ACBA
(other than with respect to the aforesaid continuing
indemnification Claims) or against any other general partner or
limited partner shall be deemed extinguished, released and waived
as of the Effective Date, and an injunction shall be issued on
the Effective Date barring the assertion of any such claims.
(v) Holders of Unsecured Claims, other than any deficiency claim
asserted by holders of the First Mortgage Notes to the extent
such a claim exists, against ACBA, the Corporation or CPPI shall
be assumed by the Reorganized Claridge Debtors up to $5,500,000
(the "Maximum Unsecured Claim Limit") and paid by the Reorganized
Claridge Debtors over five (5) years from the Effective Date in
six (6) equal annual installments. The Debtors project that the
aggregate of all Allowed Claims classified by the Debtors in
Classes 4, 5 and 7 will be less than $5,500,000 and, as a result,
holders of such Claims will be paid in full, without interest.
However you should be aware that the claims resolution process
has not yet been completed and, as a result, it may turn out that
the actual aggregate dollar amount of Allowed Class 4, 5 and 7
Claims may exceed $5,500,000, in which event holders of such
Claims may receive less than 100% upon their Allowed Claims. The
Plan also provides that the Reorganized Claridge Debtors'
obligation to holders of Allowed Class 4, 5 and 7 Claims shall be
deemed satisfied upon payment to holders of such claims aggregate
distributions, equal to the Maximum Unsecured Claim Limit. The
Indenture Trustee maintains that the Noteholders are entitled to
share in the recovery to unsecured creditors in Classes 4, 5 and
7 to the extent of their deficiency claims against each Debtor.
Summary of Treatment of Claims and Interests Relating to the Debtors
The Plan categorizes the Claims against and Interests in the Debtors
that the Debtors believe existed on August 16, 1999 into thirteen classes. The
Plan also provides that expenses incurred by the Debtors during the Chapter 11
cases will be paid in full and specifies the manner in which the Claims and
Interests in each class are to be treated. To the extent that the terms of this
Disclosure Statement vary with the terms of the Plan, the terms of the Plan
shall be controlling. The table below provides a summary of the classification
and treatment of Claims and Interests relating to the Debtors under the Plan:
4
<PAGE>
<TABLE>
<CAPTION>
Class Type of Claim or Interest Treatment
- ----- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
N/A Administrative Expense To be paid, to the extent Allowed, in full in cash on the
Claims Effective Date or within five days after such Claim
becomes Allowed. With respect to Administrative Expense Claims
asserted against the Debtors, the source of payment of such
claims shall be from cash on hand as of the Effective Date of
the Reorganized Claridge Debtors.
N/A Priority Tax Claims To be paid, to the extent Allowed, in full in cash on, at the
option of the Debtors, (i) the later of the Effective Date or the
date upon which such Claim becomes an Allowed Claim or (ii)
in equal quarterly installments of principal and interest over a
period of six (6) years. The Debtors believe that Priority Tax
Claims will not exceed $80,000.
1 Priority Claims Unimpaired. To be paid, to the extent Allowed, in full in cash
plus applicable interest or other charges on the later of (i) the
Effective Date or (ii) the date upon which such Claim becomes
an Allowed Claim.
2 Miscellaneous Secured Unimpaired. At the Claridge Debtors' sole option, the holder
Claims of such Allowed Claim will receive (i) the unaltered legal,
equitable and contractual rights to which such Miscellaneous
Secured Claim entitles the holder thereof, (ii) such other
treatment that will render such Miscellaneous Secured Claim
unimpaired under Section 1124 of the Bankruptcy Code, (iii)
all collateral securing such Miscellaneous Secured Claim will
be transferred and surrendered to the holder without
representation or warranty by or recourse against the Debtors
or (iv) other treatment agreed to by the Debtors and the
holder of such Claim.
3 First Mortgage Note Claims Impaired. On the Effective Date, each holder of such an
Allowed Claim will receive a pro rata amount of (i) New
Common Stock; and (ii) to the extent the holders of the First
Mortgage Notes vote to accept the Plan, as a class, the New
Notes. The New Notes will be guaranteed by CPPI, secured
by a first priority lien and security interest in the New Notes
Collateral and the shares in the Reorganized CPPI and will
have terms and conditions set forth in "Summary of the Plan
-- Description of New Notes." Not more than $15 million
aggregate principal amount of New Notes will be issued and,
therefore, each holder of the First Mortgage Notes will receive
no more than $176.47 in principal amount of New Notes for
each $1,000 in principal amount of First Mortgage Notes. If
Class 3, as a class, votes to reject the Plan, holders of Class 3
Claims will only receive the New Common Stock, and the New
Notes will not be issued.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Class Type of Claim or Interest Treatment
- ----- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
4 General Corporation Claims Impaired. Subject to the Maximum Unsecured Claim Limit, to
be paid, to the extent Allowed in full in cash, without interest,
within five (5) years from the Effective Date in six (6) equal
annual installments commencing on the Effective Date. Such
Claims will continue to be unsecured and may be repaid by the
Reorganized Corporation at any time without penalty. The
Plan caps the maximum amount of the unsecured claims
classified by the Debtors under the Plan in Classes 4, 5 and 7
which the Reorganized Claridge Debtors will be assuming at
$5,500,000 (the "Maximum Unsecured Claim Limit"). The
Debtors project that the aggregate amount of Allowed Claims
in Classes 4, 5 and 7 will be less than the Maximum
Unsecured Claim Limit. However, the claims resolution
process has not yet concluded and it is possible that the
aggregate amount of such claims may exceed the Maximum
Unsecured Claim Limit. You should be aware that if the
aggregate amount of Allowed Claims in Classes 4, 5 and 7
exceed the Maximum Unsecured Claim Limit holders of such
claims would receive less than 100% upon their Allowed
Claims.
5 General CPPI Claims Impaired. Subject to the Maximum Unsecured Claim Limit, to
be paid, to the extent Allowed, in full in cash, without interest,
within five (5) years from the Effective Date in six (6) equal
annual installments commencing on the Effective Date. Such
Claims will continue to be unsecured and may be repaid by the
Reorganized CPPI at any time without penalty. The Plan caps
the maximum amount of the unsecured claims classified under
the Plan in Classes 4, 5 and 7 which the Reorganized Claridge
Debtors will be assuming at the Maximum Unsecured Claim
Limit. The Debtors project that the aggregate amount of
Allowed Claims in Classes 4, 5 and 7 will be less than the
Maximum Unsecured Claim Limit. However, the claims
resolution process has not yet concluded and it is possible that
the aggregate amount of such claims may exceed the
Maximum Unsecured Claim Limit. You should be aware that
if the aggregate amount of Allowed Claims in Classes 4, 5 and
7 exceed the Maximum Unsecured Claim Limit holders of such
claims may receive less than 100% upon their Allowed Claims.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Class Type of Claim or Interest Treatment
- ----- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
6 Convenience Claims Unimpaired. Each holder of such Allowed Claim to be paid in
cash in an amount equal to 100% of such Allowed Claim on
the later of the Effective Date or the date that such Claim
becomes an Allowed Claim, or as soon thereafter as
practicable. Only a holder of an Allowed Claim otherwise
classified in Classes 4, 5 or 7 with (i) an Allowed Claim equal
to or less than $2,500; and (ii) who has an Allowed Claim in
excess of $2,500 but, on the ballot, voluntarily elects to reduce
such claim to $2,500, shall be treated as a Class 6
Convenience Claim.
7 General ACBA Claims Impaired. Subject to the Maximum Unsecured Claim Limit, to
be paid, to the extent Allowed, in full in cash, without interest,
within five (5) years from the Effective Date in six (6) equal
annual installments commencing on the Effective Date. Such
Claims will continue to be unsecured and may be repaid by the
Reorganized CPPI at any time without penalty. The Plan caps
the maximum amount of the unsecured claims classified under
the Plan in Classes 4, 5 and 7 which the Reorganized Claridge
Debtors will be assuming at the Maximum Unsecured Claim
Limit. The Debtors project that the aggregate amount of
Allowed Claims in Classes 4, 5 and 7 will be less than the
Maximum Unsecured Claim Limit. However, the claims
resolution process has not yet concluded and it is possible that
the aggregate amount of such claims may exceed the
Maximum Unsecured Claim Limit. You should be aware that
if the aggregate amount of Allowed Claims in Classes 4, 5 and
7 exceed the Maximum Unsecured Claim Limit holders of such
claims may receive less than 100% upon their Allowed Claims.
8 Intercompany Claims Impaired. On the Effective Date, ACBA will sell, transfer,
convey and assign, without recourse, all of its right, title and
interest in and to its Assets, including, without limitation, the
Hotel Assets, to the Reorganized CPPI free and clear of any
liens, claims, encumbrances or interests, other than any lien
classified in Class 2, which will then be dealt with under the
Plan in Class 2, or asserted by or on behalf of the holders of
the First Mortgage Notes, which lien will then be released,
extinguished and waived in accordance with the treatment
afforded holders of Allowed Class 3 Claims under the Plan, in
full, complete and final satisfaction of any Claims the
Reorganized Claridge Debtors may have against ACBA arising
under the Wraparound Note, the FF&E Notes or otherwise.
The Operating Leases will terminate without liability. All
other Intercompany Claims between and among the Claridge
Debtors and ACBA will be waived, released and extinguished.
Any Intercompany Claim of CPPI against the Corporation
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Class Type of Claim or Interest Treatment
- ----- ------------------------- -----------------------------------------------------------------
<S> <C> <C>
shall not be affected by the Plan except that such Claim shall
be subordinated, in all respects, to payment in full of any
Claims held by third-parties against the Corporation as of the
Effective Date, including those Claims classified in Class 4.
The Indenture Trustee maintains that, absent the consent of the
Noteholders, ACBA may not transfer the Hotel Assets in
satisfaction of the Wraparound Mortgage Notes or the FF&E
Notes because the transfer violates the absolute priority rule
and Section 510(a) of the Bankruptcy Code, which gives effect
to subordination agreements enforceable under applicable non-
bankruptcy law. The Wraparound Note and FF&E Notes are
secured by a second lien on the Hotel Assets and are expressly
subordinate to the First Mortgage lien of the Indenture Trustee,
for the benefit of itself and the holders of the First Mortgage
Notes pursuant to the terms of the Subordination Agreement to
which CPPI, ACBA and the Indenture Trustee are parties.
The Indenture Trustee maintains that, based upon the Debtors'
valuations and the fact that there are no ACBA Assets that are
not encumbered by the Indenture Trustee's liens, the transfer of
ACBA's assets to CPPI would be without consideration since
the Wraparound Note and FF&E Notes are not entitled to any
recovery in the ACBA Chapter 11 case.
The Indenture Trustee also maintains that it is the owner of the
Operating Leases for the benefit of itself and the Noteholders
as the result of its termination of the license given to ACBA to
collect rents thereunder and that under the terms of the
documents that secure the Notes, the Operating Leases may not
be terminated without liability and without the Indenture
Trustee's consent. The Indenture Trustee further maintains
that the termination of the Operating Leases results in rejection
damages and that the Indenture Trustee is entitled to receive
the recovery on the claim therefor and for deferred rent of
$16.1 million - whether by virtue of its ownership of the rents,
or if the Operating Leases were not effectively terminated, by
virtue of the lien it has on any payment on the Operating
Leases, since such payments are at a minimum the Indenture
Trustee's collateral. For the same reason, the Indenture
Trustee maintains that the Noteholders are entitled to receive
the funds in the Escrow Account (as defined below) and the
funds held by the Indenture Trustee pursuant to the Stipulation
which are not required for payment of the approved budgeted
expenses of ACBA (including the court approved fees and
expenses of ACBA's court appointed professionals) or the fees
and expenses of the Indenture Trustee.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Class Type of Claim or Interest Treatment
- ----- ------------------------- --------------------------------------------------------------
<S> <C> <C>
9 Contingent Payment Rights Impaired. On the Effective Date, all such Allowed Claims
Claims shall be extinguished and no distribution will be made in
respect to such Claims. Holders of these claims consist of
Releasing Investors.
10 Contingent Payment Claims Impaired. On the Effective Date, all such Allowed Claims
shall be extinguished and no distributions will be made in
respect to such Claims, including any Allowed Claims arising
out of or in connection with the Debtor's rejection of the
Restructuring Agreement. Holders of these claims consist of
Webb, or its successors and assigns.
11 Corporation Interests Impaired. On the Effective Date, all Allowed Corporation
Interests will be extinguished and no distributions will be made
in respect of such Corporation Interests.
12 CPPI Interests Unimpaired. On the Effective Date, the Corporation will
continue to own 100% of the CPPI Interests, which will revest
free and clear of all liens, claims, interests or encumbrances.
13 ACBA Interests Impaired. On the Effective Date, all ACBA Interests will be
extinguished and no distribution will be made in respect of
such ACBA Interests.
</TABLE>
For a more detailed description of the treatment of the foregoing
classes of Claims and Interests, see "Summary Of The Plan -- Classification of
Claims and Interests Under the Plan."
9
<PAGE>
BACKGROUND
The Claridge Debtors and ACBA
The Corporation, a New York corporation, through its wholly-owned
subsidiary CPPI, a New Jersey corporation, operates The Claridge Hotel and
Casino (the "Claridge") in Atlantic City, New Jersey. The Corporation has no
substantial assets other than its 100 percent ownership interest in CPPI. ACBA
is a New Jersey limited partnership.
History and Structure
On October 31, 1983, (a) CPPI acquired the casino license and gaming
equipment of the Claridge (the "Casino Assets") from DEWNJ; (b) ACBA acquired
the Hotel Assets (other than the land) and a ground lease for the land from
DEWNJ; (c) CPPI leased the Hotel Assets (other than the land) from ACBA; (d)
CPPI subleased the land on which the Claridge is located from ACBA; and (e) CPPI
assumed certain liabilities related to the acquired assets and undertook to
carry on the business of the Claridge. In connection with these transactions,
ACBA granted the Wraparound Mortgage to CPPI. These transactions were entered
into in connection with the private placement of equity interests in the
Corporation and ACBA. The offering was structured to furnish the investors with
certain tax benefits available under the federal tax law then in effect. The
Existing Common Stock and the limited partnership interests of ACBA were sold
together in the private placement as units and, because there has been
relatively little trading in the stock or ACBA interests, there is a substantial
similarity between the equity ownership of the Corporation and ACBA. Although
the Corporation and ACBA are independent entities, approximately 93% of the
Existing Common Stock is owned by Persons who also own limited partnership
interests in ACBA. ACBA does not currently engage in any significant business
activities other than those relating to the Claridge.
In October 1988, the Corporation, CPPI and ACBA entered into 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 CPPI and ACBA; (v) acquisition of the land underlying the Hotel Assets
by ACBA from DEWNJ and (vi) the forgiveness by Webb of substantial indebtedness.
On January 31, 1994, the Corporation completed an offering of $85
million aggregate principal amount of the First Mortgage Notes. The First
Mortgage Notes are secured by (i) the First Mortgage, (ii) a pledge granted by
the Corporation of all outstanding shares of capital stock of CPPI and (iii) the
CPPI Guaranty. The CPPI Guaranty is secured by a Collateral Assignment of the
Wraparound Mortgage and by a lien on the Claridge's gaming and other assets,
including, but not limited to, inventory, accounts receivable, equipment, hotel
rents, trademarks, intangibles and cash. In addition, in January 1997, CPPI
subjected its new self-parking garage (the "Self-Parking Garage") to the lien of
the First Mortgage. Interest on the First Mortgage Notes is payable semiannually
on February 1 and August 1 of each year.
The net proceeds of the First Mortgage Notes, totaling approximately
$82.2 million, were used in part as follows: (i) to repay in full on January 31,
1994, the Corporation's outstanding debt under a loan facility (approximately
$35 million); (ii) to expand the 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 (approximately $13
million); and (iii) to purchase property in 1995 and construct on that property
a self-parking garage that opened in 1996 (approximately $28 million).
10
<PAGE>
The current ownership structure of the Corporation, CPPI and ACBA is
depicted in the following table:
The current relationships and agreements between the Corporation, CPPI
and ACBA are described below:
Operating Lease/Expansion Operating Lease
The Casino Assets are owned by CPPI. The Hotel Assets and underlying
land are owned by ACBA and leased by ACBA to CPPI. The lease obligations are set
forth in the Operating Leases.
The initial term of the Operating Leases expired on September 30, 1998
and CPPI exercised the first of the 10- year renewal options, extending the
Operating Leases through September 30, 2008. Basic rent during the first renewal
term of the Operating Leases is calculated pursuant to a formula, with such rent
not to be more than $32.5 million nor less than $26.5 million for the lease year
commencing October 1, 1998 through September 30, 1999, and, subsequently, not to
be greater than 10% more than the basic rent for the immediately preceding lease
year in each lease year thereafter. Basic rent for the lease year commencing
October 1, 1998 was $26.5 million. For the lease year commencing October 1,
1999, Basic Rent is $26.5 million. Under the terms of the Operating Lease, CPPI
has an option to purchase, on September 30, 2003 and September 30, 2008, the
Hotel Assets and the underlying land for their fair market value at the time the
option is exercised.
CPPI 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,
fixtures and equipment replacements and building improvements ("FF&E
Replacements") and the general and administrative costs of ACBA, if necessary.
ACBA is required during the entire term of the Operating Leases to provide FF&E
Replacements to CPPI and to provide facility maintenance and engineering
services to CPPI. CPPI is required to lend to ACBA any amounts ("FF&E Loans")
necessary to fund the cost of FF&E Replacements and if ACBA's cash flow, after
allowance for certain distributions, is insufficient to provide the facility
maintenance and engineering services required of it, CPPI is also required to
lend to ACBA the funds required to provide those services. Any advances by CPPI
for either of the foregoing are secured under the Wraparound Mortgage in an
amount up to $25 million. There is currently approximately $14.6 million owed in
respect of the FF&E Loans. According to CPPI, the total amount owed in respect
of the Wraparound Note and the FF&E Notes exceeds $86 million. Certain other
amounts owed to CPPI by ACBA also constitute collateral that secures the claims
of the Indenture Trustee and the Noteholders pursuant to the CPPI Security
Agreement.
Effective with the consummation of the restructuring in June 1989, the
Operating Leases were amended to provide for the deferral of up to $15.1 million
of rental payments during the period from 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 ACBA's cash flow to an amount estimated to be necessary
only to meet ACBA's cash requirements. During the third quarter of 1991, the
maximum deferral of rent was reached. On August 1, 1991, the Operating Leases
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.
11
<PAGE>
The terms of the Operating Leases have been amended from time to time
to provide for continued rent abatement. The most recent amendment (the "Sixth
Amendment"), which was effective September 30, 1998, allowed 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, included (i) CPPI having received the proceeds in connection
with its settlement of the parking garage arbitration; and (ii) the Corporation
or CPPI having paid the interest that was due on the First Mortgage Notes on
February 1, 1999. CPPI received the proceeds from the settlement of the parking
garage arbitration in February 1999 (see "Certain Information Concerning the
Debtors -- Legal Proceedings"), and paid the interest due on the First Mortgage
Notes on March 2, 1999, within the 30-day grace period allowed in accordance
with the terms of the First Mortgage Notes Indenture. The $1.1 million of basic
rent deferred in 1999 is to be paid to ACBA 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 ACBA's cash flow to
an amount necessary only to meet ACBA'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 described in the
preceding paragraph, the Sixth Amendment provides for the payment of $3.5
million of additional basic rent on the earlier of (i) the maturity date of the
Expansion Wraparound Note; (ii) such earlier date, if any, as the entire
principal amount of the Wraparound Mortgage becomes due and payable; or (iii)
the date on which any merger, consolidation, or similar transaction to which the
Corporation or CPPI is a party, or any sale of all or substantially all of the
assets of the Corporation or CPPI is consummated, or any change in control of
the Corporation or CPPI occurs.
If ACBA should fail to make any payment due under the Wraparound
Mortgage, CPPI 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, subject to certain limitations set forth in the Subordination
Agreement referred to below.
Wraparound Mortgage
On October 31, 1983, ACBA executed and delivered to CPPI the Wraparound
Mortgage, which was subordinate to an $80 million first mortgage granted by ACBA
to a group of banks, and a $47 million purchase money second mortgage ("Purchase
Money Second Mortgage"), granted by ACBA to DEWNJ. The Purchase Money Second
Mortgage, which was due on September 30, 2000, was canceled upon satisfaction of
certain conditions set forth in an agreement entered into at the time of the
restructuring. In conjunction with the offering of the First Mortgage Notes on
January 31, 1994, the outstanding debt owed to the banks, which was secured by
the first mortgage, was satisfied in full. By its terms, the Wraparound Mortgage
may secure up to $25 million of additional loans to ACBA from CPPI to finance
FF&E Replacements and facility maintenance and engineering shortfalls. The
Wraparound Mortgage provides that, so long as ACBA is not in default on its
obligations under the Wraparound Mortgage, CPPI is obligated to make payments
required under any senior mortgage indebtedness. The indebtedness secured by the
Wraparound Mortgage, which originally was to mature on September 30, 2000, bears
interest at an annual rate equal to 14%, with certain interest installments that
accrued in 1983 through 1988 totaling $20 million being deferred until maturity.
In addition, ACBA is required under the Wraparound Mortgage to make payments of
principal and interest in respect of any FF&E Loans made to finance FF&E
Replacements or facility maintenance or engineering costs as described above. To
the extent these FF&E Loans exceed $25 million in the aggregate outstanding at
any time, they will be secured under separate security agreements and not by the
lien of the Wraparound Mortgage.
On March 17, 1986, the first mortgage was amended and assumed by CPPI.
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 Wraparound Mortgage was increased by an amount up to
$17 million to provide ACBA with the necessary funding.
12
<PAGE>
Effective August 28, 1986, ACBA 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 Wraparound Mortgage. On
March 17, 1986, the Wraparound Mortgage was amended to require that the $127
million aggregate principal amount secured by it would be repayable in
installments during the years 1988 through 1998 in escalating amounts totaling
$80 million, with a balloon payment of $47 million and the $20 million of
deferred interest due on September 30, 2000.
In connection with the offering of the First Mortgage Notes on January
31, 1994, CPPI and ACBA entered into the Subordination Agreement with the
Trustee (the "Subordination Agreement"), which made the lien of the Wraparound
Mortgage and the Wraparound Notes, Expansion Wraparound Note and FF&E Note
secured thereby and payment thereof expressly subordinate to the First Mortgage.
In connection with the offering of the 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 certain internal improvements to the
Claridge which were funded through additional FF&E Loans. In connection
therewith, the Wraparound Mortgage and the Operating Leases were amended to
provide that the principal on these additional FF&E Loans will be payable at
final maturity of the Wraparound Mortgage.
Effective March 1, 1997, the Corporation, CPPI and ACBA entered into a
restructuring agreement, pursuant to which CPPI agreed to use its best efforts
to cause a modification of the Wraparound Mortgage (the "Wraparound
Modification") that is permitted by, or is in compliance with, the terms of the
First Mortgage Notes Indenture. The Wraparound Modification, if so permitted,
will provide for an extension of the maturity date of the 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 First Mortgage Notes
Indenture, CPPI has agreed to effect the Wraparound Modification at such time as
the First Mortgage Notes are no longer outstanding.
Effective September 30, 1998, the Corporation, CPPI and ACBA agreed to
amend the March 1997 restructuring agreement to provide for an extension of the
maturity date of the Wraparound Mortgage to January 1, 2005. In addition, the
Wraparound Mortgage and Wraparound Note were amended to defer the principal
payments that were payable during the fourth quarter of 1998 (totaling $3.5
million) to the earlier of (i) the maturity date of the Wraparound Mortgage and
Wraparound Note; (ii) such earlier date, if any, as the entire principal amount
of the Wraparound Note becomes due and payable; or (iii) the date on which any
merger, consolidation, or similar transaction to which the Corporation or CPPI
is a party, or any sale of all or substantially all of the assets of the
Corporation or CPPI is consummated, or any change of control of the Corporation
or CPPI occurs.
Contingent Payment
Following the 1983 transactions, Webb and its affiliates retained
significant interests in the Claridge. Effective with the closing of the
Restructuring (as defined in the Restructuring Agreement) in June 1989, all or
substantially all of the financial, contractual, ownership, guarantee and other
relationships of the Corporation and CPPI with Webb were terminated. The
Restructuring Agreement provided that Webb would retain the Contingent Payment.
To give effect to the Contingent Payment, the Corporation and ACBA agreed not to
make any distributions to their respective shareholders or partners, whether
derived from operations or from sale or refinancing proceeds, until Webb had
received the Contingent Payment. The estimated amount payable in respect of the
Contingent Payment on December 31, 1998 was $88.3 million.
In connection with the Restructuring, Webb agreed to grant Contingent
Payment Rights to those investors in the Corporation and ACBA from whom Webb had
received written releases from all liabilities (the "Releasing Investors").
Approximately 84% of the investors provided releases and became Releasing
Investors. Payments to Releasing Investors were to be made in accordance with a
schedule of priorities, as defined in the Restructuring Agreement.
13
<PAGE>
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 "NJCCC").
On February 23, 1996, the Corporation acquired an option (the
"Contingent Payment Option") to purchase, at a discount from the carrying value,
the Contingent Payment. The purchase price of the Contingent Payment Option was
$1 million, and the Contingent Payment Option could have been exercised any time
prior to December 31, 1997. The Corporation was not able to exercise the
Contingent Payment Option, and it expired unexercised on December 31, 1997.
Events Preceding Commencement of the Chapter 11 Cases
During 1995, the cash provided by operations of the Claridge was
sufficient to meet the Corporation's obligations to pay interest on the First
Mortgage 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 did 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 ongoing obligations, including the interest due on the First
Mortgage 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,
CPPI 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 toward the mid-level slot customer through the use of
promotions and advertising have been enhanced.
Furthermore, as it had sought to do prior to the Filing Date,
management continues to conserve cash through various cost containment measures.
These include various operational changes, including the previously mentioned
redirection of the bus program. In addition, prior to the Filing Date,
management also caused CPPI to enter into certain transactions with PDS
Financial Corporation ("PDS") and the Casino Reinvestment Development Authority
("CRDA"), as further discussed below.
In December 1997, CPPI obtained a commitment from PDS for a sale
lease-back facility (the "Facility"). Under the terms of the Facility, CPPI
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, CPPI
sold 370 slot machines to PDS for approximately $1 million under this Facility.
The machines were then leased back to CPPI under an operating lease arrangement
for two years. After two years, CPPI has an option to either purchase the
machines, renew the lease
14
<PAGE>
arrangement for twelve months, or return the equipment to PDS. In December 1998,
CPPI 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 CPPI funds,
already on deposit with the CRDA, and the completion of certain donations of
CPPI funds also already on deposit. These transactions resulted in the receipt
by CPPI of approximately $930,000 from the CRDA in December 1998.
In addition, in February 1999, the Corporation and CPPI agreed to a
settlement of approximately $2.3 million in the arbitration proceedings
concerning the accident which took place in CPPI's self-parking garage in July
1996. The settlement proceeds were received by CPPI in late February 1999.
As a result of these transactions, on March 2, 1999, CPPI was able to
pay the interest due on the First Mortgage Notes on February 1, 1999, under the
30-day grace period allowed in accordance with the terms of the First Mortgage
Notes Indenture.
In 1996 the Claridge Debtors retained financial advisors and explored
several alternatives, including strategic investments by third parties, the sale
of the Claridge Debtors and the restructuring of the First Mortgage Notes.
Although the Claridge Debtors negotiated with interested parties in late 1996
and early 1997, the Claridge Debtors did not pursue any of those alternatives.
Based on the Claridge Debtors' poor cash flow and recurrent losses,
management determined that the Claridge Debtors were not able to continue paying
interest due on the First Mortgage Notes while being able, at the same time, to
satisfy their other obligations. The Claridge Debtors did not pay the interest
due on the First Mortgage Notes on August 2, 1999, and on August 16, 1999, the
Claridge Debtors each filed voluntary petitions under Chapter 11 of the
Bankruptcy Code. As a result of certain actions taken by the First Mortgage
Notes Indenture Trustee, ACBA filed a voluntary petition under Chapter 11 of the
Bankruptcy Code on October 5, 1999.
During 1998 and 1999, the Claridge Debtors continued to consider
alternatives, such as a sale of their businesses or strategic investments by
third parties. In 1999, the Corporation entered into a letter of intent with
Schottenstein Realty Corporation that contemplated a strategic investment in the
Corporation and a restructuring of the First Mortgage Notes. On November 10,
1999 the Corporation announced that it would not pursue that transaction;
instead, the Debtors determine that it would be in the best interest of their
respective estates, creditors and equity holders for them to file a stand-alone
plan of reorganization.
REASONS FOR THE SOLICITATION; RECOMMENDATION
The solicitation is being commenced at this time in order to receive
the acceptances of all creditors of the Debtors entitled to vote to accept or
reject the Plan. Under the Plan, holders of the First Mortgage Notes will
receive a pro rata amount of the New Common Stock and provided that the holders
of the First Mortgage Notes as a class accept the Plan, the New Notes in a
principal amount of $15 million, which the Debtors believe is the best
alternative to Noteholders at this time. See "Alternatives to Confirmation and
Consummation of the Plan." Further, the Debtors believe that any other plan is
likely to require significant delays that will further diminish the value
received by the Noteholders and the Debtors' other creditors. As noted above,
the Claridge Debtors have not been able to locate other prospective buyers of
the Claridge. See "Background -- Events Preceding Commencement of the Chapter 11
Cases." The Debtors believe that the Plan has the most favorable terms available
to their respective creditors and equity security holders and, if the Plan is
accepted by the Persons entitled to vote thereon, the pendency of the bankruptcy
cases should be significantly shortened and the administration of such cases
should be simplified and made less costly.
IN LIGHT OF THE BENEFITS TO BE ATTAINED BY THE PERSONS ENTITLED TO VOTE
TO ACCEPT OR REJECT THE PLAN PURSUANT TO CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THE PLAN, EACH OF THE DEBTORS RECOMMENDS THAT YOU VOTE TO ACCEPT
THE PLAN.
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THE BANKRUPTCY PLAN -- VOTING INSTRUCTIONS AND PROCEDURES
General
The Debtors are seeking the acceptance of the Plan by their creditors
and equity security holders entitled to vote thereon, and this Disclosure
Statement, together with the accompanying Ballot, is being furnished to such
persons in connection with such solicitation. This Disclosure Statement may not
be relied upon or used for any purpose by any Person other than to determine
whether or not to vote to accept or reject the Plan.
Voting Deadline
The Voting Deadline, after which Ballots and master Ballots (in the
case of a brokerage firm or other nominee holder of First Mortgage Notes in its
own name on behalf of a beneficial owner) with respect to the Plan will not be
accepted by the Debtors, is 5:00 p.m., Eastern Standard Time, on __________.
Except to the extent the Debtors so determine or as permitted by the Bankruptcy
Court, Ballots that are received after the Voting Deadline will not be accepted
or used by the Debtors in connection with the Debtors' request for confirmation
of the Plan (or any permitted modification thereof).
The Debtors reserve the right to amend or modify the terms of the Plan
or waive any of the conditions thereto, subject to the requirements of the
Bankruptcy Code and to such other consents as may be required under the Plan, if
and to the extent that the Debtors determine that such amendments or
modifications are necessary or desirable in order to complete the Plan. The
Debtors will give the Persons entitled to vote on the Plan such notice of
amendments and modifications as may be required by the Plan or by applicable
law.
Voting Procedures Particular to Noteholders
The Debtors are providing copies of this Disclosure Statement, Ballots,
and where appropriate, master Ballots, to all registered Noteholders as of the
Approval Date. Noteholders who hold First Mortgage Notes otherwise than for
their own account (e.g., brokerage firms, banks, trust companies or other
nominees) should promptly provide copies of this Disclosure Statement and
appropriate Ballots to customers and to Beneficial Owners. Any Beneficial Owner
of First Mortgage Notes who has not received a Ballot should contact their
nominee or the Corporation.
(a) Beneficial Owners of First Mortgage Notes
For purposes of voting to accept or reject the Plan, the Beneficial
Owners of First Mortgage Notes will be deemed to be the "holders" of the Claims
represented by such First Mortgage Notes. Beneficial Owners holding First
Mortgage Notes in "street name" through a brokerage firm, bank, trust company or
other nominee can vote only by following these instructions:
1. Fill in all the applicable information on the Ballot;
2. Sign the Ballot (unless the Ballot has already been signed by the
brokerage firm, bank, trust company or other nominee); and
3. Return the Ballot to your brokerage firm, bank, trust company or
other nominee as soon as possible (but in any event at least one
Business Day before the Voting Deadline). If you have any
questions, contact the Corporation or your brokerage firm, bank,
trust company or other nominee for instructions.
No Ballot submitted to a brokerage firm or proxy intermediary will be
counted until such brokerage firm or proxy intermediary properly completes and
delivers a corresponding master Ballot to the Corporation (as discussed below).
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Any Beneficial Owners holding First Mortgage Notes of record in their
own name (i.e., registered Noteholders) can vote by completing and signing the
enclosed Ballot and returning it directly to the Corporation on or before the
Voting Deadline (using the enclosed self-addressed stamped envelope).
If any Beneficial Owner owns First Mortgage Notes through more than one
brokerage firm, bank, trust company or other nominee, such Beneficial Owner may
receive multiple mailings containing the Ballots. Each Beneficial Owner should
execute a separate Ballot for each block of First Mortgage Notes that it holds
through a different nominee, for the aggregate amount of First Mortgage Notes
that it beneficially owned as of the Approval Date through such nominee and
return such Ballots to the respective nominees in the return envelope provided
therewith.
Beneficial Owners who execute multiple Ballots with respect to First
Mortgage Notes held through more than one nominee must indicate on each Ballot
the names of all such other nominees and the additional amounts of such First
Mortgage Notes so held and voted.
If a Beneficial Owner holds a portion of the First Mortgage Notes
through a nominee and another portion as a record holder in its own name, such
owner should follow the procedures described above to vote the portion held of
record in its own name and separately follow the procedures described above to
vote the portion held through a nominee or nominees.
(b) Brokerage Firms, Banks and Other Nominees
A brokerage firm which is the registered holder of First Mortgage Notes
for more than one Beneficial Owner can vote on behalf of such Beneficial Owners
by (i) distributing a copy of this Disclosure Statement and all appropriate
Ballots to such Beneficial Owners, (ii) collecting such Ballots, (iii)
completing a master Ballot compiling the votes and other information from the
Ballots collected, and (iv) transmitting such master Ballot, together with the
Ballots completed by the Beneficial Owners, to the Corporation. A proxy
intermediary acting on behalf of a brokerage firm or bank should also follow the
procedures outlined in the preceding sentence.
A bank, trust company or other nominee which is the registered holder
of First Mortgage Notes for only a single Beneficial Owner can arrange for such
Beneficial Owner to vote by executing the appropriate Ballot and by distributing
a copy of the Disclosure Statement and such executed Ballot to such Beneficial
Owner.
(c) Securities Clearing Agencies
To the extent that there are any securities clearing agencies among the
registered Noteholders, the Claridge Debtors expect that each of such clearing
agencies will arrange for its respective participants to vote by executing an
omnibus proxy in favor of such participants. As a result of the omnibus proxy,
such participants will be authorized to vote in the name of such securities
clearing agencies and would follow the relevant procedures outlined in the
preceding paragraphs.
(d) Other
If a Ballot is signed by one or more trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should indicate
such capacity when signing and, unless otherwise determined by the Debtors, must
submit proper evidence satisfactory to the Debtors of their authority to so act.
The Debtors are not at this time requesting the delivery of, and will
not accept, certificates evidencing the First Mortgage Notes. If the Bankruptcy
Court confirms the Plan, the Debtors will, by the Effective Date, furnish all
Noteholders with instructions (together with all appropriate materials) relating
to the procedures for remitting First Mortgage Notes and receiving the New
Common Stock and/or the New Notes in exchange therefor.
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Defects, Irregularities, Etc
Unless otherwise directed by the Bankruptcy Court, all questions as to
the validity, form, eligibility (including time of receipt), acceptance and
revocation or withdrawal of Ballots will be determined by the Debtors in their
sole discretion, whose determination will be final and binding. Unless the
Ballot being furnished is timely submitted to the Debtors on or prior to the
Voting Deadline, together with any other documents required by such Ballot, the
Debtors may, in their sole discretion, reject such Ballot as invalid and,
therefore, decline to use it in connection with seeking confirmation of the Plan
by the Bankruptcy Court. In the event of a dispute with respect to a Claim, any
vote to accept or reject the Plan cast with respect to such Claim will not be
counted for purposes of determining whether the Plan has been accepted or
rejected, unless the Bankruptcy Court orders otherwise. As indicated below under
"Withdrawal of Ballots," effective withdrawals of Ballots must be delivered to
the Debtors prior to the Voting Deadline. The Debtors reserve the absolute right
to contest the validity of any such withdrawal. The Debtors also reserve the
right to reject any and all Ballots not in proper form. The Debtors further
reserve the right to waive any defects or irregularities or conditions of
delivery as to any particular Ballot.
The interpretation (including the Ballot and respective instructions
thereto) by the Debtors, unless otherwise directed by the Bankruptcy Court, will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with deliveries of Ballots must be cured within
such time as the Debtors (or the Bankruptcy Court) determine. Neither the
Debtors nor any other Person will be under any duty to provide notification of
defects or irregularities with respect to deliveries of Ballots nor will any of
them incur any liabilities for failure to provide such notification. Unless
otherwise directed by the Bankruptcy Court, delivery of such Ballots will not be
deemed to have been made until such irregularities have been cured or waived.
Ballots previously furnished (and as to which any irregularities have not
theretofore been cured or waived) will be invalidated.
Withdrawals of Ballots; Revocation
IN ORDER FOR YOUR BALLOT TO BE COUNTED, YOUR BALLOT MUST BE COMPLETED
AS SET FORTH ABOVE AND RECEIVED BY THE VOTING DEADLINE (5:00 P.M., EASTERN
STANDARD TIME, ON _______________, UNLESS EXTENDED). BALLOTS SHOULD BE MAILED IN
THE ENVELOPE PROVIDED WITH SUCH BALLOT TO: THE CLARIDGE HOTEL AND CASINO
CORPORATION, INDIANA AVENUE AND THE BOARDWALK, ATLANTIC CITY, NEW JERSEY 08401,
ATTENTION: _______________.
The Bankruptcy Court will hold a hearing (the "Confirmation Hearing")
on confirmation of the Plan, at which time the Bankruptcy Court will consider
objections to confirmation of the Plan, if any, commencing at [____________] on
[_______________], in Courtroom ____, United States Bankruptcy Court for the
District of New Jersey, 15 North 7th Street, Camden, New Jersey 08102. The
Confirmation Hearing may be adjourned from time to time without notice, other
than the announcement of an adjourned date at the Confirmation Hearing.
Objections to confirmation of the Plan, if any, must be in writing and served
and filed as described in "Acceptance and Confirmation of the Plan --
Confirmation Hearing."
DESCRIPTION OF CHAPTER 11 CASES OF THE CLARIDGE DEBTORS
Chapter 11 Filings
On August 16, 1999, each of the Claridge Debtors filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code. On August 17,
1999, the Bankruptcy Court entered an order granting the Claridge Debtors'
request for joint administration of their Chapter 11 cases.
As of the date of this Disclosure Statement, the Claridge Debtors have
operated and intend to continue to operate as debtors in possession with the
protection of the Bankruptcy Court. In such capacity, management has developed
the Plan. The Bankruptcy Court has certain supervisory powers over the Claridge
Debtors' operations
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during the Chapter 11 cases. The Claridge Debtors are authorized to operate in
the ordinary course of business; any transactions that are out of the ordinary
course of business require the Bankruptcy Court's approval.
One immediate effect of the commencement of the Chapter 11 cases is the
imposition of the automatic stay under the Bankruptcy Code which, with limited
exceptions, enjoins the commencement or continuation of all collection efforts
by creditors, enforcement of liens against the Claridge Debtors and litigation
against the Claridge Debtors. This injunction remains in effect unless modified
or lifted by order of the Bankruptcy Court.
First Day Orders
In order to minimize the possible disruption to the Claridge Debtors'
operations, the Claridge Debtors submitted a number of so-called "first day
orders," along with supporting applications, to the Bankruptcy Court on August
16, 1999. These first day orders included, among others:
(i) an order authorizing the retention of Clifford Chance Rogers &
Wells LLP as New York co-counsel to the Claridge Debtors;
(ii) an order authorizing the retention of Archer & Greiner as New
Jersey co-counsel to the Claridge Debtors;
(iii) an order authorizing the retention of KPMG LLP as the Claridge
Debtors' accountants,
(iv) an order authorizing the retention of Jay Alix & Associates as the
Claridge Debtors' financial advisor;
(v) an order authorizing the Claridge Debtors to pay prepetition
employee wages, reimbursable expenses and benefits and directing the Claridge
Debtors' banks to honor prepetition employee wage and expense checks;
(vi) an order authorizing the Claridge Debtors to maintain their
prepetition bank accounts, business forms, stationery and checks;
(vii) an interim order authorizing the Claridge Debtors to use cash
collateral;
(viii) an order authorizing the Claridge Debtors to honor advance
customer payments and performance of any agreements pursuant to which they are
made and to make certain other pre-petition payments to certain critical vendors
and suppliers;
The Bankruptcy Court has signed and entered all of the orders described
above, other than the order confirming the Plan. The Claridge Debtors may seek
other orders based on the needs of the Claridge Debtors and ACBA and their
operations throughout the Chapter 11 cases.
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Use of Cash Collateral
Pursuant to the First Mortgage Notes Indenture and the security
documents related thereto entered into by the Corporation, CPPI and ACBA, in
order to secure the obligations due under the First Mortgage Notes, each of the
Corporation, CPPI and ACBA pledged substantially all of its real and personal
property to the Indenture Trustee on behalf of the Noteholders including, in the
case of CPPI and ACBA, deposit accounts, cash on hand, investments made with
cash and rights to receive cash. Pursuant to certain orders entered in the
Corporation, CPPI and ACBA cases authorizing the use of cash collateral of the
Indenture Trustee (the "Cash Collateral Orders"), each of the Debtors has
acknowledged that the Indenture Trustee has valid and perfected first liens and
security interests in all of the assets of the Debtors, except that in the case
of CPPI, CPPI reserved its right to dispute whether the Indenture Trustee has
valid and perfected liens in certain cash on hand on the Filing Date and gaming
revenues - whether in deposit accounts or used or generated in the gaming
business of CPPI. No cash was held by ACBA on its Filing Date other than monies
representing certain Operating Leases payments, which it has agreed are, at a
minimum, the Indenture Trustee's cash collateral pursuant to the Stipulation
referred to below. According to CPPI, at the Filing Date there was $2.4 million
in cash held in the CPPI Cash Collateral Account maintained at First Union Bank,
as agent for the Indenture Trustee. The Indenture Trustee asserts that it has
valid and perfected liens and security interests in such cash as well as liens
and security interest in, among other things, cash, income, receipts, and
profits received by CPPI subsequent to the Filing Date. According to CPPI, on
March 31, 2000, approximately $8.6 million was held in bank accounts of CPPI
(net of outstanding checks) maintained pursuant to such Cash Collateral Orders,
inclusive of the $2.4 million held in the CPPI Cash Collateral Account on the
Filing Date. According to the Debtors, on March 31, 2000 $8.3 million was held
in casino cage accounts and in the form of undropped validators.
On September 30, 1999 the Indenture Trustee commenced an adversary
proceeding (the "Adversary Proceeding") in the Bankruptcy Court to establish the
Indenture Trustee's lien and security interest in cash, including the cash on
hand on the Filing Date, the interest and earning thereon and income, receipts
and profits deposited and held in the cash collateral accounts maintained
pursuant to the cash collateral orders. The Claridge Debtors maintain that the
Indenture Trustee does not have a valid, perfected lien on all cash of CPPI
including $9.8 million of cash that was held in the casino cage accounts and in
the form of undropped validators on the CPPI Filing Date and bases its view, in
part, on recent decisions in another case relating to the ability to obtain a
valid lien on gaming revenues. To the extent that it was determined that the
holders of the First Mortgage Notes had no lien on all or a portion of such
cash, creditors of CPPI holding unsecured claims, including the holders of the
First Mortgage Notes (to the extent, inter alia, that their claims are
determined to be undersecured) would be entitled to share in such cash ratably.
On the Claridge Debtors' Filing Date, the Claridge Debtors sought
emergency authority to continue use of cash collateral on an interim basis for
the period August 31, 1999 through September 9, 1999, which relief the
Bankruptcy Court granted on August 31, 1999. Various subsequent orders,
including a fifth interim cash collateral order dated December 21, 1999 (the
"Fifth Cash Collateral Order") have been entered authorizing CPPI to continue to
use cash collateral pursuant to certain terms and conditions and permitting it
to make certain lease payments under the Operating Leases. These include, among
other things, limiting CPPI's use of cash collateral to the amounts set forth in
various cash collateral budgets. The Bankruptcy Court also granted a replacement
perfected lien and security interest to the Indenture Trustee under Section
361(2) of the Bankruptcy Code in the Claridge Debtors' post-petition assets in
the amount used by the Claridge Debtors pursuant to the Cash Collateral Order
and, if such lien proves insufficient to protect the Indenture Trustee, the
Indenture Trustee will have a super priority administrative expense claim
pursuant to Section 507(a) of the Bankruptcy Code. On August 27, 1999, the
Indenture Trustee, pursuant to the absolute assignment of rents which was
granted to the Indenture Trustee by ACBA under the First Mortgage and the
Collateral Assignment of Lessor's Interest in the Operating Leases, asserts that
it terminated the Partnership's license to, among other things, collect rents
under the Operating Leases and asserted rights to $971,718 of the September
Operating Leases payment. That amount was placed in an interest-bearing account
at Summit Bank, N.A. (the "Escrow Account") pending the court's determination of
the Indenture Trustee's rights to such payments or stipulation of the Debtors
and the Indenture Trustee. The Indenture Trustee asserted that the termination
of the license granted by the
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Trustee to the Partnership resulted in the Operating Leases payment being
property of the Indenture Trustee. The Indenture Trustee further asserted that,
at a minimum, the Operating Leases payments are its cash collateral. By
Stipulation and Order dated December 21, 1999 (the "Stipulation") in connection
with (a) entry of the Fifth Cash Collateral Order, (b) limited suspension of the
First Mortgage Notes Adversary Proceeding for determination of the extent,
validity and priority of liens on assets of the Claridge Debtors and amendments
to answers thereto, (c) partial distribution of funds in the Escrow Account, and
(d) resolution of disputes relating to the extent, validity and priority of the
First Mortgage Notes Indenture Trustee's liens, cash collateral and funding
issues in the ACBA case, one-half of the funds in the Escrow Account were
released to the Indenture Trustee, with prejudice. The balance of the funds in
the Escrow Account are being held in the Escrow Account subject to the claims of
the Indenture Trustee and ACBA thereto. Under the Stipulation, ACBA acknowledged
that, at a minimum, all Operating Leases payments, including but not limited to
the funds in the Escrow Account, constitute the Indenture Trustee's cash
collateral. The Stipulation also provides for certain adequate protection
payments to the Indenture Trustee equal to the amount of the Operating Lease
Payments and provided for the Indenture Trustee to pay a portion of each monthly
Operating Leases payment to ACBA for court approved budgeted operating expenses
of ACBA and court approved fees and expenses of court appointed professionals of
ACBA, as well as the payment of the Indenture Trustee's fees and expenses
(including but not limited to the fees and expenses of its counsel and agents).
Administrative Office Building/People Mover Motion
By verified application (the "AOB Motion") dated March 9, 2000, the
Debtors filed a motion joined by Greate Bay Hotel and Casino, Inc. ("GBHC"),
seeking authorization to sell the Administrative Office Building. GBHC is the
owner of the real and personal property which constitutes the Sands Hotel &
Casino (the "Sands") and is itself subject to a bankruptcy case in the
Bankruptcy Court. The Indenture Trustee opposed the AOB Motion. By order dated
April 3, 2000, the Bankruptcy Court approved the AOB Motion over the Indenture
Trustee's objection. No appeal was taken.
The AOB Motion also involved the assumption by both GBHC and CPPI of a
certain Brighton Park Improvements Agreement (the "Improvements Agreement") the
subject matter of which involves the so-called "People Mover". The People Mover,
completed in 1988, is a 560 foot long one-way elevated walkway system connecting
the Atlantic City Boardwalk to the Sands and the Claridge Casinos. Under the
Improvements Agreement, CPPI paid rent to GBHC of $600,000 per year (i.e.,
$50,000 per month) in addition to funding half of the People Mover's operating
costs. In order to construct the People Mover, CPPI, GBHC and the City of
Atlantic City also entered into the Brighton Park Development Agreement
(together with the Improvement Agreement, the Brighton Park Agreements") which
obligated GBHC and CPPI to renovate Brighton Park, Atlantic City and maintain
certain improvements thereto.
Pursuant to the AOB Motion, and as approved by the Bankruptcy Court,
ACBA sold the Administrative Office Building to GBHC for a purchase price of
$3,500,000 (the "Purchase Price"), payable $1,500,000 at closing with the
balance payable in equal $50,000 monthly payments over forty months. ACBA
assigned its rights to the Purchase Price to CPPI. In connection therewith, both
CPPI and GBHC assumed the Brighton Park Agreements pursuant to Section 365 of
the Bankruptcy Code, as modified to provide for, among other things, a rent
abatement of the $50,000 per month otherwise payable by CPPI under the
Improvements Agreement. The abatement runs for the first 40 months after the
closing and is designed to, in effect, offset GBHC's obligation to pay $50,000
per month for the balance of the Purchase Price (i.e., the $50,000 per month
deferred purchase price payable by GBHC to CPPI over the next forty (40) months
will be set off against CPPI's obligation to pay rent equal to $50,000 per month
to GBHC under the Improvement Agreement over the same next forty (40) months).
Following the fortieth month, CPPI's rent requirement will be reduced to $20,000
per month.
As part of the AOB Motion Order, the Bankruptcy Court directed that the
$1,500,000 cash portion of the purchase price be held by Summitt Bank, N.A., as
escrow agent for the Indenture Trustee in an interest bearing escrow account
(the "AOB Escrow Account") pending further order of the Court. If the Plan is
confirmed, these monies will be released to the Reorganized Claridge Debtors
subject to the Indenture Trustee's lien for payment of its fees and expenses.
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Bar Dates and Notice Thereof
The Bankruptcy Court, pursuant to Bankruptcy Rule 3003(c)(3), fixed
February 28, 2000 as the final date to file proofs of claim or interest in the
Claridge Debtors' Chapter 11 cases (the "Bar Date").
The holder of any Claim that is not scheduled by the Claridge Debtors
or is scheduled as disputed, contingent or unliquidated and who has failed or
fails to file a proof of claim or interest on or before the Bar Date or any
other bar date fixed by order of the Bankruptcy Court, as applicable, will be
forever barred, estopped and enjoined from (a) asserting any and all Claims that
such holder possesses against the Claridge Debtors and (b) voting upon, or
receiving distributions under, the Plan.
DESCRIPTION OF CHAPTER 11 CASE OF ACBA
Chapter 11 Filings
On October 5, 1999, ACBA filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code.
As of the date of this Disclosure Statement, ACBA has operated and
intends to continue to operate as debtor in possession with the protection of
the Bankruptcy Court. The Bankruptcy Court has certain supervisory powers over
ACBA's operations during the Chapter 11 case. ACBA is authorized to operate in
the ordinary course of business; any transactions that are out of the ordinary
course of business require the Bankruptcy Court's approval.
One immediate effect of the commencement of the Chapter 11 case is the
imposition of the automatic stay under Bankruptcy Code which, with limited
exceptions, enjoins the commencement or continuation of all collection efforts
by creditors, enforcement of liens against ACBA and litigation against ACBA.
This injunction remains in effect unless modified or lifted by order of the
Bankruptcy Court.
First Day Orders
Following the filing of ACBA's petition on October 5, 1999, ACBA sought
various relief from the Bankruptcy Court with respect to the continued operation
of its business, including the payment of its post-petition expenses, certain
pre-petition claims and use of cash collateral. The First Mortgage Note
Indenture Trustee objected to the relief sought by ACBA. The bankruptcy court,
by an Interim Order Authorizing Use of Cash Collateral entered November 9, 1999
(the "ACBA Cash Collateral Order"), authorized ACBA to pay certain pre-petition
expenses with funds received from CPPI pursuant to the bankruptcy court's Third
Interim Order authorizing Use of Cash Collateral entered in CPPI's bankruptcy
case on or about October 5, 1999. The ACBA Cash Collateral Order further
authorized ACBA to use cash collateral received from CPPI for payment of its
general and administrative post-petition expenses for the months of October,
November and December 1999 in accordance with a budget approved by the
bankruptcy court. The ACBA Cash Collateral Order provided the First Mortgage
Note Indenture Trustee with various rights and remedies as adequate protection
of its interests in connection with ACBA's use of its cash collateral.
ACBA subsequently agreed to consent to the entry of the Stipulation
which was entered by the Bankruptcy Court on December 21, 1999, that provides
for the payment of ACBA's court approved operating expense budget and settles
certain controversies with the First Mortgage Note Indenture Trustee regarding
cash collateral and the validity, extent and priority of certain liens on ACBA's
assets asserted by the First Mortgage Note Indenture Trustee and acknowledges
the Indenture Trustee's rights in $329,000 of cash transferred to the Indenture
Trustee prior to the ACBA Filing Date, in addition to one-half the funds in the
Escrow and ongoing Operating Leases payments. Any balance of these funds held by
the Indenture Trustee may be applied only to pay the fees and expenses of its
counsel and agents and may not be distributed to the Noteholders or the Debtors
except by court order or pursuant to a plan of reorganization. The Indenture
Trustee has asserted that these funds are property of the Indenture Trustee for
the benefit of itself and the holders of the First Mortgage Notes and to the
extent not used should be paid to the holders of the First Mortgage Notes along
with the funds remaining in the Escrow Account. ACBA maintains that the
Operating Lease payments are property of ACBA and intends under the Plan to have
these funds transferred to Reorganized CPPI as if
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they were assets of ACBA. As set forth above, the Trustee maintains that such
transfer would violate the Subordination Agreement and the Bankruptcy Code. The
Indenture Trustee further maintains that, at a minimum, these funds and the
funds in the Escrow Account constitute its cash collateral and must be included
in calculating the value of the Indenture Trustee's secured claim.
Bar Dates and Notice Thereof
The Bar Date in ACBA's Chapter 11 case is February 28, 2000. The holder
of any Claim that is not scheduled by ACBA or is scheduled as disputed,
contingent or unliquidated and who has failed or fails to file a proof of claim
or interest on or before the Bar Date or any other bar date fixed by order of
the Bankruptcy Court, as applicable, will be forever barred, estopped and
enjoined from (a) asserting any and all Claims that such holder possesses
against ACBA and (b) voting upon, or receiving distributions under, the Plan.
SUMMARY OF THE PLAN
THE FOLLOWING IS A SUMMARY OF CERTAIN SIGNIFICANT PROVISIONS OF THE
PLAN. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION SET FORTH IN THE PLAN WHICH IS ATTACHED TO THIS DISCLOSURE
STATEMENT AS APPENDIX A. TO THE EXTENT THAT THE TERMS OF THIS DISCLOSURE
STATEMENT VARY FROM THE TERMS OF THE PLAN, THE TERMS OF THE PLAN SHALL BE
CONTROLLING.
The Debtors believe that under the Plan, holders of Claims entitled to
accept or otherwise reject the Plan will obtain a recovery with a value that is
in excess of what otherwise would be recovered by such holders if the assets of
the Debtors were liquidated under Chapter 7. See "Acceptance And Confirmation Of
The Plan -- Best Interests Test."
General
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself and its creditors and stockholders. Upon the
filing of a petition for relief under Chapter 11, Section 362 of the Bankruptcy
Code generally provides for an automatic stay of all attempts to collect claims
or enforce liens that arose prior to the commencement of the debtor's case under
Chapter 11 or that otherwise interfere with the debtors' property or business.
Formulation of a plan of reorganization is the principal objective of a
Chapter 11 reorganization case. In general, a Chapter 11 plan of reorganization
(i) divides claims and equity interests into separate classes, (ii) specifies
the property or distributions that each class is to receive under the plan and
(iii) contains other provisions necessary to the reorganization of the debtor.
Chapter 11 does not require each holder of a claim or interest to vote in favor
of the plan of reorganization in order for the bankruptcy court to confirm the
plan. However, a plan or reorganization must be accepted by the holders of at
least one impaired class of claims without considering the votes of Insiders (as
defined in Section 101(31) of the Bankruptcy Code). Generally, a claim or
interest that will not be repaid in full, or as to which legal, equitable or
contractual rights are altered, is impaired. A holder of an impaired claim or
interest that will receive a distribution under a plan of reorganization is
entitled to vote to accept or reject the plan.
Distributions to be made under the Plan will be made on the Effective
Date or as soon thereafter as is practicable, or at such other time or times
specified in the Plan.
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Voting on the Plan
Holders of Claims Entitled to Vote
As more fully described below, the Plan designates thirteen separate
classes of Claims and Interests. See "Summary Of The Plan -- Classification and
Treatment of Claims and Interests Under the Plan." Only classes that are
impaired under the Plan, but that are not deemed to have rejected the Plan as a
matter of law, are entitled to vote to accept or reject the Plan. Generally, a
class of claims or interests is considered to be unimpaired under a plan of
reorganization if the plan or reorganization does not alter the legal, equitable
and contractual rights of the holders of such claims or interests. Under the
Bankruptcy Code, holders of claims in an unimpaired class are conclusively
presumed to have accepted a plan and are not entitled to vote to accept or
reject a plan.
The Claims in classes 3, 4, 5, 7 and 8 are impaired under the Plan, are
receiving distributions under the Plan and, therefore, the holders of Allowed
Claims in these classes are entitled to vote to accept or reject the Plan. The
Claridge Debtors, as holders of Claims in class 8, support the Plan and vote to
accept the Plan. The Indenture Trustee disputes that the Claims in Class 8 are
properly classified or that the Debtors can vote such claims.
The Claims in class 9, 10 and 11 and the Interests in class 13 are
impaired, do not receive or retain any property under the Plan and are deemed to
reject the Plan. Holders of these Claims and Interests will not be solicited for
votes.
The Claims in class 1, 2 and 6 and the Interests in class 12 are not
impaired under the Plan and are conclusively deemed to accept the Plan. Holders
of these Claims and Interests will not be solicited for votes.
Vote Required for Class Acceptance
The Bankruptcy Court will determine whether sufficient acceptances have
been received to confirm the Plan. Classes 3, 4, 5, 7 and 8 will be deemed to
accept the Plan if the holders of Claims in these classes casting votes
accepting the Plan hold at least two-thirds in dollar amount and more than
one-half in number of the Claims of the holders in these classes who cast votes
with respect to the Plan. Because classes 9, 10 and 11 will not receive any
distribution under the Plan and thus will be conclusively presumed to have
rejected the Plan as a matter of law, the Debtors must request that the
Bankruptcy Court confirm the Plan pursuant to Section 1129(b) of the Bankruptcy
Code.
In order for the Plan to be confirmed, among other requirements, at
least one class of impaired Claims as to each Debtor determined without
including any acceptances of the Plan by any Insider, must have accepted the
Plan. If at least one of the classes of Claims as to each Debtor does not vote
to accept the Plan, the Debtors will request the Bankruptcy Court to confirm the
Plan under Section 1129(b) of the Bankruptcy Code.
The Plan does not contemplate the substantive consolidation of the
three Debtors' estates. For the Plan to be confirmed as to Debtors the Debtors
must show at the confirmation hearing that the requirements of the Bankruptcy
Code, most notably Section 1129 of the Bankruptcy Code, have been satisfied for
each Debtor. Among other things, Class of claims and Interest asserted against
each Debtor must either vote to accept the Plan or, absent that, the Debtors
must be able to show that as to the particular Debtor that the cram-down
requirements contained in Section 1129(b) of the Bankruptcy Code have been
satisfied.
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Waiver of Section 1111(b) Election by Icahn Interests
Under the Bankruptcy Code, holders of secured claims may under certain
circumstances make an election under Section 1111(b) of the Bankruptcy Code to
have such claims treated as secured claims only. If an election is made, the
First Mortgage Noteholders would give up their unsecured deficiency claim and
would be entitled to receive new notes from each of the Corporation, CPPI and
ACBA in a principal amount equal to their allowed claims for principal and
interest against each such Debtor. Such new notes must have deferred cash
payments having a net present value equal to the allowed amount of their secured
claim, i.e. the value of the collateral pledged be each such Debtor to the
Indenture Trustee. In the case of ACBA, the value would be the value of all the
assets of ACBA, including the Hotel Assets and any other property of ACBA in
which the Indenture Trustee has a lien or security interest for the benefit of
the First Mortgage Noteholders. In the case of CPPI, the value would be the
value of the assets of CPPI including the Self Parking Garage, gaming equipment,
inventory, accounts receivable, trademarks and all assets other than such cash,
if any, which the Court determines does not secure the Claims of the holders of
the First Mortgage Notes against CPPI. According to the Debtors, there was as of
March 31, 2000 approximately $16.9 million of cash held by the CPPI, divided
almost equally between "cage cash" and cash in bank accounts. The Indenture
Trustee maintains that in addition to CPPI's real and other personal property,
at a minimum, the claims of the Trustee and the holders of the First Mortgage
Notes are secured by $2.4 million of cash held in an account at First Union Bank
on the Filing Date plus all accrued interest earned thereon since the Filing
Date. (Summitt Bank, N.A. is also holding for the benefit of the Indenture
Trustee an additional $1.5 million in cash, plus accrued interest thereon, in
the AOB Escrow Account, which represents the initial cash component of the
purchase price paid by GBHC for the Administrative Office Building). It is
unclear what value would be placed on any note to be issued from the Reorganized
Corporation because under the Debtors' valuation of CPPI, the stock of CPPI
would be worthless. In each case the New Notes would be secured by a lien on all
of the Collateral which currently secures the First Mortgage Notes.
The foregoing is included as explanation only, because under Section
1111(b) the election must be made by holders of First Mortgage Notes
representing 66 2/3% in dollar amount of First Mortgage Note Claims and more
than one-half in number of such Claims. The Indenture Trustee has been advised
by counsel to High River Limited Partnership and American Real Estate Partners
(the "Icahn Entities"), two entities owned or controlled by Carl Icahn, that his
clients hold 37% in principal amount of the First Mortgage Claims and will not
make any election under Section 1111(b) of the Bankruptcy Code. Accordingly, the
right of all other holders to make such election in connection with the Plan has
been rendered moot.
In the case of the Corporation, one of Classes 3 and 4 must accept the
Plan. In the case of CPPI, one of Classes 3 and 5 must accept the Plan. In the
case of ACBA, one of Classes 3 and 7 must accept the Plan. Class 3 shall be
deemed to have voted in each of the Debtors' cases.
The Indenture Trustee maintains that the Claims in Class 8 are
improperly classified since they constitute unsecured claims in Classes 4, 5,
and 7 respectively and because these claims are either owned by the Indenture
Trustee (e.g., in the case of claims relating to the Operating leases) or are
claims pledged to the Trustee as its collateral. The Indenture Trustee further
maintains that if any or all such claims are treated as owned by the Debtors,
the vote of Class 8 may not provide the one impaired accepting class under
Section 1129(a)(10) for any of the Debtors because the Debtors are Insiders. In
the case of the claims of CPPI and the Corporation, CPPI is a wholly-owned
subsidiary of the Corporation and therefore each is an affiliate of the other,
and in the case of CPPI and ACBA, they are affiliates, since ACBA's business or
substantially all of its property is operated under the Operating Leases by
CPPI.
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Classification and Treatment of Claims and Interests Under The Plan
General
The Bankruptcy Code requires that a plan of reorganization classify the
claims of a debtor's creditors and the interests of its equity holders. The
Bankruptcy Code also provides that, except for certain claims classified for
administrative convenience, a plan of reorganization may place a claim or
interest of a creditor or equity holder in a particular class only if such claim
or interest is substantially similar to the other claims or interests of such
class.
Except to the extent that modification of classification in the Plan
adversely affects the treatment of a holder of a Claim and requires
resolicitation, acceptance of the Plan by any holder of a Claim pursuant to this
solicitation will be deemed to be a consent to the Plan's treatment of such
holder regardless of the class as to which such holder is ultimately deemed to
be a member.
The Bankruptcy Code also requires that a plan of reorganization provide
the same treatment for each claim or interest of a particular class unless the
holder of a particular claim or interest agrees to a less favorable treatment of
its claim or interest. The Debtors believe that they have complied with the
standard of 1122, equal treatment. The Indenture Trustee maintains that the
failure to provide the First Mortgage Noteholders with the same right to receive
cash for their undersecured claims and the failure to pay anything in respect of
the Noteholders' claims for accrued and/or unpaid interest on the First Mortgage
Notes unfairly discriminates against the deficiency claims of the First Mortgage
Noteholders. The Indenture Trustee alleges that the Plan cannot be confirmed
since the Plan violates Sections 1122, 1123(a)(4) and 510(a) of the Bankruptcy
Code, and does not meet the cramdown requirements of Section 1129(b). The
Debtors dispute this conclusion. To the extent that the Bankruptcy Court finds
that the Plan does not satisfy such standard, the Bankruptcy Court could deny
confirmation of the Plan if the creditors affected do not consent to the
treatment afforded them under the Plan.
Indenture Fees and Expense
The Indenture Trustee's fees and expenses to the extent they have not
been paid from adequate protection payments received by the Indenture Trustee
will be paid in full on the Effective Date to the extent such fees and expenses
have been approved by the Bankruptcy Court, to the extent such approval is
required. The Indenture Trustee has through March 7, 2000 paid fees and expenses
that were incurred through earlier dates of approximately $550,000 in these
chapter 11 cases and has incurred additional amounts which have not been billed
to date and expects to incur additional fees and expenses in the future. The
Indenture Trustee's claims for fees and expenses are secured by virtually all of
the assets of the Debtors. According to the Indenture Trustee, pursuant to the
First Mortgage Note Indenture and the Collateral Trust Agreement, the Indenture
Trustee is entitled to be paid its fees and expenses prior to any distribution
to the holders of the First Mortgage Notes and the First Mortgage Noteholders
agreed that the Indenture Trustee shall have a prior lien on the Collateral for
payment of its fees and expenses. Accordingly, the payments to the Indenture
Trustee of its fees and expenses pursuant to the cash collateral orders and
Stipulation from the adequate protection payments gives effect to such rights to
priority of payment and lien. In the event that the claims of the Indenture
Trustee for its fees and expenses are not paid in full it will assert its lien
rights against the distributions to be made to Noteholders in respect of the
Noteholder Claims pursuant to the Plan.
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Administrative Expense Claims
Administrative Expense Claims consist of the actual and necessary
expenses incurred during the Chapter 11 cases. Such expenses include costs
incurred in the operation of the Debtors' business after the commencement of
Chapter 11 cases, the actual, reasonable fees and expenses of professionals
retained by the Debtors and any committee appointed in the Chapter 11 cases,
postpetition taxes, if any, and certain other obligations arising after the
commencement of the Chapter 11 cases, including, with respect to ACBA, fees and
expenses to be incurred by it and its general partners in connection with the
dissolution or winding-up of ACBA's affairs following the Effective Date.
Assuming that neither significant litigation nor objections are filed with
respect to the Plan and assuming the Plan is confirmed on or around June 1,
2000, the Debtors estimate that the unpaid Administrative Expense Claims on the
Effective Date of professionals for the Debtors and any committee appointed
pursuant to Section 1102 of the Bankruptcy Code, will not exceed approximately
$2.5 million. Such amount also includes the statutory fees payable to the United
States Trustee, which the Debtors estimate should not exceed $50,000. The amount
of fees paid on the Effective Date will be reduced by any payments previously
made from retainers held by such professionals or court approved budgets in
accordance with court orders in the Debtors' cases.
Allowed Administrative Expense Claims (other than Claims for
compensation and reimbursement of expenses of professionals) will be paid in
full, in cash, on the Effective Date, or, if such Claim becomes Allowed after
the Effective Date, within five (5) days after such Claim becomes Allowed. Any
fees due and owing to the United States Trustee shall be paid in full on the
Effective Date, or as soon thereafter as practicable. All requests by
professionals for final allowance of compensation and reimbursement of expenses
accrued as of the Confirmation Date must be filed with the Bankruptcy Court
within sixty (60) days of the Confirmation Date and will be paid within five (5)
days after such Claims become Allowed. The estimated amount of unpaid fees and
expenses of professionals as of the Effective Date will be deposited by the
Debtors in one or more segregated accounts on the Confirmation Date. Such
escrowed funds shall be used to pay Allowed Administrative Expense Claims of
professionals and any funds remaining after making all such payments shall
revest in the Reorganized CPPI. The source of funding to satisfy Administrative
Expense Claims asserted against the Debtors' Estates shall be from cash on hand
as of the Effective Date.
Administrative Expense Claims of the Debtors arising in the ordinary
course of the operation of the Debtors' business, to the extent not due and
payable upon the Effective Date, shall be assumed by the Reorganized Claridge
Debtors to the same extent as the Debtors may have been liable or responsible
for such obligations prior to the Effective Date and shall be satisfied by the
Reorganized Claridge Debtors as and when such Claims become due and payable in
accordance with their terms.
The Indenture Trustee asserts that payments under the Operating Leases
are administrative claims and that accordingly all funds held in the Escrow
Account are entitled to be distributed to the Noteholders in respect of their
claims, in addition to $1.5 million being held by the Summitt Bank, N.A., for
the benefit of Indenture Trustee which represents the initial cash purchase
price paid by GBHC for the Administrative Office Building. The Indenture Trustee
is also holding funds pursuant to the Stipulation which includes payments under
the Operating Leases that after payment of all amounts required under the
Stipulation are entitled to be distributed to the Noteholders unless the holders
of First Mortgage Notes as a Class vote to accept the Plan, since the Plan
provides for a different treatment. In addition, certain other monies owed by
CPPI to ACBA and pledged to the Trustee may be entitled to administrative
expense treatment. The Indenture Trustee maintains that it may have additional
Administrative Expense Claims against the Debtors to the extent that it was not
adequately protected under any of the Cash Collateral Orders in any of the
cases.
Priority Tax Claims
A Priority Tax Claim is any Claim against the Debtors of the type
specified in Section 507(a)(8) of the Bankruptcy Code. These Claims consist of
certain unsecured Claims of governmental units for taxes. The Claridge Debtors
estimate that Allowed Priority Tax Claims were $80,000, in the aggregate, as of
the Filing Date.
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At the option of the Claridge Debtors, each holder of an Allowed
Priority Tax Claim asserted against the Claridge Debtors arising in the ordinary
course of the Claridge Debtors' Chapter 11 Cases shall be paid the full amount
of such Allowed Priority Tax Claim, (a) in cash, on the later of (i) the
Effective Date (or as soon thereafter as is practicable) or (ii) the first
Business Day after such Claim becomes an Allowed Claim (or as soon thereafter as
is practicable); or (b) in equal quarterly installments of principal and
interest at the applicable legal rate over a period not to exceed six (6) years
from the date of assessment of such Priority Tax Claim. The Debtors estimate
that Priority Tax Claims were approximately $80,000, in the aggregate, as of the
Filing Date.
Class 1 -- Priority Claims
Class 1 consists of all Claims arising on or prior to the Filing Date
which are entitled to priority status in accordance with Section 507(a) of the
Bankruptcy Code, other than Administrative Expense Claims and Priority Tax
Claims.
Each holder of an Allowed Priority Claim shall be paid the Allowed
amount of such Claim, including all applicable interest and other charges to
which the Holder of such Allowed Priority Claim may be entitled under applicable
law or contract, to the extent permitted under the applicable provision of
section 507(a), in cash, on the later of: (a) the Effective Date (or as soon
thereafter as is practicable) and (b) the first Business Day after such Claim
becomes an Allowed Claim (or as soon thereafter as is practicable). Based upon
current information, the Debtors do not believe that there are any holders of
Allowed Priority Claims in Class 1.
Class 2 -- Miscellaneous Secured Claims
Class 2 consists of all Miscellaneous Secured Claims under Section
506(a) of the Bankruptcy Code. Miscellaneous Secured Claims include, but are not
limited to, properly perfected slot machine, automobile and other equipment
capital leases and other claims secured by purchase money security interests.
The Debtors estimate that Miscellaneous Secured Claims were approximately
$400,000, in the aggregate, as of the Filing Date.
Each of an Allowed Miscellaneous Secured Claim shall receive, at the
sole option of the Reorganized CPPI, (a) the unaltered legal, equitable and
contractual rights to which the Miscellaneous Secured Claim entitles the holder
of such Claim, (b) such other treatment that will render such Miscellaneous
Secured Claim unimpaired under section 1124 of the Bankruptcy Code, (c) the
transfer and surrender of all collateral securing such Claim to such holder,
without representation or warranty by or recourse against any Debtor, or (d)
will be treated in accordance with an agreement between the Debtors and the
Holder of such Claim. In the event that the treatment provided in subparagraphs
(a), (b) or (c) above results in payment to such holder of less than the Allowed
amount of its Claim, it shall be entitled to assert a General Unsecured Claim
against the Debtors that it remains liable thereon for any deficiency. Class 2
is not impaired.
Class 3 -- First Mortgage Note Claims
Class 3 consists of all Claims against the Debtors under the CPPI
Guaranty, the First Mortgage, the First Mortgage Notes Indenture, the First
Mortgage Notes or the Security Document. The First Mortgage Note Claims are
secured to the extent of the value of the collateral securing the First Mortgage
Notes. The Claridge Debtors estimate that the principal amount of the First
Mortgage Note Claims was approximately $90,500,000 (including accrued interest
of $5,500,000), in the aggregate, as of the Filing Date. No payment will be made
to any Noteholders in respect of any accrued and/or unpaid interest on the First
Mortgage Note Claims. Class 3 is impaired.
On the Effective Date, the First Mortgage Notes Indenture and related
security documents will be terminated, the First Mortgage Notes will be
cancelled, and holders of First Mortgage Notes will be entitled to receive a pro
rata amount of 100% of the common stock of the Reorganized Corporation (the "New
Common Stock"). In addition, in the event holders of Allowed Class 3 Claims, as
a class, vote to accept the Plan, each holder of First Mortgage Notes shall
receive a pro rata and pari passu distribution of the New Notes. "New Notes"
means the Reorganized Corporation's 8% Secured Notes due 2010, in the principal
amount of $15,000,000 which are to be guaranteed by the Reorganized CPPI and
will be secured by a first lien and security interest in the New Notes
Collateral pursuant to new security
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documents. Significantly, you should be aware that the New Notes Collateral, as
defined in the Plan, does not include the Administrative Office Building which
was previously sold by ACBA to GBHC pursuant to an order approved by the
Bankruptcy Court. However, the Debtors believe that the value of the New Notes
Collateral substantially exceeds the aggregate face amount of the New Notes to
be issued under the Plan. See " -- Description of New Notes." Issuance of the
New Common Stock and New Notes is subject to certain regulatory approvals. See
"-- Regulatory Condition."
Holders of First Mortgage Notes should also be aware that, upon the
Effective Date, the Reorganized Corporation shall issue warrants to Reorganized
CPPI's officers, to whom and in such amount as the Corporation on or prior to
the Effective Date shall determine is appropriate, all without any further order
from the Bankruptcy Court. The warrants shall have an exercise price to be
determined prior to the Effective Date equal to a proportionate share of the
enterprise value of the Reorganized Corporation on the Confirmation Date, which
calculation will take into account, among other things, whether the New Notes
will be issued under the Plan. The Warrants cannot be exercised until one (1)
year from the Effective Date but must be exercised within five (5) years from
the Effective Date. If exercised, the holders of the warrants shall own 5% of
the New Common Stock, on a fully diluted basis.
You should be aware that in the event the Plan is not accepted by
holders of Allowed Class 3 Claims, as a class, holders of Allowed Class 3 Claims
will not receive the New Notes but only the New Common Stock. In addition, the
Debtors will seek to confirm the Plan pursuant to Section 1129(b) of the
Bankruptcy Code. You should also be aware that the Plan provides that all of the
ownership interests in the Reorganized Corporation will be transferred to the
holders of the First Mortgage Notes in full satisfaction thereof. Because of
this treatment, the Debtors assert that the holders of the First Mortgage Notes
will not have any deficiency claim against the Debtors to the extent the value
of the Reorganized Corporation is less than the amount of indebtedness owed by
the Debtors to the holders of the First Mortgage Notes. The Indenture Trustee
disputes the Debtors' position and maintains that if the Noteholders vote as a
class to reject the Plan, the Noteholders will be entitled to receive in respect
of their secured claims new notes, secured by the same liens as the First
Mortgage Notes (other than the Administrative Office Building which has been
sold by ACBA pursuant to an order approved in these chapter 11 cases by the
Bankruptcy Court) having a principal amount equal to the value of their secured
claims. While the Debtors claims that the liquidation value of the Debtors'
assets (other than cash) taken as a whole is at least $27 million, the Indenture
Trustee maintains the amount of its secured claims would be at least the
Debtors' enterprise value of between $52 and $60 million less the amount of
unencumbered cash. Based on the advice of its financial advisor the Indenture
Trustee believes it will be able to prove that the Debtor's enterprise value
exceeds $52-60 million. Accordingly, assuming arguendo that the Trustee did not
have a lien on the Debtor's cash, the Trustee's secured claim, even based on the
Debtor's enterprise value, would be between $36 million to $44 million. In
addition, in the Indenture Trustee's opinion the Noteholders' unsecured
deficiency claims would be entitled to share ratably in the $5.5 million in cash
available to pay unsecured creditors of the Debtors and to receive their ratable
share of 100% of the common stock of the Reorganized Debtors.
For illustration purposes only, if the value of the Indenture Trustee's
secured claim against CPPI alone were $45 million then it would be entitled to a
deficiency claim of over $45 million against CPPI or approximately 90% of such
unsecured claims. If the value of the collateral that secures the Noteholders'
claims against each Debtor were less, the recovery to the Noteholders on their
unsecured deficiency claims as a percentage of all unsecured claims against such
Debtor would be greater. If the value of the collateral that secures the
Noteholders' claims were greater, the Noteholders would receive a greater
principal amount of New Notes and a smaller percentage of New Common Stock, if
all unsecured credits shared in such New Common stock ratably.
The Indenture Trustee further maintains that it is entitled to a
separate deficiency claim against each Debtor since none of the cases has been
substantively consolidated. The Debtors dispute this assertion.
In the alternative, the Debtors believe that even if the holders of the
First Mortgage Notes, because of 11 U.S.C. ss. 1111, were to have a deficiency
claim, legitimate and valid legal and factual bases exist to separately classify
any such deficiency claim, to the extent holders of such claim would have
recourse against the Debtors' unencumbered
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assets, separate and apart from claims classified in Classes 4, 5, 6 and 7 of
the Plan. By voting to accept the Plan, holders of Class 3 Claims, as a class,
will be deemed to waive any right to assert that they have a deficiency claim
which should share in distributions pro rata and pari passu with the Debtors'
other unsecured creditors. The Indenture Trustee disputes that the deficiency
claims of the First Mortgage Noteholders can be separately classified from other
unsecured claims. The Indenture Trustee has further asserted claims on behalf of
the Noteholders in respect of the Operating Leases, the Wraparound Note and FF&E
Notes and certain accounts receivable owing by CPPI to ACBA and ACBA to CPPI
that are pledged to the Indenture Trustee by ACBA and CPPI under the Partnership
Security Agreement and CPPI Security Agreement respectively. If holders of Class
3 Claims, as a class, vote to reject the Plan, the Debtors believe that the
treatment afforded holders of Allowed Class 3 Claims satisfies the cram-down
requirements under 11 U.S.C. ss. 1129(b) and that holders of Allowed Class 3
Claim will not be entitled to any distribution other than a pro rata and pari
passu distribution of the New Common Stock outstanding on the Effective Date.
The Indenture Trustee maintains that in a "cramdown" of the Noteholders' claims
the Noteholders will be entitled to new notes that far exceed the $15 million in
principal amount of New Notes proposed by the Debtors. Moreover, the Indenture
Trustee also maintains that the New Notes must be secured by all the collateral
that currently secures the First Mortgage Notes, with the balance of their
unsecured deficiency claims payable in cash and common stock of the Reorganized
Debtors. The Debtors dispute this position.
Noteholders should also be aware that the Indenture Trustee has been
advised by counsel to High River Limited Partnership and American Real Estate
Partners two entities owned or controlled by Carl C. Icahn that his clients
together hold approximately 37%, in aggregate principal amount of the First
Mortgage Notes outstanding and that such holders will not make an election under
Section 1111(b) of the Bankruptcy Code to have the outstanding balance owed by
each of the Debtors under the First Mortgage Notes be treated as if it were
fully secured. Because these two (2) entities control over 1/3 of the
outstanding amount of the First Mortgage Notes, no Section 1111(b) of the
Bankruptcy Code can be made with respect to the First Mortgage Notes.
You should also be aware that it is the Debtors' position that, because
the Debtors' Assets upon which the holders of the First Mortgage Notes asserted
a lien will be transferred to the holders of the First Mortgage Notes under the
Plan through the vesting of 100% of the ownership interests in the Reorganized
Corporation in such holders, holders of the First Mortgage Notes will not be
able to assert any deficiency claim against the Debtors or their unencumbered
Assets. In particular, Section 1111(b)(1)(A) of the Bankruptcy Code provides
that a claim which is otherwise non- recourse against a debtor is treated as
having recourse against a debtor's unencumbered assets unless, among other
things, the property securing such creditors' claim is sold under the Plan. The
Debtors assert that the transfer of New Common Stock to the holders of the First
Mortgage Notes constitutes a "sale under the Plan" as that provision has been
interpreted by other bankruptcy courts. The Indenture Trustee disputes this
position. If Class 3, as a class, votes to accept the Plan, you should be aware
that holders of Class 3 Claims will be deemed to have waived any deficiency
claim. Whether the Debtors' interpretation of the phrase "sale under the Plan"
is correct will become germane, in the Debtors' view, if the holders of Allowed
Class 3 Claims, as a class, vote to reject the Plan. In that event, the
Bankruptcy Court will be asked to decide that issue. The Debtors believe that
other legal and factual bases exist to separately classify any deficiency claim
should one exist, asserted by the holders of the First Mortgage Notes from the
claims of other unsecured creditors. The Indenture Trustee disputes that
position. You should consult your legal advisor or the Indenture Trustee
directly if you are unsure of your legal rights, including how your recovery
could be impacted if, as a holder of a First Mortgage Note, you were entitled to
assert a deficiency claim against the Debtors.
Class 4 -- General Corporation Claims
Class 4 consists of all unsecured Claims against the Corporation
arising on or prior to the Filing Date other than Administrative Expense Claims,
Priority Tax Claims, Priority Claims, First Mortgage Note Claims, and
Intercompany Claims. General Corporation Claims consist of trade obligations and
miscellaneous unsecured Claims against the Corporation other than Claims that
holders of General Corporation Claims elect to treat as a Class 6 Convenience
Claim. The Debtors estimate that General Corporation Claims were approximately
$1,000, in the aggregate, as of the Filing Date.
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Each Holder of an Allowed General Corporation Claim shall receive one
hundred percent (100%) of such holder's Claim, without interest, payable in six
(6) equal, annual installments over five (5) years commencing upon the Effective
Date. The balance of any amount owed to the holders of Allowed General
Corporation Claims can be paid in full at any time by the Reorganized
Corporation without penalty. The General Corporation Claims will continue to be
unsecured. Class 4 is impaired. The Indenture Trustee maintains that to the
extent that the definition of General Corporation Claims fails to include the
unsecured deficiency claim of the holders of the First Mortgage Notes, the Plan
unfairly discriminates against the holders of the First Mortgage Notes since
other creditors of the Corporation will receive up to 100% of their unsecured
claims in cash while the Noteholders will receive nothing for their unsecured
deficiency claims and improperly classifies the unsecured deficiency claims of
the holders of the First Mortgage Notes against the Corporation.
The Plan caps the maximum amount of the unsecured claims classified by
the Debtors under the Plan in Classes 4, 5 and 7 which the Reorganized Claridge
Debtors will be assuming at the Maximum Unsecured Claim Limit. The Debtors
project that the aggregate amount of Allowed Claims in Classes 4, 5 and 7 will
be less than the Maximum Unsecured Claim Limit. However, the claims resolution
process has not yet concluded and it is possible that the aggregate amount of
such claims may exceed the Maximum Unsecured Claim Limit. You should be aware
that if the aggregate amount of Allowed Claims in Classes 4, 5 and 7 exceed the
Maximum Unsecured Claim Limit holders of such claims may receive less than 100%
upon their Allowed Claims. The Reorganized Claridge Debtors shall covenant and
agree that the balance of any amount then outstanding and owed to holders of
Class 4, 5 and 7 Allowed Claims shall be satisfied in full upon a sale of
substantially all of the New Notes Collateral or, to the extent issued under the
Plan, a refinance and payment in full of the New Notes.
Class 5 -- General CPPI Claims
Class 5 consists of all General CPPI Claims. General CPPI Claims
consist of trade obligations and miscellaneous unsecured Claims against CPPI and
other Claims that holders thereof elect to treat as a class 6.
In the aggregate, the Claridge Debtors estimate that General CPPI
Claims, other than claims attached by certain personal injury and casualty
claimants, equals less than $4.5 million as of the Filing Date. Of this amount,
the IRS has asserted a Claim of approximately $533,000 relating to certain
Claims arising under a settlement agreement entered into regarding payment of
1990 and 1991 taxes and the National Labor Relations Board has asserted a claim
of $49,000. In addition, certain individuals as of the Filing Date have asserted
Claims against CPPI relating to personal injuries and property casualty they
allegedly may have sustained during visits to the Casino. Based upon a review of
its books and records, the aggregate amount of such asserted Claims, not
otherwise covered by applicable insurance, is approximately $1.1 million. Unless
compromised and allowed by order of the Bankruptcy Court, all such Claims will
be deemed disputed as of the Effective Date and shall receive distribution when
and to the extent provided in the Plan.
Each holder of an Allowed General CPPI Claim shall receive one hundred
percent (100%) of such holder's claim, without interest, payable in six (6)
equal, annual installments over five (5) years commencing upon the Effective
Date. The balance of any amount owed to the holders of Allowed General CPPI
Claims can be paid in full at any time by the Reorganized CPPI, without penalty.
The Reorganized Claridge Debtors shall covenant and agree that the balance of
any amount then outstanding and owed to holders of Class 4, 5 and 7 Allowed
Claims shall be satisfied in full upon a sale of substantially all of the New
Notes Collateral or, to the extent issued under the Plan, a refinance and
payment in full of the New Notes. Class 5 is impaired.
The Plan caps the maximum amount of the unsecured claims classified by
the Debtors under the Plan in Classes 4, 5 and 7 which the Reorganized Claridge
Debtors will be assuming at the Maximum Unsecured Claim Limit. The Debtors
project that the aggregate amount of Allowed Claims in Classes 4, 5 and 7 will
be less than the Maximum Unsecured Claim Limit. However, the claims resolution
process has not yet concluded and it is possible that the aggregate amount of
such claims may exceed the Maximum Unsecured Claim Limit. You should be aware
that if the aggregate amount of Allowed Claims in Classes 4, 5 and 7 exceed the
Maximum Unsecured Claim Limit holders of such claims may receive less than 100%
upon their Allowed Claims.
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The Indenture Trustee maintains that to the extent the General CPPI
Claims fail to include the unsecured deficiency claim of the holders of the
First Mortgage Notes, the Plan unfairly discriminates against the holders of the
First Mortgage Notes and improperly classifies the unsecured deficiency claims
of the holders of the First Mortgage Notes against CPPI. The Debtors dispute
this assertion.
Class 6 -- Convenience Class Claims
Class 6 consists of an allowed Class 4, 5 or 7 Claim (i) whose Allowed
Claim is equal to $2,500 or less; or (ii) whose Claim exceeds $2,500 provided
that such Holder elects upon the Ballot to be treated as such and meets certain
eligibility requirements. Only those Class 4 Claims, Class 5 Claims or Class 7
Claims Creditors that meet the following eligibility requirement shall be
permitted to be Class 6 Creditors: (i) those holders of Allowed Class 4 Claims,
Class 5 Claims or Class 7 Claims whose claim is $2,500 or less; or (ii) those
holders of Allowed Class 4 Claims, Class 5 Claims or Class 7 Claims that elect
to reduce voluntarily the amount of such creditor's claim to $2,500 upon the
holders' Ballot.
As an alternative treatment to certain holders of Allowed Class 4
Claims, Class 5 Claims or Class 7 Claims that meet the eligibility requirement
set forth herein, each holder of an Allowed Claim shall receive cash in an
amount equal to 100% of such Allowed Claim on the later of the Effective Date
and the date such Claim becomes an Allowed Claim, or as soon thereafter as is
practicable.
Due to the voluntary election to be treated as a Class 6 Creditor,
holders of Allowed Class 6 Claims shall be unimpaired under the Plan. The
holders of Allowed Claims in Class 6 are presumed to accept the Plan and are not
entitled to vote to accept or reject the Plan. By checking the appropriate box
on a timely cast Ballot, the holder of a Allowed Class 4 Claim, an Allowed Class
5 Claim or Class 7 Claim in an amount greater than $2,500 may elect to reduce
the amount of such holder's Allowed Claim to $2,500 and to receive a
distribution upon such Allowed Class 6 Claim shall thereby be deemed to waive
and release Corporation or CPPI, as the case may be, and their Estates and their
property from any and all liability for such excess amount. The holder of an
Allowed Claim which timely elects to reduce the amount of its Allowed Claim
shall be deemed to be the holder of an Allowed Class 6 Claim for classification,
voting and all other purposes under the Plan. The total amount of claims in
Class 4, 5 or 7 whose Allowed Claims are $2,500 or less is estimated to be
$200,000 and comprise almost 75% of all holders of Allowed Class 4, 5 and 7
claims.
Class 7 -- General ACBA Claims
Class 7 consists of all General ACBA Claims. ACBA estimates that
General ACBA Claims were $0 as of the Filing Date and that it was current with,
and had satisfied in full, all Claims held by trade and other unsecured
creditors.
Each holder of an Allowed General ACBA Claim shall receive one hundred
percent (100%) of such holder's claim, without interest, payable in six (6)
equal, annual installments over five (5) years commencing upon the Effective
Date. The balance of any amount owed to the holders of Allowed General ACBA
Claims can be paid in full at any time by the Reorganized CPPI, without penalty.
The Reorganized Claridge Debtors shall covenant and agree that the balance of
any amount then outstanding and owed to holders of Class 4, 5 and 7 Allowed
Claims shall be satisfied in full upon a sale of substantially all of the New
Notes Collateral or, to the extent issued under the Plan, a refinance and
payment in full of the New Notes. Class 7 is impaired.
The Plan caps the maximum amount of the unsecured claims classified
under the Plan in Classes 4, 5 and 7 which the Reorganized Claridge Debtors will
be assuming at the Maximum Unsecured Claim Limit. The Debtors project that the
aggregate amount of Allowed Claims in Classes 4, 5 and 7 will be less than the
Maximum Unsecured Claim Limit. However, the claims resolution process has not
yet concluded and it is possible that the aggregate amount of such claims may
exceed the Maximum Unsecured Claim Limit. You should be aware that if the
aggregate amount of Allowed Claims in Classes 4, 5 and 7 exceed the Maximum
Unsecured Claim Limit holders of such claims may receive less than 100% upon
their Allowed Claims.
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The Indenture Trustee maintains that since ACBA has no assets that are
unencumbered by the lien of the Indenture Trustee for the benefit of itself and
the holders of the First Mortgage Notes (and therefore has no available assets
to pay the claims of ACBA's unsecured creditors), no amount may be paid in
respect of the General ACBA Claims. The Indenture Trustee maintains that the
Plan unfairly discriminates against such claim of the holders of the First
Mortgage Notes and improperly classifies the unsecured deficiency claims of the
holders of the First Mortgage Notes. The Indenture Trustee further maintains
that the Plan further unfairly discriminates by the assumption by CPPI of the
indemnification claims of ACBA's general and limited partners.
Class 8 -- Intercompany Claims
Class 8 consists of all Intercompany Claims. Allowed Intercompany
Claims shall be satisfied in full as follows: On the Effective Date, ACBA will
sell, transfer, convey and assign, without recourse, all of its right, title and
interest in and to its assets, including, without limitation, the Hotel Assets,
to the Reorganized CPPI free and clear of any liens, claims, encumbrances or
interests other than the lien asserted by holders of Allowed Class 2 Claims or
on behalf of the holders of the First Mortgage Notes, in full, complete and
final satisfaction of the Reorganized CPPI's Claims against ACBA, including
those evidenced by the Wraparound Note, the Expansion Wraparound Note and the
FF&E Notes and any other obligations of ACBA to CPPI, in proportion to the
unpaid balances of such obligations. The Indenture Trustee maintains that, for
the reasons stated above, the transfer of the Hotel Assets to CPPI violates the
absolute priority rule; the terms of the Subordination Agreement and Section
510(a) of the Bankruptcy Code, and is without consideration. In the Indenture
Trustee's opinion, the Hotel Assets must first be transferred to the Indenture
Trustee in satisfaction of the First Mortgage. The Plan also provides that the
Operating Lease and the Expansion Operating Lease shall terminate without
liability. The Indenture Trustee maintains that the Operating Leases may not be
terminated without its consent. All other Intercompany Claims between and among
the Debtors shall be waived, released and extinguished. The Indenture Trustee
maintains that no Intercompany Claims may be waived, released or extinguished
without its consent because they are in almost all cases either the Indenture
Trustee's property or its collateral. The Indenture Trustee further maintains
that if the Debtors vote such claims, Class 8 may not be the only class that
accepts the Plan, since under Section 1129(a)(10) at least one impaired class
must accept the Plan without including any acceptance of the Plan by any
Insider. Claims of CPPI against the Corporation shall be assumed by the
Reorganized Corporation and shall not be affected, modified or altered by the
Plan, except that such Claims shall be subordinate, in all respects, to Claims
asserted against the Corporation as of the Effective Date, including those
Claims in Class 4. The Reorganized Claridge Debtors shall assume all Claims
against ACBA (i) asserted by any Person other than a general or limited partner;
and (ii) asserted by a general or limited partner of ACBA based upon
indemnification or contribution. On the Effective Date, all general and limited
partners of ACBA shall be deemed to have released and waived, and ACBA shall
have no obligation with respect to, any Claims held by a general partner or a
limited partner against (i) a general or limited partner of ACBA; and (ii) ACBA,
other than with respect to any indemnification or contribution right relating to
Claims asserted against ACBA by an entity other than a general or limited
partner of ACBA. The Reorganized Claridge Debtors shall also assume the expense
and cost (but not any underlying tax liability owed by an ACBA general partner
or a limited partner) related to any tax inquiry, audit or appeal of any tax
liability of a general partner or ACBA. The Indenture Trustee maintains that any
claims against ACBA asserted by a general or limited partner of ACBA based upon
indemnification or contribution are either contingent claims which shall be
extinguished on the Effective Date or, if liquidated, should be equitably
subordinated to the claims of all other creditors, including the secured and
unsecured claims of the holders of the First Mortgage Notes. The Indenture
Trustee maintains that the Plan unfairly discriminates by the assumption by the
Reorganized Claridge Debtors of such claims.
Class 9 -- Contingent Payment Right Claims
Class 9 consists of all Allowed Contingent Payment Right Claims. The
Debtors estimate that Contingent Payment Right Interest Claims were
approximately $69.4 million, in the aggregate, as of the Filing Date. These
claims are held by Releasing Investors.
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On the Effective Date, all Allowed Contingent Payment Right Claims
shall be extinguished and no distribution will be made in respect of such
Allowed Contingent Payment Right Claims. Class 9 is impaired.
Class 10 -- Contingent Payment Claims
Class 10 consists of all Allowed Contingent Payment Claims. The Debtors
estimate that Contingent Payment Rights Claims were approximately $96.9 million,
in the aggregate, as of the Filing Date.
On the Effective Date, all Allowed Contingent Payment Claims shall be
extinguished and no distributions will be made in respect of such Allowed
Contingent Payment Claims, including any Allowed Claims arising out of or in
connection with the Debtors' rejection of the Restructuring Agreement. Class 10
is impaired.
Class 11 -- Corporation Interests
Class 11 consists of all Corporation Interests. On the Effective Date,
all Corporation Interests will be extinguished and no distributions will be made
to the holders of Corporation Interests. Class 11 is impaired.
Class 12 -- CPPI Interests
Class 12 consists of all CPPI Interests. On the Effective Date, the
Corporation will continue to own 100% of the CPPI Interests, which will revest
free and clear of any liens, claims, interests or encumbrances. Class 12 is
unimpaired. To the extent holders of Class 3, as a class, vote to reject the
Plan, the Indenture Trustee has indicated that it will argue that such retention
by Corporation of its interest in CPPI violates the absolute priority rule. The
Debtors dispute that position.
Class 13 -- ACBA Interests
Class 13 consists of all ACBA Interests. On the Effective Date, the
ACBA Interests shall be extinguished and cancelled. Class 13 is impaired.
Description of New Notes
The Reorganized Corporation will issue the New Notes only in the event
holders of Allowed Class 3 Claims vote, as a class, to accept the Plan. The New
Notes will be in a principal amount of $15 million. The New Notes will be
unconditionally guaranteed by the Reorganized CPPI. The Reorganized Claridge
Debtors will use their best efforts to cause the New Notes to be listed on a
national securities exchange. The New Notes trustee will be identified at or
prior to the Confirmation Hearing.
The New Notes will bear interest at the rate of 8% per annum, payable
semiannually to holders of record, beginning six (6) months after Effective
Date. The unpaid principal balance and all accrued interest on the New Notes
shall be due and payable in full ten (10) years after the Effective Date.
The New Notes will be secured by new security documents granting a
valid and perfected first lien on the New Notes Collateral including, but not
limited to, a first mortgage on all of the real property owned by the
Reorganized CPPI. You should be aware, however, that the New Notes Collateral,
as defined under the Plan, do not include the Administrative Office Building
which, as discussed, supra, was sold during these chapter 11 cases to GBHC
pursuant to an order entered April 5, 2000 by the Bankruptcy Court. The Debtors
believe that the value of the New Notes Collateral far exceeds the face amount
of the New Notes.
The New Notes indenture will contain covenants:
(i) requiring the Reorganized Corporation to, and to cause Reorganized
CPPI to, (a) maintain its existence and properties, (b) pay its material
obligations and taxes, (c) comply with applicable laws and licenses and (d)
deliver to the New Notes trustee annual and quarterly reports; and
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(ii) requiring the Reorganized Corporation not to, and to cause the
Reorganized CPPI not to, (a) create any liens on, or take any action to impair
the value of or the Noteholder's security interest in, the collateral for the
New Notes, (b) enter into mergers, consolidations or other material business
combinations with third parties, (c) enter into transactions with affiliates
unless such transactions are as favorable as an arms-length transaction, (d)
make a material change in its business as a whole or (e) allow any subsidiary to
enter into an agreement restricting its ability to pay dividends.
The covenants in the New Notes Indenture are substantially less
restrictive than those in the First Mortgage Notes Indenture and Security
Documents and therefore the New Notes will not have the same protections as the
First Mortgage Notes. There will not be restrictions on the payment of
dividends, additional indebtedness, liens and encumbrances, or affiliate
transactions. In addition, the Debtors will be able to incur additional
indebtedness and encumber certain of their assets with additional liens to
secure such indebtedness, including but not limited to liens on the New Notes
Collateral. Such additional indebtedness may adversely affect the Debtor's
ability to pay principal and interest payments on the New Notes. If the value of
the collateral securing the New Notes is less than the amount of New Notes
claims against each of the Debtors, any new indebtedness will share ratably with
any undersecured deficiency claim of the holders of the New Notes in any
unencumbered assets. In addition, to the extent that any indebtedness is
encumbered by liens on any unencumbered assets such other debt would have to be
paid from such assets before any recovery on any deficiency claim on the New
Notes and before any recovery on the New Common Stock of the Reorganized
Corporation. You should also be aware that the Indenture Trustee has asserted
that the New Common Stock of the Reorganized Corporation may decrease in value
to the extent that new debt is incurred. In addition, the Debtors may be able to
pay dividends on and make distributions on the New Common Stock even if the New
Notes are in default. The Reorganized Corporation may make rights offerings that
may have the effect of diluting the ownership percentage of the holders of the
New Common Stock. The Reorganized Debtors may be able to enter into transactions
with affiliates on other than an arm's length basis, which could also impact the
value of any New Notes and of the New Common Stock. To the extent you have any
questions regarding your right as a New Note Holder or a New Common Stockholder
you should consult your own legal advisor.
A draft of the New Notes indenture will be filed with the Bankruptcy
Court as soon as practicable, but no later than three (3) days after the date
the Disclosure Statement has been approved.
Regulatory Condition
The Debtors are not obligated to deliver New Common Stock and New Notes
to members of class 3 until and unless all Regulatory Conditions to issuance of
such New Common Stock and New Notes either have been satisfied, waived, or are
not applicable to a particular holder of First Mortgage Notes.
In particular, the New Jersey Casino Control Act ("NJCCA") imposes
certain restrictions upon the ownership of securities issued by a corporation
that holds a casino license or is a holding company of a corporate licensee. The
securities governed by the NJCCA include both equity and debt. Among other
restrictions, the sale, assignment, transfer, pledge or other disposition of any
security issued by a corporate licensee or holding company is subject to the
regulation of the NJCCC. In the case of corporate holding companies whose stock
is publicly traded, the NJCCC may require divestiture of the security held by a
disqualified holder such as an officer, director, or controlling stockholder who
is required to be qualified under the NJCCA.
All holders of the securities of nonpublicly traded casino licensees
such as CPPI must submit to NJCCC qualification. Only certain holders of
securities of publicly traded holding companies of casino licensees such as the
Corporation must typically submit to NJCCC qualification. Security holders of
publicly traded holding or intermediary companies who do not have the ability to
control the publicly traded corporation or elect one or more directors thereof
are not typically required to qualify. Holders with 5% or less of equity
securities of publicly traded holding or intermediary companies are
presumptively exempt from qualification. Qualification requirements for holders
of any percentage of securities may also be waived by the NJCCC, with the
concurrence of the Director of the New Jersey Division of Gaming Enforcement
("NJDGE"), upon a showing that such holder is not significantly involved in the
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activities of the corporate licensee and does not have the ability to control
the publicly traded corporation or elect one or more directors thereof. If an
investor is an "Institutional Investor" such as a retirement fund for
governmental employees, a registered investment company or adviser, a collective
investment trust, or an insurance company, in the absence of a prima facie
showing by the NJDGE that the "Institutional Investor" may be found unqualified,
the NJCCC may grant a waiver of this qualification requirement if the investor
will own (i) less than 10% of the common stock of the company in question on a
fully diluted basis, (ii) less than 20% of such company's outstanding
indebtedness or (iii) less than 50% of any outstanding issue of indebtedness of
such company, subject to the limitation in (ii) of this paragraph and subject to
certification that the Institutional Investor has no intention of influencing or
affecting the affairs of the issuer, the casino licensee, or its holding or
intermediary companies; provided, however, that it shall be permitted to vote on
matters put to the vote of the outstanding security holders. These waiver
criteria also apply to Institutional Investor security holders of other
subsidiaries of the casino licensee's holding or intermediary companies which
are related in any way to the financing of the casino licensee; the NJCCC may,
in its sole discretion, grant a waiver of qualification to an "Institutional
Investor" holding a higher percentage of such securities upon a showing of good
cause and if the conditions specified above are met.
The NJCCA provides that a holder that is not qualified shall not be
permitted to exercise the rights or receive the benefits possessed of a debt
holder and that the NJCCC may take any necessary action to protect the public
interest, including the suspension or revocation of the casino license. However,
the Debtors believe that since the NJCCC has the power to prevent a holder that
is not qualified from exercising rights or receiving benefits as a debt holder,
suspension or revocation of the casino license would be unlikely.
Each holder of the New Notes and New Common Stock and its directors,
officers, employees and affiliates are required to cooperate with the NJCCC and
the NJDGE and to provide to the NJCCC and the NJDGE, upon request, all relevant
information and documentation required of the holder and each of them.
The Debtors are required to disclose to the NJCCC all proposed holders
of New Common Stock and New Notes. The Debtors believe that it is likely that
the NJCCC will require the identification of beneficial holders of New Notes and
the extent of their holdings in order to determine whether the beneficial
holders will be required to qualify or will be granted a waiver of
qualifications. The Debtors may provide the NJCCC with the information set forth
on ballots executed by beneficial holders to allow the NJCCC to make the
necessary determination. The Debtors may also apply to the Bankruptcy Court to
compel registered holders of First Mortgage Notes to make disclosure as to
beneficial holders. The NJCCC shall then make the necessary determinations as to
whether Regulatory Conditions apply to each proposed holder. Upon a
determination by the NJCCC as to the restrictions, if any, on distributions of
New Common Stock and New Notes, the Debtors shall act, or cause their nominee to
act, accordingly.
Summary of Other Provisions of the Plan
Executory Contracts and Unexpired Leases
Subject to the approval of the Bankruptcy Court, the Bankruptcy Code
empowers a debtor in possession to assume or reject executory contracts and
unexpired leases. Generally, an "executory contract" is a contract under which
material performance is due from both parties. If an executory contract or
unexpired lease is rejected by a debtor in possession, the other party to the
agreement may file a claim for damages incurred by reason of the rejection,
which claim is treated as a pre-Filing Date Claim. If an executory contract or
unexpired lease is assumed by a debtor in possession, the debtor in possession
has the obligation to perform its obligations thereunder in accordance with the
terms of such agreement and failure to perform such obligations would result in
a claim for damages which may be entitled to Administrative Expense status.
On the Effective Date, all executory contracts and unexpired leases
that exist between the Debtors and any Person are hereby rejected, except for
any executory contracts and unexpired leases that have been specifically assumed
by the Debtors with the approval of the Bankruptcy Court on or before the
Effective Date or in respect of which a motion for rejection has been filed on
or before the Effective Date.
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On the Effective Date, (i) CPPI and ACBA will reject the Operating
Lease and the Expansion Operating Lease, and (ii) ACBA and the Claridge Debtors
will reject the Restructuring Agreement, to the extent executory as of the
Effective Date and (iii) ACBA will reject any agreement with or obligation to
its general partners arising by contract or operation of law, to the extent
executory as of the Effective Date. The Debtors intend (a) to either terminate
the Operating Leases without liability or extinguish the claims arising from the
rejection of the Operating Lease and Expansion Operating Lease, and (b) to
assume indemnification obligations of ACBA to the general partners.
On the Effective Date, CPPI and the Corporation will assume (i) all
employment agreements to which they are a signatory, in effect as of the
Effective Date; (ii) any and all collective bargaining agreements to which they
are a signatory, in effect as of the Effective Date; and (iii) all employee
benefit plans to which they are a signatory, in effect as of the Effective Date.
In addition, on the Effective Date, the Debtors shall assume such other
contracts, agreements or leases identified in Exhibit "D" to the Plan and, to
the extent ACBA shall be a party to such contract or lease, ACBA shall assign
and the Reorganized CPPI shall assume such contract or lease pursuant to the
Plan.
Entry of the Confirmation Order by the Clerk of the Bankruptcy Court
shall constitute approval of all executory contracts and unexpired leases to be
assumed by the Debtors in accordance with the Plan pursuant to section 365(a) of
the Bankruptcy Code, as identified in Exhibit "D" to the Plan.
Claims created by or arising in connection with the rejection of
executory contracts and unexpired leases of the Debtors must be filed no later
20 days after the entry of a Final Order authorizing such rejection. Any such
Claims not filed within such time shall be forever barred from assertion against
the Debtors, the Reorganized Corporation and the Reorganized CPPI and their
property and estates. Each Claim resulting from such rejection shall constitute
a class 2 Claim if secured or a class 4, 5, 6 and 7 Claim, as the case may be,
if unsecured.
You should be aware that prior to the Petition Date Thermal Energy
Limited Partnership I ("TEP I") had entered into a certain thermal energy
services agreement with CPPI. After reviewing the underlying agreement, and
following extensive negotiations, CPPI has determined to assume the agreement,
with certain modifications which TEP I has accepted. These modifications, among
other things, will result in CPPI saving upwards of $125,000 per year on its
utility charges. CPPI has agreed to assume the agreement with TEP I as part of
the confirmation of the Plan, or if confirmation is delayed for any reason
beyond year end, to file a separate motion with the Bankruptcy Court. You should
also be aware that TEP I has alleged that if this agreement is rejected, TEP I
would be entitled to assert a rejection claim, as a Class 5 Claim. TEP I
estimates that its claim would be not less than $7,000,000. The Debtors dispute
that CPPI would have any liability against TEP I if the agreement was rejected.
However, in the event the agreement is not assumed and should TEP I have a claim
based upon its rejection damages, the recovery to creditors in Classes 4, 5 and
7 could be substantially discounted given that the Maximum Unsecured Claim limit
is $5,500,000, in the aggregate, for all claims in Class 4, 5 and 7 under the
Plan.
Notwithstanding any other provisions of the Plan, the obligations of
the Claridge Debtors to indemnify their present or former directors, officers
and employees pursuant to their respective certificates of incorporation,
by-laws, contractual obligations or any applicable laws in respect of all past,
present and future actions, suits and proceedings against any of such directors,
officers, agents, employees and representatives based upon any act or omission
related to service with, for or on behalf of any of the Claridge Debtors shall
not be discharged or impaired by confirmation or consummation of this Plan, but
shall survive unaffected by the reorganization contemplated by this Plan and
shall be performed and honored in full pursuant to the Claridge Debtors' or the
Reorganized Corporation's or Reorganized CPPI's by-laws, certificate of
incorporation, contractual obligations or applicable laws regardless of such
confirmation, consummation and reorganization. The Indenture Trustee asserts
that the assumption of the Debtors' obligations to their officers and directors
is without consideration and violates the absolute priority rule, and that to
the extent that such claims are unliquidated they must be discharged and to the
extent they are liquidated, they must be disclosed and paid in accordance with
the Plan. The Debtors dispute this position. If any of the officers or directors
of the Corporation have claims against the Corporation, the amount of General
Corporation Claims in Classes 4 and 5 may increase, and, therefore, affect
recoveries to holders of Allowed Class 4, 5 and 7 Claims.
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All employee compensation and benefit plans, policies and programs of
the Claridge Debtors applicable generally to their employees, as in effect on
the Effective Date, including, without limitation, all savings plans, retirement
plans, health care plans, disability plans, and life, accidental death and
dismemberment insurance plans, shall continue in full force and effect, without
prejudice to the Reorganized Corporation's or Reorganized CPPI's rights under
applicable non-bankruptcy law to modify, amend or terminate any of the foregoing
arrangements.
Continuation of Business; Re-vesting
As of the date of this Disclosure Statement, the Debtors have operated
and will continue to operate their businesses as debtors in possession with the
protection of the Bankruptcy Court as provided in Sections 1107 and 1108 of the
Bankruptcy Code. On (i) the Effective Date, title to all property and assets of
the Corporation shall re-vest in the Reorganized Corporation; (ii) the Effective
Date, title to all property and assets of CPPI shall re-vest in the Reorganized
CPPI; and (iii) the Effective Date, title to all property and assets of ACBA
shall be transferred to and vest in the Reorganized CPPI; in each such case free
and clear of all liens, Claims or encumbrances except as otherwise provided in
the Plan. In addition, the Confirmation Order shall empower and authorize the
Reorganized Corporation, CPPI and ACBA, as of the Confirmation Date, to take or
cause to be taken all actions which are necessary to implement effectively the
provisions of the Plan, including authorizing the General Partners of ACBA to
transfer the ACBA Interests to the Reorganized CPPI.
Surrender and Cancellation of Instruments
Each holder of a promissory note or other instrument evidencing a Claim
impaired under the Plan shall surrender the same to the Reorganized Claridge
Debtors and the Reorganized Claridge Debtors shall distribute or shall cause to
be distributed to the holders thereof the appropriate distribution of property
thereunder. No distribution of property under the Plan shall be made to or on
behalf of any such holder unless and until such promissory note or other
instrument is received by the Debtors or the Reorganized Claridge Debtors, or
the unavailability of such note or other instrument is established to the
satisfaction of the Reorganized Claridge Debtors. Any such holder that fails to
surrender or cause to be surrendered such promissory note or other instrument,
or to execute and deliver an affidavit of loss and indemnity satisfactory to the
Reorganized Claridge Debtors, and, in the event that the Reorganized Claridge
Debtors so request with respect to the First Mortgage Notes, fails to furnish a
bond in form and substance (including, without limitation, with respect to
amount) reasonably satisfactory to the Reorganized Claridge Debtors, within two
years after the Confirmation Date, shall be deemed to have forfeited all Claims
against the Debtors represented by such note or other instrument and shall not
participate in any distribution under the Plan in respect of such note or other
instrument and all property in respect of such forfeited distribution, including
(if applicable) interest accrued thereon, shall revert to the Reorganized
Claridge Debtors. Notwithstanding the foregoing, all Claims shall be discharged
and all Interests shall be terminated by the Plan to the extent provided therein
regardless of whether and when any surrender, indemnity or bond required by the
Plan is provided and regardless of whether the Reorganized Claridge Debtors
makes a distribution thereunder in the absence of compliance by any holder of a
Claim with the requirements of the Plan. The Reorganized Claridge Debtors may
waive this requirement of the Plan.
In order to preserve the rights of holders of First Mortgage Notes who
do not promptly surrender their First Mortgage Notes to interest and dividends,
the Reorganized Claridge Debtors will issue New Notes and New Common Stock to
the Indenture Trustee for such holders and upon surrender of the First Mortgage
Note Certificates the Indenture Trustee will transfer the New Notes and/or New
Common Stock as applicable as well as any interest or dividends received in
respect thereof.
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Retention and Enforcement of Causes of Action
Pursuant to Section 1123(b)(3) of the Bankruptcy Code, the Reorganized
Corporation (as representative of the Chapter 11 estates) will retain the
exclusive right to enforce in its sole and absolute discretion any and all
causes of action of the Debtors, including all causes of action which may exist
under Sections 510, 544 through 550 and 553 of the Bankruptcy Code or under
similar non-bankruptcy laws. Except as stated below, the Debtors do not believe
that, as of the date hereof, they have any causes of action arising under
Section 510, 544 through 550 or 553 of the Bankruptcy Code, do not intend to
pursue any causes of action and therefore attribute no value to any such causes
of action.
Restated Certificate of Incorporation
Upon the confirmation of the Plan, the Reorganized Corporation shall
amend its certificate of incorporation and by-laws by filing with the Secretary
of State of New York the Restated Certificate of Incorporation and Restated By-
laws substantially in the form of Exhibit ___ and Exhibit ___, respectively, of
the Plan. Except to the extent prohibited by the Plan, after the Effective Date,
the Reorganized Corporation may amend the Restated Certificate of Incorporation
and may amend the Restated By-laws in accordance with the Restated Certificate
of Incorporation, such Restated By-laws or applicable state law.
Distributions Under the Plan
Time and Method of Distributions Under the Plan. Except as otherwise
provided in the Plan, payments and distributions to be made pursuant to the Plan
will be made by the Reorganized Corporation (or its designee) on or as promptly
as practicable after the Effective Date. The Plan further provides that such
distributions will be made only to holders of Allowed Claims.
Compliance with Tax Requirements. With respect to the Claridge Debtors,
the Reorganized Claridge Debtors will comply with all withholding and reporting
requirements imposed by federal, state or local taxing authorities in connection
with making distributions pursuant to the Plan.
In connection with each distribution with respect to which the filing
of an information return (such as an Internal Revenue Service Form 1099 or 1042)
and/or withholding is required, the Reorganized Claridge Debtors shall file such
information return with the Internal Revenue Service and provide any required
statements in connection therewith to the recipients of such distribution and/or
effect any such withholding and deposit all funds so withheld as required by
law. With respect to any Person from whom a tax identification number, certified
tax identification number or other tax information required by law to avoid
withholding has not been received by the Reorganized Claridge Debtors, the
Reorganized Claridge Debtors shall withhold the amount required and distribute
the balance to such Person.
With respect to ACBA, under the Plan, ACBA will be dissolved and its
affairs wound-up pursuant to applicable non-bankruptcy law. AC Boardwalk
Partners, Inc., the corporate general partner of ACBA, will have the power and
authority to wind-up ACBA, including complying with applicable federal and state
laws, the filing of all necessary or required tax returns and forms in order to
cause, as soon as possible, the dissolution of ACBA. AC Boardwalk Partners, Inc.
shall become the tax matters partner of ACBA for all future and past tax
returns.
Distribution of Unclaimed Property. Any distribution of property under
the Plan which is unclaimed after two years following the Effective Date will
irrevocably revert to the Reorganized Claridge Debtors.
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Treatment of Disputed Claims
Objections to Claims. Only Allowed Claims shall be entitled to
distributions under the Plan. The Debtors, as the case may be, reserve the sole
and absolute right to contest and object to any Claims, including, without
limitation, those Claims that are not listed in the Schedules, are listed
therein as disputed, contingent and/or unliquidated in amount, or are listed
therein at a lesser amount than asserted by the holder of such Claim. Unless
otherwise ordered by the Bankruptcy Court, all objections to Claims (other than
Administrative Expense Claims) shall be filed and served upon counsel to the
Debtors, counsel to any Committee and the holder of the Claim objected to on or
before the later of (a) 90 days after the Effective Date and (b) 90 days after
the date (if any) on which a proof of claim is filed in respect of such Claim,
or such other date determined by the Bankruptcy Court upon motion to the
Bankruptcy Court without further notice or hearing.
Procedure. Unless otherwise ordered by the Bankruptcy Court or agreed
to by written stipulation of the Debtors or the Reorganized Claridge Debtors, or
until the Debtors' or the Reorganized Claridge Debtors' objection thereto is
withdrawn, the Debtors or the Reorganized Corporation shall litigate the merits
of each Disputed Claim until determined by a Final Order, provided, however,
that, subject to the approval of the Bankruptcy Court, (a) prior to the
Effective Date, the Debtors, and (b) after the Effective Date, the Reorganized
Claridge Debtors, may compromise and settle any objection to any Claim.
Payments and Distributions With Respect to Disputed Claims. No payments
or distributions will be made in respect of a Disputed Claim unless and until
such Disputed Claim becomes an Allowed Claim.
Timing of Payments and Distributions With Respect to Disputed Claims.
Subject to the provisions of the Plan, payments and distributions with respect
to each Disputed Claim that becomes an Allowed Claim, and that would have
otherwise been made had the Allowed Claim been an Allowed Claim on the Effective
Date, will be made within thirty days after the date that such Disputed Claim
becomes an Allowed Claim. Holders of Disputed Claims that become Allowed Claims
shall be bound, obligated and governed in all respects by the provisions of the
Plan. In addition, the Reorganized Claridge Debtors shall establish a reserve
for any Disputed Claim in an amount equal to, at the Reorganized Claridge
Debtors' election: (a) the amount of such claim as filed in such creditor's
proof of claim; (b) the amount as estimated by the Bankruptcy Court pursuant to
Section 502(c) of the Bankruptcy Code; or (c) such amount as agreed upon in
writing between the Reorganized Claridge Debtors and such holder. The
distribution to the holder of such Disputed Claim based upon the reserved amount
shall be set aside by the Reorganized Claridge Debtors who shall then be free to
make distributions to holders of Allowed Claims, in the manner as provided in
the Plan. Nothing herein shall increase or enlarge the Reorganized Claridge
Debtors' obligations under the Plan, including with respect to the Maximum
Unsecured Claim Limit. To the extent a Disputed Claim is allowed in an amount
greater than the reserved amount, the Reorganized Claridge Debtors shall adjust
future distributions to holders of Allowed Claims accordingly but shall not be
enabled to seek or obtain disgorgement of any prior distributions made to any
holder of an Allowed Claim.
Effects of Plan Confirmation
Discharge. Except as otherwise specifically provided in the Plan, the
Plan provides for the discharge of the Claridge Debtors, the Reorganized
Corporation and ACBA and their respective property and assets (subject to the
occurrence of the Effective Date) from any debt that arose prior to the
Confirmation Date and any debt of the kind specified in Sections 502(g), 502(h)
and 502(i) of the Bankruptcy Code (whether or not a proof of claim based upon
such debt is filed or deemed filed, whether such debt becomes an Allowed Claim
or whether the holder of such debt has voted on the Plan). The effect of
discharging a Claim is to release the Claridge Debtors, the Reorganized
Corporation and ACBA from any obligations to make payments with respect to such
debt, other than those specifically provided by the Plan, and to prohibit any
collection efforts by the holder of the Claim.
Injunction. Except as otherwise expressly provided in the Plan, the
entry of the Confirmation Order shall, provided that the Effective Date shall
have occurred, permanently enjoin all Persons that have held, currently hold or
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may hold a Claim, or other debt or liability that is discharged pursuant to this
Plan or who have held, currently hold or may hold an Interest that is terminated
pursuant to this Plan from taking any of the following actions in respect of
such discharged Claim, debt or liability or such terminated Interest: (a)
commencing, conducting or continuing in any manner, directly or indirectly, any
suit, action or other proceeding of any kind against the Debtors, the
Reorganized Claridge Debtors, their property or their respective officers,
directors, employees or the General Partners of ACBA; (b) enforcing, levying,
attaching, collecting or otherwise recovering in any manner or by any means,
whether directly or indirectly, any judgment, award, decree or order against the
Debtors, the Reorganized Claridge Debtors, their property or their respective
officers, directors, employees or the General Partners ACBA; (c) creating,
perfecting or enforcing in any manner, directly or indirectly, any lien or
encumbrance of any kind against the Debtors, the Reorganized Claridge Debtors,
their property or their respective officers, directors, employees or the General
Partners of ACBA; (d) asserting any setoff, right of subrogation or recoupment
of any kind, directly or indirectly, against any debt, liability or obligation
due to the Debtors, the Reorganized Claridge Debtors, their property or their
respective officers, directors, employees or the General Partners of ACBA; and
(e) proceeding in any manner in any place whatsoever that does not conform to or
comply with or is inconsistent with the provisions of the Plan.
Exculpation. Neither the Reorganized Claridge Debtors, nor any
creditors' committee, the General Partners of ACBA, nor any of their respective
members, officers, directors, shareholders, employees, agents, attorneys,
accountants or other advisors shall have or incur any liability to any Holder of
a Claim or Interest for any act or failure to act in connection with, or arising
out of, the pursuit of confirmation of this Plan, the consummation of this Plan
or the administration of the Plan or the property to be distributed under the
Plan, except for any act or failure to act that constitutes willful misconduct
or recklessness as determined pursuant to a Final Order, and in all respects,
such Persons (a) shall be entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under the Plan, and shall be fully
protected from liability in acting or in refraining from action in accordance
with such advice and (b) shall be fully protected from liability with respect to
any act or failure to act that is approved or ratified by the Bankruptcy Court.
Binding Effect. Upon confirmation of the Plan by the Bankruptcy Court,
the provisions of the Plan will be binding upon and inure to the benefit of the
Debtors, the Reorganized Corporation, any holder of a Claim or Interest, their
respective predecessors, successors, assigns, agents, officers and directors and
any other Person affected by the Plan whether or not such Person or holder of a
Claim or Interest has accepted the Plan.
Miscellaneous Provisions of the Plan
Retention of Jurisdiction. The business and assets of the Debtors shall
remain subject to the jurisdiction of the Bankruptcy Court until the Effective
Date. From and after the Effective Date, the Bankruptcy Court shall retain and
have exclusive jurisdiction over the Reorganized Corporation and the Chapter 11
cases to the fullest extent permissible by law, including, without limitation,
for the purposes of determining all disputes and other issues presented by or
arising under the Plan, including, without limitation, exclusive jurisdiction to
(a) determine any and all disputes relating to Claims and the allowance and
amount thereof, (b) determine any and all disputes among Creditors with respect
to their Claims, (c) consider and allow any and all applications for
compensation for professional services rendered and disbursements incurred in
connection therewith, (d) determine any and all applications, motions, adversary
proceedings and contested or litigated matters pending on the Effective Date and
arising in or related to the Chapter 11 cases or the Plan, (e) remedy any defect
or omission or reconcile any inconsistency in the Confirmation Order, (f)
enforce the provisions of the Plan relating to the distributions to be made
hereunder, (g) issue such orders, consistent with Section 1142 of the Bankruptcy
Code, as may be necessary to effectuate the consummation and full and complete
implementation of the Plan, (h) enforce and interpret any provisions of the
Plan, (i) determine such other matters as may be set forth in the Confirmation
Order or that may arise in connection with the implementation of the Plan, and
(j) determine the final amounts allowable as compensation or reimbursement of
expenses pursuant to Section 503(b) of the Bankruptcy Code.
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Authorization of Corporate and Partnership Action. The entry of the
Confirmation Order shall constitute a direction and authorization to and of the
Debtors to take or cause to be taken any corporate or partnership action
necessary or appropriate to consummate the provisions of this Plan prior to and
through the Effective Date without any requirement of further action by the
stockholders, partners or directors of the Debtor, (including, without
limitation, the filing of or amending or restating the certificate of
incorporation of the Debtors, the filing of a certificate of dissolution for
ACBA, and the exercise of the general partners power of attorney), and all such
actions taken or caused to be taken shall be deemed to have been authorized and
approved by the Bankruptcy Court.
Modification of the Plan. The Debtors may alter, amend or modify the
Plan pursuant to Section 1127 of the Bankruptcy Code at any time prior to the
time that the Bankruptcy Court has signed the Confirmation Order. After such
time and prior to the substantial consummation of the Plan, the Debtors may, so
long as the treatment of holders of Claims and Interests under the Plan is not
adversely affected, institute proceedings in Bankruptcy Court to remedy any
defect or omission or to reconcile any inconsistencies in the Plan, the
Disclosure Statement or the Confirmation Order and any other matters as may be
necessary to carry out the purposes and effects of the Plan; provided, however,
that prior notice of such proceedings shall be served in accordance with
Bankruptcy Rule 2002.
Revocation and Withdrawal of the Plan. The Debtors reserve the right to
revoke or withdraw the Plan at any time prior to the Confirmation Date. If the
Debtors revoke or withdraw the Plan prior to the Confirmation Date, then the
Plan shall be deemed null and void. In such event, nothing contained therein
shall be deemed to constitute a waiver or release of any Claims by or against
the Debtors or any other Person or to prejudice in any manner the rights of the
Debtors or any Person in any further proceedings involving the Debtors.
ACCEPTANCE AND CONFIRMATION OF THE PLAN
Described below are certain important considerations under the
Bankruptcy Code in connection with confirmation of the Plan.
Solicitation of Acceptance
As permitted by the Bankruptcy Code, the Debtors are soliciting, in
good faith and in compliance with the applicable provisions of the Bankruptcy
Code, the acceptance of the Plan from all beneficial holders of Claims in
certain classes of Claims that are impaired under the Plan. The solicitation of
acceptances from holders of Claims in unimpaired classes is not required under
the Bankruptcy Code.
The record date for determining holders of Claims and Interests who are
entitled to accept or reject the Plan is 5:00 p.m., Eastern Standard Time, on
the Approval Date.
The Debtors believe that this classification of Claims complies with
Section 1122 of the Bankruptcy Code and is in the best interests of the Debtors,
their estates, Creditors and holders of equity interests.
Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court,
after notice, to hold a confirmation hearing. Section 1128(b) of the Bankruptcy
Code provides that any party in interest may object to confirmation of the Plan.
The Bankruptcy Court has scheduled a hearing on the confirmation (the
"Confirmation Hearing") of the Plan on ___________ at _______ in Courtroom ____,
United States Bankruptcy Court for the District of New Jersey, 15 North 7th
Street, Camden, New Jersey. The Confirmation Hearing may be adjourned from time
to time by the Bankruptcy Court without further notice (other than except for an
announcement of the adjournment date made at the Confirmation Hearing or any
adjournment thereof). Objections to confirmation must be made in writing,
specifying in detail the name and address of the Person objecting, the grounds
for the objection, and the nature and amount of the Claim or Interest held by
the objector. Objections must be filed with the Bankruptcy Court, together with
proof of
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service, and served upon the parties so designated in the Confirmation Notice,
on or before the time and date designated in the Confirmation Notice as being
the last date for serving and filing objections to confirmation of the Plan.
Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014 and
the local rules of the Bankruptcy Court.
Requirements for Confirmation of the Plan
As discussed below, the Debtors intend to request confirmation of the
Plan pursuant to Section 1129(b) of the Bankruptcy Code. In order for the Plan
to be confirmed pursuant to Section 1129(b) of the Bankruptcy Code, the Plan
must satisfy all of the provisions of Section 1129(a), except for Section
1129(a)(8). Specifically, the Bankruptcy Court must determine, among other
things, that (i) the Plan was accepted by the requisite votes of holders of
Claims entitled to vote on the Plan (see "-- Confirmation of the Plan under
Section 1129(b)"); (ii) the Plan is in the "best interests" of all Creditors and
Interest holders -- that is, that each Creditor and holder of an Interest who
rejects the Plan will receive at least as much pursuant to the Plan as it would
receive in a liquidation under Chapter 7 of the Bankruptcy Code (see "-- Best
Interests Test" and the "Liquidation Analysis" annexed hereto as Appendix C);
and (iii) the Plan is feasible -- that is, there is a reasonable probability
that the Debtors will be able to perform their obligations under the Plan and
continue to operate their business without further financial reorganization or
liquidation (see "-- Feasibility").
The Debtors believe that, (i) upon acceptance of the Plan by classes 3,
4, 5, and 7 determined without including any acceptance of the Plan by any
Insider, the Plan will satisfy all the statutory requirements of Chapter 11 of
the Bankruptcy Code, (ii) the Debtors have complied or will have complied with
all of the requirements of Chapter 11 and (iii) the Plan is being proposed and
will be submitted to the Bankruptcy Court in good faith. The Indenture Trustee
believes that the Plan does not meet the requirements of the Bankruptcy Code for
confirmation in that it, inter alia, (a) improperly classifies claims of the
First Mortgage Noteholders, (b) violates Section 510(a) of the Bankruptcy Code,
(c) unfairly discriminates against the unsecured deficiency claims of the First
Mortgage Noteholders, (d) may fail to meet the best interests test, and (e) is
not fair and equitable and violates the absolute priority rule.
Confirmation of the Plan Under Section 1129(b)
Generally, a class of claims or interests is considered to be
unimpaired under a plan of reorganization if the plan does not alter the legal,
equitable and contractual rights of the holders of such claims or interests.
Classes of claims or interests that are not impaired under a plan or
reorganization are conclusively presumed to have accepted the plan of
reorganization and are not entitled to vote. Classes of claims or interests that
are impaired under a plan of reorganization that receive no distribution or
retain no property in respect of such claims or interests are conclusively
presumed to have rejected the plan of reorganization and are also not entitled
to vote.
Acceptances of the Plan are being solicited only from those Creditors
who hold Claims in an impaired class and who will receive a distribution under
the Plan. The Debtors must request the Bankruptcy Court confirm the Plan
pursuant to Section 1129(b) of the Bankruptcy Code. See "Summary Of The Plan --
Classification and Treatment of Claims and Interests Under the Plan." Acceptance
of the Plan is being solicited from holders of Claims in classes 3, 4, 5, and 7.
See "Introduction And Summary -- The Solicitation."
The Debtors will request confirmation of the Plan pursuant to the
provisions of Section 1129(b) of the Bankruptcy Code. Under these provisions,
the Bankruptcy Court shall confirm the Plan despite the lack of acceptance by an
impaired class or classes if the Bankruptcy Court finds that (a) the Plan does
not discriminate unfairly with respect to each non-accepting impaired class, (b)
the Plan is "fair and equitable" with respect to each non-accepting impaired
class, (c) at least one impaired class has accepted the Plan (without counting
acceptances by Insiders), and (d) the Plan satisfies the other requirements set
forth in Bankruptcy Code Section 1129(a) except for Section 1129(a)(8). In
general, a plan does not discriminate unfairly if claims or interests in
different classes but with similar priorities and characteristics receive the
same treatment.
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The Bankruptcy Code establishes different "fair and equitable" tests
for holders of secured claims, unsecured claims and interests. In general,
Bankruptcy Code Section 1129(b) permits confirmation notwithstanding non-
acceptance by an impaired class if that class and all more junior classes are
treated in accordance with the "absolute priority" rule, which requires that the
dissenting class be paid in full before a junior class may receive or retain
anything under the plan. With respect to each class of secured claims the Plan
must provide that holders of such claims retain the liens securing such claims,
to the extent of the Allowed Amount of such claims and each holder of a claim of
such class receive on account of such claim deferred cash payments totaling at
least the allowed amount of such claim, of a value, as of the Effective Date of
the Plan of at least the value of such holder's interest in the estate's
interest in the property. With respect to a class of unsecured Claims that does
not accept the Plan, the Debtors must demonstrate to the Bankruptcy Court that
either (a) each holder of an unsecured Claim of the dissenting class receives or
retains under the Plan property of a value equal to the Allowed Amount of its
unsecured Claim or (b) the holders of Claims or Interests that are junior to the
Claims of the holders of such unsecured Claims will not receive or retain any
property under the Plan. With respect to a class of Interests that does not
accept the Plan, the Claridge Debtors must demonstrate to the Bankruptcy Court
that either (A) each holder of such Interest receives or retains under the Plan
property of a value equal to the greatest of (i) any fixed liquidation
preference to which such holder is entitled, (ii) any fixed redemption price to
which such holder is entitled or (iii) the value of such interest or (B) the
holder of any Interest that is junior to the Interests of such class will not
receive or retain under the Plan on account of such junior Interest any
property. The Indenture Trustee maintains that if the holders of the 662/3% in
amount and a majority in number of First Mortgage Claims do not vote to accept
the Plan (i.e. at least one-third in principal amount or a majority in number
vote to reject the Plan), then the Debtors will not be able to meet, among other
things, the "fair and equitable" test and the holders of the First Mortgage
Claims will not be able to be "crammed down" under the Plan.
Best Interests Test
Whether or not the Plan is accepted by classes 3, 4, 5, and 7 the
Bankruptcy Court must independently determine that the Plan is in the best
interests of each class of Claims or Interests impaired by the Plan -- that is,
with respect to each impaired class, (a) each holder of a Claim or Interest has
accepted the Plan or (b) that Creditors and Interest holders in such impaired
class will receive at least as much pursuant to the Plan as they would receive
in a liquidation under Chapter 7 of the Bankruptcy Code.
To determine the value that holders of impaired Claims and Interests
would receive if the Debtors were liquidated, the Bankruptcy Court must
determine the dollar amount that would be generated from the liquidation of the
Claridge Debtors' assets in the context of a Chapter 7 liquidation case. The
cash amount which would be available for satisfaction of Administrative Expense
Claims, Priority Claims, unsecured Claims, and Interests in the Debtors would
consist of the proceeds resulting from the disposition of the assets of the
Debtors, augmented by the cash held by the Debtors at the time of the
commencement of the Chapter 7 case. Any such cash amount then would be reduced
by the amount of any Claims secured by such assets, the costs and expenses of
the liquidation, and such additional Administrative Expense Claims and Priority
Claims that may result from the termination of the Debtors' businesses and the
use of Chapter 7 for the purposes of liquidation.
The Debtors' costs of liquidation under Chapter 7 would include the
fees payable to a trustee in bankruptcy, as well as those which might be payable
to attorneys and other professionals that such a trustee may engage, plus any
unpaid expenses incurred by the Debtors during the Chapter 11 cases and allowed
in the Chapter 7 cases, such as compensation for attorneys, financial advisors,
appraisers, accountants and other professionals, and costs and expenses of
members of any statutory committee of unsecured creditors appointed by the
United States Trustee pursuant to Section 1102 of the Bankruptcy Code and any
other such appointed committee. In addition, as described above, Claims may
arise by reason of the breach or rejection of obligations incurred and executory
contracts entered into by the Debtors during the pendency of Chapter 11 cases
which otherwise would have been assumed in a Chapter 11 reorganization.
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To determine if the Plan is in the best interests of each impaired
class, the present value of the distributions from the proceeds of the
liquidation of the Debtors' assets and properties, after subtracting the amounts
attributable to the foregoing Claims, costs and expenses, is compared with the
value of the property offered to such classes of Claims and Interests under the
Plan.
In applying the "best interests test," it is possible that Claims and
Interests in Chapter 7 cases may not be classified as provided in the Plan. In
the absence of a contrary determination by the Bankruptcy Court, all prepetition
unsecured Claims which have the same rights upon liquidation would be treated as
one class for purposes of determining the potential distribution of the
liquidation proceeds resulting from each of the Debtors' Chapter 7 cases. The
distributions from the liquidation proceeds would be calculated ratably
according to the amount of the Claim held by each Creditor. The rule of absolute
priority of distributions applicable in Chapter 7 cases provides that no junior
creditor may receive any distribution or retain any property until all senior
creditors are paid in full with interest. Consequently, the Debtors believe that
if the Debtors were liquidated under Chapter 7, the holders of Claims in classes
3, 4, 5, 6 and 7 would receive distributions of a value significantly less, if
anything, than the value of the distributions provided to the Creditors in such
classes under the Plan, and that holders of Claims in class 8 as well as holders
of Interests in classes 9 through 13 would receive no distributions under
Chapter 7. See "Liquidation Analysis" attached as Appendix C hereto.
The Debtors have considered the effects that a Chapter 7 liquidation
would have on the ultimate proceeds available for distribution to creditors in a
Chapter 11 case, including: (i) the increased costs and expenses of liquidation
under Chapter 7 arising from fees payable to a trustee in bankruptcy and
professional advisors to such trustee; (ii) the erosion in value of assets in
Chapter 7 cases in the context of the expeditious liquidation required under
Chapter 7 and the "forced sale" atmosphere that would prevail; and (iii) the
substantial increases in Claims which would be satisfied on a priority basis or
on parity with creditors in a Chapter 11 case. Therefore, the Debtors have
determined that confirmation of the Plan will provide each holder of a Claim in
all classes with a recovery that is not less (and is expected to be
substantially more) than it would receive pursuant to liquidation of the Debtors
under Chapter 7 of the Bankruptcy Code. Therefore, the Debtors believe the best
interests test is satisfied with respect to these classes as well.
Annexed hereto as Appendix C is a liquidation analysis prepared by the
Claridge Debtors. Based upon that analysis, the proposed distribution under the
Plan is materially higher and better than that which creditors could expect to
recoup if the Debtors' assets were liquidated under chapter 7. The Indenture
Trustee disputes the Debtors' liquidation analysis. See Appendix H.
Feasibility
Section 1129(a)(11) of the Bankruptcy Code requires a finding by the
Bankruptcy Court that confirmation of the Plan will not be likely to be followed
by the liquidation, or the need for further financial reorganization, of the
Debtors or the successors of the Debtors (unless such liquidation or
reorganization is proposed in the Plan). Under the Plan, ACBA would have no
assets or operations and no Creditors after the Effective Date and would be
liquidated. If the Plan is confirmed, the Reorganized Corporation will have
significantly lower long-term debt than that of the Claridge Debtors prior to
the confirmation of the Plan. The Debtors believe that the reorganization under
the Plan meets the feasibility requirements under the Bankruptcy Code.
Consummation
In order for the Plan to be confirmed, the Noteholders must have
accepted the Plan. If the Plan is confirmed, subject to the satisfaction of the
conditions set forth below, the Plan will be consummated and distributions will
be made on the Effective Date, except as provided in the Plan. The Corporation
shall file a notice of the Effective Date within three (3) days after its
occurrence, which shall be served upon parties in interest.
The Plan provides that the following conditions must occur and be
satisfied on or before the Effective Date for the Plan to be effective on the
Effective Date:
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1. Entry of Confirmation Order. The Confirmation Order, in form and
substance acceptable to the Debtors, shall have been signed by
the Bankruptcy Court and duly entered and have become a Final
Order;
2. Regulatory Approvals. The NJCCC shall have issued any necessary
approvals of the Plan;
3. Timeliness. The Effective Date must occur on o before June 1,
2000 unless such date is extended by the Debtors.
4. Qualification of New Notes Indenture. The New Notes Indenture
shall have been qualified under the Trust Indenture Act of 1939,
as amended.
The Debtors believe that each of these conditions can or will be
satisfied or otherwise waived in accordance with the terms of the Plan. The
occurrence of such satisfaction or waiver is, however, dependent upon a variety
of facts and circumstances, some of which are beyond the control of the Debtors.
Thus, there can be no assurance that such conditions will be satisfied, or if
not so satisfied, will be waived as provided by the Plan.
In addition, section 1129 of the Bankruptcy Code contains a list of
requirements that must be met before a plan may be confirmed. The Debtors
believe that each of these requirements can and will be satisfied.
Securities Issued Under Section 1145 Exemption From Registration
The New Notes and New Common Stock to be issued under the Plan will be
issued in reliance on the exemption from registration provided by Section 1145
of the Bankruptcy Code. Generally, except with respect to an "underwriter," as
defined in Section 1145(b), Section 1145(a) makes Section 5 of the Securities
Act of 1933 and comparable registration requirements under local law
inapplicable to the issuance of the New Notes and New Common Stock to the
holders of the First Mortgage Notes.
A person who is not an "underwriter" may resell New Notes and New
Common Stock (together, "Plan Securities") without registration of those
securities under the Securities Act, unless such person is a securities "dealer"
as defined in section 2(12) of the Securities Act. Under Section 1145(b)(1)(A)
an entity will be an "underwriter" if it purchases a claim against the Claridge
Debtors for the purpose of receiving securities under a plan with a view toward
distribution of such securities. Under Section 1145(b)(1)(B), an entity is an
"underwriter" if the entity offers to sell securities distributed under the Plan
for the holders of such securities. "Control persons" of the Debtors receiving
securities under the Plan are deemed underwriters. The Debtors take no position
on whether an entity is a control person and therefore an "underwriter" within
the meaning of Section 1145, but note that the legislative history of Section
1145 suggests the United States Congress believed that any Creditor receiving at
least ten percent (10%) of the reorganized debtor's securities would be a
control person. The Debtors urge Creditors to consult their own legal and
financial advisors prior to distribution of Plan Securities before a
registration statement for such securities becomes effective.
Persons deemed to be "underwriters" of Plan Securities will be unable
to resell such securities in reliance on the exemption from registration of
Section 1145 of the Bankruptcy Code. In the event that persons are unable to
resell Plan Securities in reliance on Section 1145, such persons would be
permitted to resell only in conformity with the Securities Act of 1933 and
comparable registration requirements under local law, if at all.
The Debtors intend to list the New Notes and New Common Stock for
trading on a national securities exchange. There is the potential of an adverse
impact on the value of the Plan Securities should the Reorganized Debtors fail
or be unable to register or list them. In the event the Plan Securities are not
registered or accepted for listing on a national securities exchange, the
Proponents anticipate that the principal effect would relate to the development
of a recognized trading market for such securities. Moreover, there has been no
prior market for the Plan Securities, and there can be no assurance that a
public market for the Plan Securities will develop or be sustained after the
Effective Date. To be listed on and to have such listing continue on a national
securities exchange after the
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Effective Date, the Reorganized Debtors must satisfy certain initial and
maintenance criteria. The failure to meet these initial and maintenance criteria
in the future may result in the Plan Securities not being eligible for
quotations on a national securities exchange; trading, if any, of the Plan
Securities may thereafter be conducted over-the-counter. Equity securities would
likely be traded on the OTC Bulletin Board. The OTC Bulletin Board is a NASA
sponsored and operated inter-dealer automated quotation system for equity
securities not included in a national securities exchange system. The OTC
Bulletin Board was introduced as an alternative to "pink sheet" trading of
over-the-counter securities. There is no bulletin board exchange for unlisted
debt securities, which are traded on an ad hoc basis. Consequently, the
liquidity and price of the Plan Securities in the secondary market may be
adversely affected.
There is no assurance that a regular trading market will develop for
any of the Plan Securities or that, if developed, any such market will be
sustained. As a result of such ineligibility for quotations, an investor may
find it more difficult to dispose of, or obtain accurate quotations as to the
market value of the Plan Securities. In the absence of an active trading market,
holders of the Plan Securities may experience substantial difficulty in selling
their securities. The trading price of the Plan Securities is expected to be
subject to significant fluctuations in response to variations in quarterly
operating results, changes in analysts' earnings estimates, announcements of
business innovations by the Reorganized Debtors or their competitors, general
conditions in the gaming industry and other factors. In addition, the stock
market is subject to price and volume fluctuations that affect the market prices
for companies and that are often unrelated to operating performance. Whether or
not the Plan Securities are listed on a national securities exchange, the
Proponents expect that in order for a trading market to develop, and in order
for trading to occur, market makers will be required to trade the Plan
Securities. To date, there have not been any discussions or undertakings between
the Proponents or the Debtors and any potential market makers regarding the
participation of such market makers in the future trading market, if any, for
the Plan Securities.
After the Effective Date, and upon the satisfaction of all Regulatory
Conditions which pertain to it, the Icahn Entities will own approximately
thirty-seven (37%) percent of the issued and outstanding shares of New Common
Stock. As a result, Carl C. Icahn, through his related entities, may be able to
exercise control over the Reorganized Claridge Debtors.
CREDITORS COMMITTEE
Pursuant to Section 1102(a) of the Bankruptcy Code, following the
commencement of a Chapter 11 case, the United States Trustee may appoint a
committee of creditors holding unsecured claims against the Chapter 11 debtor,
and may appoint additional committees of creditors or of equity security holders
as deemed appropriate to assure the adequate representation of holders of claims
and interests in the Chapter 11 case.
Ordinarily, the statutory committee of creditors appointed by the
United States Trustee will consist of those Persons willing to serve that hold
the seven largest unsecured claims against the Chapter 11 debtor of the kinds of
claims represented on the committee. However, Section 1102(b) of the Bankruptcy
Code permits the United States Trustee to appoint, as the statutory committee,
the members of a committee organized by creditors of the debtor prior to the
commencement of the Chapter 11 Case if such committee was fairly chosen and is
representative of the different kinds of claims to be represented in the case.
No Noteholder Committee was formed in these cases and neither the Indenture
Trustee nor any Noteholder sits as a member of any official committee of
unsecured creditors.
ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed by the Bankruptcy Court and consummated,
the alternatives to the Plan include (a) an alternative plan of reorganization,
(b) liquidation of the Debtors under Chapter 11 and (c) liquidation of the
Debtors under Chapter 7.
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Alternative Plan
If the Plan is not confirmed, the Debtors could file a different plan
of reorganization. Such a plan might involve either a reorganization and
continuation of the Debtors' businesses or an orderly liquidation of their
assets. With respect to an alternative plan, the Debtors have explored various
other alternatives in connection with the formulation and development of the
Plan. The Debtors believe that the Plan, as described herein, enables holders of
Claims to realize the most value under the circumstances. The Indenture Trustee
disputes this conclusion.
Any alternative plan would likely be less favorable to holders of
Claims because rejection of this Plan in favor of some theoretical alternative
method of reconciling the Claims and Interests of the various classes will
require, at the very least, an extensive and time-consuming negotiation process
and will not result in a better recovery for any class. It is not atypical for
bankruptcy cases involving substantial entities with multi-corporate and complex
financial structures, such as the Debtors, to continue for periods of years
before a plan of reorganization is consummated and payments are made.
During any protracted reorganization, the Debtors would inevitably
incur substantial administrative expenses and costs pursuant to the operation of
their businesses under Chapter 11. In addition to the financial drain resulting
from such costs, the Debtors' unique business and financial position render the
Debtors especially vulnerable to a wide variety of adverse consequences directly
related to such a proceeding.
First, the New Jersey casino industry is closely regulated. CPPI
currently holds a license from the NJCCC to operate the Claridge. CPPI regularly
must appear before the NJCCC to qualify for the renewal of its casino license.
Such qualification includes showings of good character and financial stability
and responsibility. The rejection of the Plan and an extended reorganization
proceeding may well have a negative effect on the NJCCC's review of CPPI's
future license renewal applications. Moreover, although CPPI reapplied for a
four-year casino license for the period commencing September 30, 1999, the
filing of the voluntary petition under Chapter 11 on August 16, 1999 prompted
CPPI to amend its petition to request that the NJCCC renew CPPI's casino license
only for a period of one year. In response thereto the NJCCC granted CPPI's
request for a one-year license. In addition, the casino license renewal contains
certain financial reporting conditions and requirements consistent with the
manner in which the NJCCC has relicensed other casino licensees who have filed
voluntary petitions under Chapter 11 in the past. The NJCCC may reopen the
licensing hearings at any time on its own motion, and must do so if requested to
do so by the enforcement division.
Second, casino and hotel businesses are part of a service-oriented
industry, in which the appearance of unreliability or instability can
drastically disadvantage a company. An extended bankruptcy case will create the
impression that the Claridge cannot continue the normal operations of its casino
and hotel operations, which may cause key employees, customers, entertainers,
vendors and promoters to turn to other casinos. Competition among casinos in
Atlantic City is already keen and can only be expected to increase
significantly. In recent years, several major casinos in Atlantic City have
significantly expanded. Moreover, Atlantic City casinos and hotels suffer from a
chronic shortage of labor which also will only worsen with the opening of the
aforementioned expansions and new casino-hotel facilities. Consequently, the
adverse publicity and negative image generated by continuation of the bankruptcy
proceeding may well undercut the Debtors' present competitive position in
Atlantic City and preclude their efforts to revitalize their gaming operations.
On April 24, 2000, the Debtors received an offer (the "Edelstein
Proposal") from Ron Edelstein and Royal Palace Hotels, Inc. (the "Edelstein
Group") to acquire all of the assets and operations of the Debtors. The
Edelstein Proposal provides, among other things, that the Edelstein Group will
pay $61,000,000 to the noteholders in twelve (12) equal monthly installments
over one (1) year. Interest will accrue at the rate of 7% during the 12-month
period. The Edelstein Proposal is subject to a number of contingencies,
including obtaining financing from a third-party and regulatory approval.
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<PAGE>
On or about April 26, 2000, Schottenstein Realty Co. and Driftwood
Ventures (collectively, "Schottenstein") submitted a proposal ("S/D Proposal")
to acquire 80% of the ownership interest in the Reorganized Corporation, in
exchange for payment of $10,000,000, with the noteholders to receive the
remaining 20% of the new common stock in the Reorganized Corporation. In
addition, under the S/D Proposal, the noteholders will receive new first
mortgage notes in the aggregate principal amount of $42,500,000. These notes are
proposed to pay interest at 8% per annum, amortize by annual payments of
$3,035,000, and mature in 2007. In addition, under the S/D Proposal,
Schottenstein would permit the noteholders to receive a cash distribution
estimated by Schottenstein to be approximately $13,000,000, which amount
represents cash on hand of the Debtors, inclusive of the $1,500,000, plus
accrued interest thereon, being held in the AOB Escrow Account, less funds
necessary to operate the Casino. The S/D Proposal is also subject to a number of
conditions, including regulatory approval.
The Debtors are currently reviewing both proposals with their retained
professionals and have not yet made a determination as to the respective merits
of either proposal. However, as noted above, each is subject to certain
conditions which could impact upon their feasibility. In addition, given the
concentration of ownership of the Notes, it is not clear that the Debtors would
be able to achieve confirmation of either proposal over the dissenting vote of
Class 3. Moreover, each proposal contemplates that the holders of Class 3 Claims
will receive less than 100% of the allowed amount of their claims. In contrast,
under the Plan, the Noteholders will receive 100% of the outstanding equity in
the Reorganized Corporation on the Effective Date of the Plan. Under the S/D
Proposal and Edelstein Proposal, noteholders would receive 20% and 0%,
respectively, of the new ownership interests in the Reorganized Claridge
Debtors. Furthermore, given that noteholders, as a class, will control the
Reorganized Claridge Debtors following the Effective Date, it is important to
recognize that nothing will preclude the board of directors of the Reorganized
Corporation, whose members the noteholders, as a class, will elect, from
considering post Effective Date either of these two proposals or any other
alternate proposal regarding the Reorganized Claridge Debtors or their assets.
Accordingly, the Debtors believe that it is appropriate for the solicitation of
the Plan to proceed at this time notwithstanding that the Debtors have not yet
made a determination as to the merits of either of the two (2) proposals.
Liquidation Under Chapter 7
If no plan of reorganization can be confirmed, the Debtors' Chapter 11
cases may be converted to cases under Chapter 7 of the Bankruptcy Code, pursuant
to which a trustee in bankruptcy would be elected or appointed to liquidate the
assets of the Debtors for distribution to Creditors and Interest holders in
accordance with the priorities established by the Bankruptcy Code. A discussion
of the effects that a Chapter 7 liquidation would have on the recovery of
holders of Claims and Interests is set forth under "Acceptance And Confirmation
Of The Plan -- Best Interests Test." As discussed therein, the Debtors believe
that confirmation of the Plan will provide each holder of a Claim entitled to
receive a distribution under the Plan with a recovery that is not less (and is
expected to be substantially more) than it would receive pursuant to liquidation
of the Debtors under Chapter 7. Although preferable to a Chapter 7 liquidation,
the Claridge Debtors believe that any alternate liquidation under Chapter 11 is
much less attractive to holders of Claims than the Plan because of the greater
recovery provided for by the Plan.
The Debtors believe that a liquidation under Chapter 7 would result in
substantially reduced recovery of funds by the Debtors' estates because of (i)
an enormous loss of value resulting from the possible revocation of CPPI's
gaming license and, consequently, the potential for the sale of its assets as
non-gaming properties, (ii) a significant loss of value resulting from the
possible appointment by the NJCCC of a conservator who would be authorized to
operate the Claridge and could be authorized to sell the Claridge if CPPI's
gaming license is revoked, and the additional administrative expenses and fees
that would be incurred by the conservator and other professionals employed by
him, (iii) additional administrative expenses involved in the appointment of a
trustee in bankruptcy for each of the Debtors and attorneys and other
professionals to assist such trustees and (iv) additional expenses and claims,
some of which would be entitled to priority, which would be generated during the
liquidation and from the rejection of leases and other executory contracts in
connection with a cessation of the Debtors' operations.
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SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected historical consolidated financial
data of the Claridge Debtors for the fiscal years 1996 through 1998 and for the
nine month periods ended September 30, 1998 and 1999. The following data should
be read in conjunction with the consolidated financial statements of the
Claridge Debtors and the notes thereto included as Appendix B to this Disclosure
Statement. The financial data for the nine month periods is derived from
unaudited consolidated financial statements which, in the opinion of management
of the Claridge Debtors, contain all adjustments necessary for a fair
presentation of this information. The result of operations for the nine (9)
months ended September 30, 1999 and 1998 are not necessarily indicative of the
operating results to be expected for the full year. Historically, the gaming
industry in Atlantic City, New Jersey has been seasonal in nature with peak
demand months occurring during the summer season.
<TABLE>
<CAPTION>
Nine Months
Years Ended December 31, Ended September 30,
--------------------------------------- ----------------------------
1998 1997 1996 1999 1998
Amounts in thousands except per ---- ---- ---- ---- ----
share data (audited) (audited) (audited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net revenues $191,000 $192,753 $193,311 $145,439 $146,929
Net income (loss) (9,415) (5,979) (15,389) 974(a) (4,039)
Net income (loss) per share (1.89) (1.20) (3.05) 0.19 (0.81)
Balance Sheet Data at Period End
Total assets 131,776 150,380 164,163 141,226 134,877
Current assets 18,403 37,906 31,753 28,655 22,290
Current liabilities 42,088 41,234 39,027 16,489(b) 40,251
Liabilities subject to compromise 0 0 0 144,885 0
Long-term debt 85,170 85,023 85,000 3 85,263
Stockholders' equity (deficit) (25,228) (15,813) (9,834) (24,254) (19,852)
</TABLE>
(a) Due to the bankruptcy filing on August 16, 1999, $6,724,000 of the
$8,112,000 of contractual interest was recorded as an expense for the nine (9)
months ended September 30, 1999.
(b) Current liabilities believed not subject to compromise.
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CERTAIN INFORMATION CONCERNING THE DEBTORS
General
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. CPPI was formed as a New Jersey corporation on August 29,
1983. Both companies maintain their executive and administrative offices at
Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401. ACBA was
formed as a New Jersey limited partnership on October 31, 1983. ACBA's executive
and administrative offices are located at c/o AC Boardwalk Partners, Inc., 2880
West Meade Avenue, Suite 204, Las Vegas, NV 89102.
The Claridge
The Claridge, located in the Boardwalk casino section of Atlantic City,
New Jersey, is a 26-story building that contains the Claridge Debtors' casino
and hotel facilities. Built in 1929 as a hotel, the Claridge was remodeled at a
cost of approximately $138 million prior to its reopening as a casino hotel in
1981. The expansion improvements, which were completed in 1986 at a cost of
approximately $20 million, provided approximately 10,000 additional square feet
of casino space, together with a 3,600 square foot lounge. In 1994,
approximately $12.7 million was expended to expand the Claridge's casino square
footage by approximately 12,000 feet.
The Claridge's casino consists of approximately 59,000 square feet of
casino space on three main levels with various adjacent mezzanine levels. The
casino currently contains approximately 1,752 slot machines and 64 table games,
including 36 blackjack tables, eight craps tables, five roulette tables, three
Caribbean stud poker tables, two mini-baccarat tables, two baccarat tables and
eight other specialty games. The hotel with related amenities consists of 502
guest rooms, numerous restaurants and lounges, a private players club, a
600-seat theater, meeting rooms, a gift shop, a beauty salon, and a health club
with an indoor swimming pool. In 1996, CPPI completed construction of a
self-parking garage facility, connected to its existing valet garage. The
combined valet and self-parking garage provide space for approximately 1,200
vehicles.
CPPI 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. CPPI's principal market is the Mid-Atlantic area of
the United States. Casino gaming in Atlantic City is highly competitive and is
strictly regulated under the NJCCA and regulations thereunder which affect
virtually all aspects of casino operations. See "-- Gaming Regulation and
Licensing".
Business Strategy
The Claridge Debtors have positioned the Claridge 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 Claridge Debtors believe retains an 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 from that
of a majority of its competitors. The Claridge Debtors seek to attract and
retain a customer base whose wagering spans the same market segments serviced by
other casino hotels, but stops in the middle, leaving the high end business to
its competitors. The Claridge Debtors believe it is uneconomical to pursue the
high end market as its core business because of the high maintenance cost and
potential volatility in hold percentages. The typical Claridge patron has a
lesser need for credit as well as a lower average complimentary cost. The
majority of the Claridge's casino revenue is generated by slot machine play, the
fastest growing segment of gaming play, but the Claridge Debtors have taken
steps to increase table games play.
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The key elements of the 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 Claridge Debtors' traditional market areas. The Claridge
Debtors also operate a direct marketing program to attract and retain customers.
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
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 approximately
1,173,000 square feet of gaming space available as of December 31, 1997.
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 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.
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 in Atlantic City also extends to the employment market. The
NJCCC has promulgated regulations which require staffing levels at Atlantic City
casinos that are higher than those for casino-hotels in Nevada. In addition, all
of CPPI'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
NJCCC 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.
52
<PAGE>
There is also significant competition outside of New Jersey. Since
1988, legal gambling operations have started in Connecticut, Delaware and other
states.
Gaming Regulation and Licensing
General
The NJCCA requires that all casino operations be licensed by the NJCCC
and that all employees, major stockholders and other persons or entities
financially interested in the casino operation be either licensed or approved by
the NJCCC. Casino gaming is strictly regulated in Atlantic City under the NJCCA
and the rules and regulations of the NJCCC, which affect virtually all aspects
of the operations of the Claridge. The laws, rules and regulations affecting
Atlantic City gaming operations concern primarily the financial stability,
integrity and character of casino operators, their employees, their security
holders and others financially interested in casino operations; the nature of
the casino/hotel facilities; the operation methods (including rules of games and
credit granting procedures); and financial and accounting practices used in
connection with casino operations. A number of these regulations require
practices that are different from those in many casinos in Nevada and elsewhere,
and some of these regulations result in casino operating costs greater than
those in comparable facilities in Nevada and elsewhere.
The NJCCC will grant a plenary license after it determines that the
operation of a casino conforms to the requirements of the NJCCA and applicable
regulations. A license is not transferable and may be revoked or suspended under
certain circumstances by the NJCCC.
Licensing Status
The NJCCC issues casino licenses that are renewable every four years,
subject to a series of requirements including a requirement of demonstrating
financial viability. On September 22, 1995, CPPI was issued a four-year casino
license by the NJCCC for the period commencing September 30, 1995. Although CPPI
reapplied for a four-year casino license for the period commencing September 30,
1999, the filing of the voluntary petition under Chapter 11 on August 16, 1999
prompted CPPI to amend its petition to request that the NJCCC renew CPPI's
license for only one- year. In response to that request, the NJCCC granted
CPPI's request for a one-year license. In addition, the casino license renewal
contains certain financial reporting conditions and requirements consistent with
the manner in which the NJCCC has relicensed other casino licensees that have
filed voluntary petitions under Chapter 11 in the past. The NJCCC may reopen the
licensing hearings at any time on its own motion, and must do so if so requested
by its enforcement division.
The Icahn Entities intend shortly to file with the NJCCC an application
for Interim Casino Authorization and Plenary Qualification as Holding and
Intermediary Companies of a Casino Licensee pursuant to N.J.S.A. 5:12-95. 12 et
seq. In connection therewith, Mr. Icahn will file an application as an
individual qualifier of the Icahn Entities.
In 1991, the Casino Commission found Mr. Icahn qualified as an
individual qualifier of Trump Taj Mahal Associates ("TTMA") by virtue of his
indirect ownership of certain companies determined to be financial sources and
entity qualifiers of TTMA. Mr. Icahn and his related entities have also been
found suitable by the Nevada Gaming Commission.
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<PAGE>
Investigations and Disqualification
The NJCCC 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 provide
that securities of the Corporation are held subject to the condition that if a
holder is found to be disqualified by the NJCCC, the holder must dispose of the
securities of the Corporation. The charter and bylaws of CPPI vest the NJCCC
with the right of prior approval with regard to the transfer of securities,
shares, and other interests in the casino licensee. The Corporation will
periodically report the names and addresses of owners of record of New Common
Stock and New Notes to the NJCCC as is required for all publicly traded holding
companies that have wholly-owned subsidiaries holding casino licenses.
Employees
As of December 31, 1998, CPPI 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 1999, the Claridge Debtors'
collective bargaining agreement covering the employees represented by Local 54
was renewed, together with the collective bargaining agreements of all Atlantic
City casinos with respect to Local 54, for a period of 4 years.
The management of the Claridge Debtors believe 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.
Properties
The Claridge 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, CPPI completed 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 will provide parking for
approximately 1,200 vehicles. The Administrative 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. By order dated April 5, 2000, the Bankruptcy Court
authorized the sale of the Administrative Office Building to GBHC. The building
was utilized as an administration facility, and totals an area of 14,020 square
feet. The Debtors intend to build-out a portion of the Self-Parking Garage in
order to house certain of the Reorganized Claridge Debtors' administrative
offices that were previously located in the Administrative Office Building. All
of the existing facilities, other than the self-parking garage, are owned by
ACBA and are leased to CPPI under the Operating Lease and the Expansion
Operating Lease. The self-parking garage and the property on which it is located
are owned by CPPI.
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Legal Proceedings
On July 10, 1996, ten days after its opening, a fatal accident occurred
at CPPI'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, CPPI's self-parking garage was
closed until the end of September 1996, while various investigations sought to
determined the cause of the accident. At the same time, CPPI determined to
remove the exterior wall cable restraint system and replace it with a rigid
I-beam barrier system.
CPPI 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, CPPI
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 CPPI 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. CPPI 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.
Executive Officers and Directors
The following table sets forth certain information with respect to the
current executive officers and Directors of the Corporation. The current
Directors and Officers of the Corporation and CPPI shall remain in place until
the first meeting of the holders of New Common Stock, who shall elect the new
Directors of the Reorganized Corporation. No promises have been made to any of
the existing Directors of the Corporation or its officers as to whether their
relationship with the Reorganized Corporation will continue following the first
meeting of the holders of the New Common Stock. The Directors of the Reorganized
Corporation shall appoint the Directors of Reorganized CPPI. Officers serve at
the discretion of the Board.
<TABLE>
<CAPTION>
Name Office Age
- ---- ------ ---
<S> <C>
James M. Montgomery Chairman, Director 60
David W. Brenner Director 63
Shannon L. Bybee Director 61
A. Bruce Crawley Director 53
Ned P. DeWitt Director 60
Mark H. Sayers Director 50
Robert M. Renneisen Director 53
Frank A. Bellis, Jr. Chief Executive Officer, Director 46
Jean I. Abbott Executive Vice President 44
Albert T. Britton Executive Vice President 43
Glenn S. Lillie Vice President 51
</TABLE>
55
<PAGE>
Business Experience
Mr. Montgomery has served as a member of the Board of the Corporation
since March 1995 and as the Chairman of the Board since November 1999. 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 the Corporation since
July 1988. He currently is Associate Professor for Gaming Management, Law &
Regulation, at University of Nevada Las Vegas. From July 1993 to August 1994 Mr.
Bybee served as President and Chief Operating Officer for United Gaming, Inc.
Mr. Bybee was the Corporation's Chairman of the Board from November 1988 to July
1993, and from August 1988 to October 1988. In June 1989, Mr. Bybee was
appointed to serve as the Chief Executive Officer of the Corporation and New
CPPI, 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 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 the Corporation since
May 1995. Since July 1997, Mr. DeWitt has been Chairman and Chief Executive
Officer of U'Race Corporation. Mr. DeWitt has served as President, Chief
Executive Officer, and a member of the Board of Directors of LBE Technologies,
Incorporated, in Saratoga, California, since November 1994. From November 1993
to August 1994, he served as President of SEGA Enterprises, (USA) in Redwood
City, California. Mr. DeWitt also served as President of the Entertainment Group
of Madison Square Garden from July 1990 to August 1991, and as President of
Source Service Group of Irving, Texas, from December 1986 to April 1989. He also
served, from 1973 through 1982, as President and Chief Executive Officer of Six
Flags Corporation.
Mr. Renneisen has served as a member of the Board of the Corporation
since June, 1991. He served as President of the Corporation from June 1992 until
November, 1999 and as Chief Executive Officer of the Corporation and CPPI from
July 1993 until November 1999. He was Vice Chairman of CPPI from June 1994 until
June 1998. Mr. Renneisen was Executive Vice President of the Corporation from
June 1991 to June 1992. He has served as President of CPPI from January 1991 to
January 1996. He was Chief Operating Officer of CPPI from January 1991 to July
56
<PAGE>
1993. Mr. Renneisen was Executive Vice President of CPPI, responsible for
marketing and later casino operations from February 1988 to January 1991. Prior
to joining CPPI, 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. Sayers has served as a member of the Board of the Corporation since
February 1990. Mr. Sayers has served as Vice President of EMES Management
Corporation, a real estate management and development company, of New York, New
York, since February 1976.
Mr. Bellis has served as Chief Executive Officer and Director of the
Corporation since November 1999. He has served as Senior Vice President, General
Counsel and Secretary to the Corporation from February 1994 until November 1999.
He also has served as Senior Vice President and General Counsel of CPPI since
February 1994, as Vice President and General Counsel of CPPI from September 1992
to February 1994, and as Secretary of CPPI 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 CPPI. Prior to joining CPPI, he was a
Deputy Attorney General in the New Jersey Division of Criminal Justice in the
State Attorney General's office.
Ms. Abbott has served as Executive Vice President of the Corporation
since June, 1996 and as Executive Vice President of Finance and Corporate
Development of CPPI since September 1997. Ms. Abbot has served as Secretary to
the Corporation since November, 1999. 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 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 CPPI. 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 CPPI from May 1987 to September 1989. She
was Vice President, Controller of CPPI from October 1985 to May 1987 and
Director of Finance of CPPI from April 1984 to October 1985. From October 1980
through April 1984, Ms. Abbott held various executive positions with CPPI and
its corporate predecessor.
Mr. Britton has served as Executive Vice President of the Corporation
since June 1994 and as President and Chief Operating Officer of CPPI since
January 1996. He served as Executive Vice President and General Manager of CPPI
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 CPPI from December 1992 to February 1994. He was Senior Vice
President of Operations of CPPI 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 CPPI 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 CPPI since December
1995. He served as Vice President of Public Affairs of CPPI from February 1990
to December 1995. He was Vice President of Marketing Communications of CPPI 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.
57
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN ARE
COMPLEX AND, IN MANY RESPECTS, UNCERTAIN. DUE TO THE UNCERTAINTIES REGARDING
POSSIBLE TAX CONSEQUENCES OF THE PLAN, ALL CREDITORS AND HOLDERS OF FIRST
MORTGAGE NOTE CLAIMS, CLAIMS IN RESPECT OF CONTINGENT PAYMENT, OR CONTINGENT
PAYMENT RIGHTS, AND INTERESTS IN THE CORPORATION OR ACBA ARE STRONGLY URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE PLAN
THAT ARE RELEVANT TO THEIR PARTICULAR CIRCUMSTANCES.
FINANCIAL AND LEGAL ADVISORS; FEES AND EXPENSES
The Claridge Debtors have engaged Clifford Chance Rogers & Wells LLP
and Archer & Greiner to act as counsel in connection with the Plan. ACBA has
engaged Lowenstein Sandler PC and Orloff, Lowenbach, Stifelman and Siegel to act
as counsel in connection with the Plan. For their services in connection with
the Plan, Clifford Chance Rogers & Wells LLP, Archer & Greiner, Lowenstein
Sandler PC and Orloff, Lowenbach, Stifelman and Siegel will receive customary
hourly fees and will be reimbursed for all reasonable out-of-pocket expenses.
KPMG LLP, the Claridge Debtors' regular outside accountants, have provided
services in connection with the Plan for which KPMG will receive customary
hourly fees and reimbursement of all reasonable out-of-pocket expenses. The
Claridge Debtors have engaged Jay Alix & Associates to act as the Claridge
Debtors' financial advisor in connection with the Plan.
58
<PAGE>
CONCLUSION; RECOMMENDATION
The Debtors believe that confirmation of the Plan is desirable and in
the best interests of all Noteholders. The Debtors therefore urge you to vote to
accept the Plan.
Dated: May __, 2000
THE CLARIDGE HOTEL AND CASINO CORPORATION
By:_____________________________________________
Frank A. Bellis, Jr. President and Chief
Executive Officer
THE CLARIDGE AT PARK PLACE, INCORPORATED
By:_____________________________________________
Frank A. Bellis, Jr. Chief Executive Officer
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: AC BOARDWALK PARTNERS, INC. its General Partner
By:_____________________________________________
Anthony Atchley President
59
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CLARIDGE
HOTEL AND CASINO CORPORATION'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 18,152,000
<SECURITIES> 0
<RECEIVABLES> 9,616,000
<ALLOWANCES> 1,307,000
<INVENTORY> 316,000
<CURRENT-ASSETS> 29,952,000
<PP&E> 41,592,000
<DEPRECIATION> 13,014,000
<TOTAL-ASSETS> 104,405,000
<CURRENT-LIABILITIES> 20,069,000
<BONDS> 79,000
0
0
<COMMON> 5,000
<OTHER-SE> (64,564,000)
<TOTAL-LIABILITY-AND-EQUITY> 104,405,000
<SALES> 0
<TOTAL-REVENUES> 43,529,000
<CGS> 0
<TOTAL-COSTS> 26,597,000
<OTHER-EXPENSES> 17,889,000
<LOSS-PROVISION> 157,000
<INTEREST-EXPENSE> 27,000
<INCOME-PRETAX> (1,141,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,141,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,141,000)
<EPS-BASIC> (.23)
<EPS-DILUTED> 0
</TABLE>
