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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

                                 ANNUAL REPORT

    (Mark One)

       [ X ]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998

       [    ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

             For the transition period from ___________to___________

                         Commission File Number 0-11287

                   THE CLARIDGE HOTEL AND CASINO CORPORATION
             (Exact name of registrant as specified in its charter)


                New York                                      22-2469172
                --------                                      ----------
  (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                       Identification Number)

   Indiana Avenue and the Boardwalk
       Atlantic City, New Jersey                                08401
       -------------------------                                -----
(Address of principal executive offices)                      (Zip Code)

       Registrant's telephone number, including area code: (609) 340-3400
                                                           --------------

Securities registered pursuant to Section 12(b) of the Act:

                                                         Name of each exchange
       Title of each class                                on which registered 
       -------------------                                ------------------- 
  First Mortgage Notes, due 2002                        New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

                         Class A Stock, $.001 par value
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes     X       No
                                       --------         --------    


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Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)

All issued and outstanding shares of the Corporation have been offered and sold
in reliance on exemptions from the registration requirements of the Securities
Act of 1933, as amended. Therefore, there is no established trading market for
any class of shares of the Corporation. The Corporation did, in 1989, jointly
with Atlantic City Boardwalk Associates, L.P. ("Partnership") and Del Webb
Corporation ("Webb"), register certain Contingent Payment Rights. As stated in
the Prospectus dated May 5, 1989, Contingent Payment Rights may or may not be
securities. None of the Corporation, the Partnership, or Webb has admitted that
the Contingent Payment Rights are securities or that any of them is the issuer
of any such securities.

Indicate the number of shares outstanding of each class of the Registrant's
Stock, as of the latest practicable date:

                          Number of Shares Outstanding
                                 March 30, 1999
                       ----------------------------------
Class A Stock                      5,062,500


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                       DOCUMENTS INCORPORATED BY REFERENCE



                   DOCUMENT                                FORM 10-K PART

Portions of the definitive Proxy Statement with                 III
respect to the Annual Meeting of Shareholders
scheduled to be held on June 8, 1999 (hereinafter
referred to as the "Proxy Statement"), but
specifically excluding the section entitled "Report
on Executive Compensation"  which shall not be
deemed to be incorporated by reference herein




<PAGE>



                                     PART I
Item 1.           BUSINESS

General

      The Claridge Hotel and Casino Corporation (the "Corporation"), through its
wholly-owned subsidiary, The Claridge at Park Place, Incorporated ("New
Claridge"), operates The Claridge Hotel and Casino ("Claridge") in Atlantic
City, New Jersey. The Corporation was formed as a New York corporation on August
26, 1983, and qualified to engage in business in New Jersey as a foreign
corporation in September 1983. New Claridge was formed as a New Jersey
corporation on August 29, 1983.

      The Corporation maintains its executive and administrative offices at
Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401, telephone
number (609) 340-3400.

Corporate Structure

      On October 31, 1983, New Claridge acquired certain assets of the Claridge
including gaming equipment ("Casino Assets"), from Del E. Webb New Jersey, Inc.
("DEWNJ"), a wholly-owned subsidiary of Del Webb Corporation ("Webb"); leased
certain other of the Claridge's assets, including the buildings, parking
facility and non-gaming, depreciable, tangible property of the Claridge ("Hotel
Assets"), from Atlantic City Boardwalk Associates, L.P., a New Jersey limited
partnership ("Partnership"); subleased the land on which the Claridge is located
from the Partnership; assumed certain liabilities related to the acquired
assets; and undertook to carry on the business of the Claridge. In connection
with these transactions, the Partnership granted the Expandable Wraparound
Mortgage (described below) to New Claridge. These transactions were entered into
in connection with the private placement of equity interests in the Corporation
and the Partnership. The offering was structured to furnish the investors with
certain tax benefits available under the federal tax law then in effect. The
common stock of the Corporation and the limited partnership interests of the
Partnership were sold together in the private placement as units, and because
there has been relatively little trading in the stock or Partnership interests,
there is a substantial similarity between the equity ownership of the
Corporation and the Partnership. Although the Corporation and the Partnership
are independent entities, approximately 93% of the Corporation's common stock is
owned by persons who also own limited partnership interests in the Partnership.
The Partnership does not currently engage in any significant business activities
other than those relating to the Claridge.

       In October 1988, the Corporation and New Claridge entered into an
agreement to restructure the financial obligations of the Corporation and New
Claridge (the "Restructuring Agreement"). The restructuring, which was
consummated in June 1989, resulted in (i) a reorganization of the ownership
interests in the Claridge; (ii) modifications of the rights and obligations of
certain lenders; (iii) satisfaction and termination of the obligations and
commitments of Webb and DEWNJ under the original structure; (iv) modifications
of the lease agreements between New Claridge and the Partnership; and (v) the
forgiveness by Webb of substantial indebtedness.

       On January 31, 1994, the Corporation completed an offering of $85 million
of First Mortgage Notes (the "Notes") due 2002, bearing interest at 11 3/4%. The
Notes are secured by (i) a non-recourse mortgage granted by the Partnership
representing a first lien on the Hotel Assets; (ii) a pledge granted by the
Corporation of all outstanding shares of capital stock of New Claridge; and
(iii) a guarantee by New Claridge. New Claridge's guarantee of the Notes is
secured by a collateral assignment of the second lien Expandable Wraparound
Mortgage, and by a lien on the Claridge's gaming and other assets, which lien
will be subordinated to liens that may be placed on those gaming and other
assets to secure any future

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revolving credit line arrangement. On January 28, 1997, New Claridge entered
into an agreement to subject its new self-parking garage to the lien of the
mortgage; such lien will not be subordinated to any liens which may be placed on
New Claridge's gaming and other assets to secure any future revolving credit
line arrangements. Interest on the Notes is payable semiannually on February 1
and August 1 of each year.

      The net proceeds of the Notes, totalling $82.2 million net of fees and
expenses, were used as follows: (i) to repay in full on January 31, 1994 the
then outstanding debt of the Corporation under its Revolving Credit and Term
Loan Agreement (the "Loan Agreement"), including the outstanding balance of the
Corporation's revolving credit line, which was secured by a first mortgage; (ii)
to expand the casino capacity of the Claridge by 12,000 square feet in 1994,
including the addition of approximately 500 slot machines and the relocation of
two restaurants and their related kitchens; (iii) to purchase property in 1995
and construct on that property a self-parking garage, which opened in mid-1996;
and (iv) to acquire the Contingent Payment Option (see Item 1. Business -
"Contingent Payment"). With the completion of the construction of the
self-parking garage, the proceeds of the offering of the Notes had largely been
expended.

Current Developments

      During 1995, the cash provided by operations of the Claridge was
sufficient to meet the Corporation's obligations to pay interest on the Notes,
as well as to make moderate capital improvements. Commencing in the latter part
of 1995, however, competition in the Atlantic City casino market for bus
customers, a principal source of customers for the Claridge at the time,
increased; this competition intensified even more during 1996 as additional
casino square footage was added, principally due to the opening of the Trump
World's Fair casino. During 1996, the average coin incentive issued per bus
patron at the Claridge increased to approximately $19, from approximately $13 in
1995. Total cash incentives issued to Claridge's casino patrons (in the form of
coin to play slot machines and gaming chips to play table games) increased to
approximately $30.5 million in 1996, from approximately $25.2 million in 1995.
While the Corporation's promotional costs increased significantly, total casino
revenues in 1996 actually decreased from 1995 levels. It had been the
expectation of the Corporation that, upon the opening of its new self-parking
garage, the Corporation would be able to reduce its reliance on the bus patron
market; however, the Corporation was forced to close the garage facility on July
10, 1996, only ten days after its opening, following a fatal accident. Because
the facility was not able to reopen until the end of September 1996, the
Corporation lost any possible benefit of the facility during the normally busy
summer season. In addition, severe winter weather in the first quarter of 1996
adversely affected revenues. As a result, the Corporation experienced a net loss
for 1996 of $15.4 million, compared to a net loss of $1.9 million in 1995.

      The Corporation has experienced recurring losses and deterioration in its
cash flow since 1996. Since the Corporation does not have substantial cash
reserves or access to a line of credit, the Corporation needed to experience
significant improvement in operating results in 1997 over 1996 levels in order
to meet its on-going obligations, including the interest due on the Notes.
Operating results in 1997 did improve over 1996 levels, due primarily to the
positive impact of the availability of the self-parking garage, lower bus
package pricing, and other cost containment initiatives. However, operating
results in 1998 fell below 1997 levels due to increased competition for casino
customers. In 1998, the Corporation experienced a net loss of $9.4 million,
compared to a net loss of $6.0 million in 1997. In the fall of 1998, New
Claridge redirected its bus program to reduce the number of customers who arrive
by bus, and, thereby, related costs. Total coin issued to bus passengers in 1998
was $13.5 million, compared to $15.0 million of coin issued to bus passengers in
1997. Marketing efforts are being directed toward the mid-level slot customer
through the use of promotions and advertising. Additionally, management
continues to conserve cash

                                        2

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through various cost containment measures. Management will also consider various
refinancing alternatives, including a sale of the Corporation, or a
restructuring of its financial obligations.

      In view of the operating results of New Claridge in 1998, and in order to
meet its obligations, management of the Corporation took several steps to
enhance its cash position, through both operational changes, including the
previously mentioned redirection of the bus program, and certain transactions
with PDS Financial Corporation ("PDS") and the New Jersey Casino Reinvestment
Development Authority ("CRDA"), as further discussed below.

      In December 1997, New Claridge obtained a commitment from PDS for a sale
lease-back facility (the "Facility"). Under the terms of the Facility, New
Claridge could sell certain of its slot machines to PDS under a sale lease-back
arrangement, for a specified amount per slot machine. In February 1998, New
Claridge sold 370 slot machines to PDS for approximately $1 million under this
Facility. The machines were then leased back to New Claridge under an operating
lease arrangement for two years. After two years, New Claridge has an option to
either purchase the machines, renew the lease arrangement for twelve months, or
return the equipment to PDS. In December 1998, New Claridge completed the sale
of an additional 379 slot machines to PDS for approximately $776,000, under
terms similar to those described above. No additional financing is available
under this Facility.

      In October 1998, the CRDA approved the direct investment of New Claridge
funds, already on deposit with the CRDA, and the completion of certain donations
of New Claridge funds also already on deposit. These transactions resulted in
the receipt by New Claridge of approximately $930,000 from the CRDA in December
1998.

      In addition, in February 1999, the Corporation and New Claridge agreed to
a settlement of approximately $2.3 million in the arbitration proceedings
concerning the accident which took place in New Claridge's self-parking garage
in July 1996. The settlement proceeds were received by New Claridge in late
February 1999.

      As a result of these transactions, on March 2, 1999, New Claridge was able
to pay the interest due on the Notes on February 1, 1999, under the 30-day grace
period allowed in accordance with the terms of the indenture governing the Notes
(the "Indenture").

Certain Agreements between the Corporation, New Claridge and the Partnership

      The current relationships and agreements between the Corporation, New
Claridge and the Partnership are described below:

      Operating Lease/Expansion Operating Lease. The Casino Assets are owned by
      New Claridge. In addition, the new self-parking garage and the land on
      which it is located are owned by New Claridge. The Hotel Assets and
      underlying land are owned by the Partnership and leased by the Partnership
      to New Claridge under the terms of an operating lease (the "Operating
      Lease"), and an expansion operating lease (the "Expansion Operating
      Lease"), which covered certain expansion improvements made to the Claridge
      in 1986 (the "Expansion Improvements"). The initial terms of both leases
      expired on September 30, 1998; each lease provides for three ten-year
      renewal options at the election of New Claridge. In connection with the
      March 1, 1997 restructuring agreement (discussed below), New Claridge
      agreed to exercise the first of the ten-year renewal options, extending
      the term of the Operating Lease and Expansion Operating Lease through
      September 30, 2008.


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      Basic rent during the renewal term of each lease is calculated pursuant to
      a defined formula, with such rent for the lease year commencing October 1,
      1998 through September 30, 1999 not to be more than $29.5 million nor less
      than $24 million for the Operating Lease, and not to be more than $3
      million nor less than $2.5 million for the Expansion Operating Lease. In
      addition, in each subsequent year, rent will be calculated pursuant to a
      defined formula, but may not exceed 10% more than the basic rent for the
      immediately preceding lease year. Basic rent, as calculated pursuant to
      the defined formula, for the lease year commencing October 1, 1998, will
      be $24 million for the Operating Lease and $2.5 million for the Expansion
      Operating Lease.

      New Claridge is also required to pay as additional rent amounts including
      certain taxes, insurance and other charges relating to the occupancy of
      the land and Hotel Assets, certain expenses and debt service relating to
      furniture, fixture and equipment replacements and building improvements
      (collectively, "FF&E Replacements") and the general and administrative
      costs of the Partnership. The Partnership is required during the entire
      term of the Operating Lease, and any subsequent renewal terms, to provide
      FF&E Replacements to New Claridge and to provide facility maintenance and
      engineering services to New Claridge. New Claridge is required to lend the
      Partnership any amounts ("FF&E Loans") necessary to fund the cost of FF&E
      Replacements, and if the Partnership's cash flow, after allowance for
      certain distributions, is insufficient to provide the facility maintenance
      and engineering services required of it, New Claridge is also required to
      lend the Partnership the funds required to provide those services. Any
      advances by New Claridge for either of the foregoing will be secured under
      the Expandable Wraparound Mortgage in an amount up to $25,000,000.
      Thereafter, such advances are to be secured under separate security
      agreements.

      Effective with the consummation of the restructuring in June 1989, the
      Operating Lease and the Expansion Operating Lease were amended to provide
      for the deferral of up to $15.1 million of rental payments during the
      period July 1, 1988 through the beginning of 1992, and to provide for the
      abatement of $38.8 million of basic rent through 1998, thereby reducing
      the Partnership's cash flow to an amount estimated to be necessary only to
      meet the Partnership's cash requirements. During the third quarter of
      1991, the maximum deferral of rent was reached. On August 1, 1991, the
      Operating Lease and Expansion Operating Lease were amended further to
      revise the abatement provisions so that, commencing January 1, 1991, for
      each calendar year through 1998, the lease abatements could not exceed $10
      million in any one calendar year, and $38.8 million in the aggregate. All
      of the $38.8 million of available rent abatements were fully utilized by
      the end of March 1997.

      The Fifth Amendment to the Operating Lease and the Fourth Amendment to the
      Expansion Operating Lease, which were effective on March 1, 1997, provided
      for the abatement of $867,953 of basic rent and for the deferral of
      $1,300,000 of basic rent on March 1, 1997, and provide for additional
      abatements of basic rent, commencing on April 1, 1997, as necessary to
      reduce the Partnership's cash flow to an amount necessary only to meet the
      Partnership's cash requirements through December 31, 1998. The $1.3
      million of basic rent deferred on March 1, 1997 is to be paid to the
      Partnership in monthly installments of $25,000 for the period April 1,
      1997 through December 31, 1997, and monthly installments of $50,000 for
      the year 1998 and thereafter until paid in full (subject to acceleration
      under certain circumstances).

      In conjunction with the Fifth Amendment to the Operating Lease and the
      Fourth Amendment to the Expansion Operating Lease, as discussed above, the
      Corporation, New Claridge and the Partnership entered into a restructuring
      agreement, effective March 1, 1997, to modify certain terms of the
      Expandable Wraparound Mortgage (see below).


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      Under the terms of the Operating Lease, as amended effective March 1,
      1997, New Claridge had an option to purchase (the "Purchase Option"), on
      September 30, 1998, the Hotel Assets and the underlying land. To exercise
      the Purchase Option, New Claridge was required to give notice to the
      Partnership, at least nine months prior to the option date, of its
      election to do so. Based on its financial situation, New Claridge did not
      give such notice to the Partnership in respect of the September 30, 1998
      option date. However, New Claridge may also exercise an option, on
      September 30, 2003, to purchase the Hotel Assets and the underlying land,
      on January 1, 2004, for their fair market value at the time the option is
      exercised.

      Effective September 30, 1998, the Operating Lease and Expansion Operating
      Lease were further amended, pursuant to a Sixth Amendment to the Operating
      Lease and Fifth Amendment to the Expansion Operating Lease (the "Sixth
      Amendment"), to allow for the deferral of $1.1 million of rent in either
      February 1999 or March 1999, dependent upon certain conditions being met.
      These conditions, which must have occurred prior to March 2, 1999, include
      (i) New Claridge having received the proceeds in connection with its
      settlement of the parking garage litigation; and (ii) the Corporation or
      New Claridge having paid the interest due on the Notes on February 1,
      1999. New Claridge received the proceeds from the settlement of the
      parking garage litigation in February 1999, and paid the interest that was
      due on the Notes on March 2, 1999, within the 30-day grace period allowed
      in accordance with the terms of the Indenture. The $1.1 million of basic
      rent deferred in 1999 is to be paid to the Partnership in monthly
      installments of $25,000 commencing January 1, 2000 until paid in full
      (subject to acceleration under certain circumstances). This amendment also
      provides for additional abatements of rent, through December 31, 2004, as
      necessary to reduce the Partnership's cash flow to an amount necessary
      only to meet the Partnership's cash requirements; these abatements,
      however, are to be reduced by specified amounts for each period commencing
      January 1, 2000 and ending December 31, 2004 ($83,333 per month in 2000,
      $130,000 per month in 2001, $180,000 per month in 2002 and 2003, and
      $130,000 per month in 2004).

      In addition to the deferral and abatements of rent provided for in the
      Sixth Amendment, the amendment provides for the payment of $3.5 million of
      additional basic rent on the earlier of (i) the maturity date of the
      Expandable Wraparound Mortgage Note (see below); (ii) such earlier date,
      if any, as the entire principal amount of the Expandable Wraparound
      Mortgage becomes due and payable; or (iii) the date on which any merger,
      consolidation, or similar transaction to which the Corporation or New
      Claridge is a party, or any sale of all or substantially all of the assets
      of the Corporation or New Claridge is consummated, or any change in
      control of the Corporation or New Claridge occurs.

      If the Partnership should fail to make any payment due under the
      Expandable Wraparound Mortgage, New Claridge may exercise a right of
      offset against rent or other payments due under the Operating Lease and
      Expansion Operating Lease to the extent of any such deficiency.

      Expandable Wraparound Mortgage. On October 31, 1983, the Partnership
      executed and delivered to New Claridge the Expandable Wraparound Mortgage,
      which was subordinate to an $80 million first mortgage granted by the
      Partnership to a group of banks, and a $47 million purchase money second
      mortgage ("Purchase Money Second Mortgage"), granted by the Partnership to
      DEWNJ. The Purchase Money Second Mortgage, which was due on September 30,
      2000, was cancelled upon satisfaction of certain conditions set forth in
      an agreement entered into at the time of the 1989 restructuring. In
      conjunction with the offering of $85 million of Notes on January 31, 1994,
      the outstanding debt under the Loan Agreement, which included a first
      mortgage and the revolving credit line, was satisfied in full. By its
      terms, the Expandable Wraparound Mortgage may secure up to $25 million of
      additional loans to the Partnership from New Claridge to finance FF&E
      Replacements and

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      facility maintenance and engineering shortfalls. The Expandable Wraparound
      Mortgage provides that, so long as the Partnership is not in default on
      its obligations under the Expandable Wraparound Mortgage, New Claridge is
      obligated to make payments required under any senior mortgage
      indebtedness. The indebtedness secured by the Expandable Wraparound
      Mortgage bears interest at an annual rate equal to 14%, with certain
      interest installments that accrued in 1983 through 1988 totalling $20
      million being deferred until maturity. In addition, the Partnership is
      required under the Expandable Wraparound Mortgage to make payments of
      principal and interest in respect of any FF&E Loans made to finance FF&E
      Replacements or facility maintenance or engineering costs as described
      above. To the extent these FF&E Loans exceed $25 million in the aggregate
      outstanding at any time, they are to be secured under separate security
      agreements and not by the lien of the Expandable Wraparound Mortgage.

      On March 17, 1986, the first mortgage was amended and assumed by New
      Claridge. The amount of the amended and assumed first mortgage was
      increased to secure up to $96.5 million to provide financing for the
      Expansion Improvements. Indebtedness secured by the Expandable Wraparound
      Mortgage was increased by an amount up to $17 million to provide the
      Partnership with the necessary funding.

      Effective August 28, 1986, the Partnership commenced making level monthly
      payments of principal and interest so as to repay on September 30, 1998,
      in full, the principal balance of this $17 million increase in the
      Expandable Wraparound Mortgage. On March 17, 1986, the Expandable
      Wraparound Mortgage was amended to require that the $127 million aggregate
      principal amount secured by it would be repayable in installments during
      the years 1988 through 1998 in escalating amounts totalling $80 million,
      with a balloon payment of $47 million and the $20 million of deferred
      interest due on September 30, 2000.

      Effective March 1, 1997, the Corporation, New Claridge, and the
      Partnership entered into a restructuring agreement, pursuant to which New
      Claridge agreed to use its best efforts to cause a modification of the
      Expandable Wraparound Mortgage (the "Wraparound Modification") that is
      permitted by, or is in compliance with, the terms of the Indenture. The
      Wraparound Modification, if so permitted, will provide for an extension of
      the maturity date of the Expandable Wraparound Mortgage from September 30,
      2000 to January 1, 2004. If the Wraparound Modification is not permitted
      by or in compliance with the terms of the Indenture, New Claridge has
      agreed to effect the Wraparound Modification at such time as the Notes are
      no longer outstanding.

      In connection with the offering of the Notes on January 31, 1994, the
      Corporation agreed to use not less than $8 million from the net proceeds
      of the offering to finance certain internal improvements to the Claridge
      which were funded through additional FF&E Loans. In connection therewith,
      the Expandable Wraparound Mortgage Loan agreement as well as the Operating
      Lease, and the Expansion Operating Lease were amended to provide that the
      principal on these additional FF&E Loans will be payable at final maturity
      of the Expandable Wraparound Mortgage.

      Effective September 30, 1998, the Corporation, New Claridge, and the
      Partnership agreed to amend the March 1997 restructuring agreement to
      provide for an extension of the maturity date of the Expandable Wraparound
      Mortgage to January 1, 2005. In addition, the Expandable Wraparound
      Mortgage Agreement and Note were amended to defer the principal payments
      which were payable during the fourth quarter of 1998 (totalling $3.5
      million) to the earlier of (i) the maturity date of the Expandable
      Wraparound Mortgage Agreement and Note; (ii) such earlier date, if any, as
      the entire principal amount of the Expandable Wraparound Mortgage Note
      becomes due and payable; or (iii)

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      the date on which any merger, consolidation, or similar transaction to
      which the Corporation or New Claridge is a party, or any sale of all or
      substantially all of the assets of the Corporation or New Claridge is
      consummated, or any change of control of the Corporation or New Claridge
      occurs.

Contingent Payment

      Following the 1983 transactions, Webb and its affiliates retained
significant interests in the Claridge. Effective with the closing of the
restructuring in June 1989, all or substantially all of the financial,
contractual, ownership, guarantee and other relationships of the Corporation and
New Claridge with Webb were terminated. The Restructuring Agreement provided
that Webb would retain an interest equal to $20 million plus interest from
December 1, 1988 at the rate of 15% per annum compounded quarterly (the
"Contingent Payment") in any proceeds ultimately recovered from the operations
and/or the sale or refinancing of the Claridge facility in excess of the first
mortgage loan and other liabilities. To give effect to this Contingent Payment,
the Corporation and the Partnership agreed not to make any distributions to
their shareholders or partners, respectively, whether derived from operations or
from sale or refinancing proceeds, until Webb had received the Contingent
Payment. It is estimated that at December 31, 1998, the aggregate amount payable
in respect of the Contingent Payment was $88.3 million.

      In connection with the 1989 restructuring, Webb agreed to grant those
investors in the Corporation and the Partnership ("Releasing Investors"), from
whom Webb had received written releases from all liabilities, rights
("Contingent Payment Rights") to receive certain amounts to the extent available
for application to the Contingent Payment. Approximately 84% in interest of the
investors provided releases and became Releasing Investors. Payments to
Releasing Investors are to be made in accordance with a schedule of priorities,
as defined in the Restructuring Agreement.

      On April 2, 1990, Webb transferred its interest in the Contingent Payment
to an irrevocable trust for the benefit of the Valley of the Sun United Way, and
upon such transfer Webb was no longer required to be qualified or licensed by
the New Jersey Casino Control Commission (the "Commission").

      On February 23, 1996, the Corporation acquired an option to purchase, at a
discount from the carrying value, the Contingent Payment. The purchase price of
the option was $1 million, and the option could have been exercised any time
prior to December 31, 1997. Given the recent operating results (see Item 1.
Business - "Current Developments"), the Corporation was not able to exercise
this Contingent Payment option, and it expired in accordance with its terms on
December 31, 1997.

The Claridge

      The Claridge, located in the Boardwalk casino section of Atlantic City,
New Jersey, is a 26-story building that contains the Corporation's casino and
hotel facilities. Built in 1929 as a hotel, the Claridge was remodeled at a cost
of approximately $138 million prior to its reopening as a casino hotel in 1981.
The Expansion Improvements, which were completed in 1986 at a cost of
approximately $20 million, provided approximately 10,000 additional square feet
of casino space, together with a 3,600 square foot lounge. In 1994,
approximately $12.7 million was expended to expand the Claridge's casino square
footage by approximately 12,000 feet, and move and enlarge two restaurants. In
1996, New Claridge constructed a self-parking garage facility connected to its
existing valet-parking garage, at a cost of approximately $28 million. The
combined garage facility provides parking for approximately 1,200 vehicles.

      The Claridge's casino consists of approximately 59,000 square feet of
casino space on three main

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levels with various adjacent mezzanine levels. The casino currently contains
approximately 1,752 slot machines and sixty-four table games, including
thirty-six blackjack tables, eight craps tables, five roulette tables, three
Caribbean stud poker tables, two mini-baccarat and two baccarat tables, and
eight other specialty games. The hotel with related amenities consists of 502
guest rooms (including 28 corner suites, 26 specialty suites and five tower
penthouse suites), four restaurants, three lounges, a private players club, a
600-seat theater, limited meeting rooms, a gift shop, a beauty salon, and a
health club with an indoor swimming pool.

      New Claridge experiences a seasonal fluctuation in demand, which is
typical of casino-hotel operations in Atlantic City. Historically, peak demand
has occurred during the summer season. New Claridge's principal market is the
mid-Atlantic area of the United States. The casino gaming business in Atlantic
City is highly competitive and is strictly regulated under the New Jersey Casino
Control Act (the "Act") and regulations thereunder which affect virtually all
aspects of casino operations. (See Item 1.
Business - "Competition" and "Gaming Regulation and Licensing").

Competition

      Competition in the Atlantic City casino-hotel market is intense. As of
December 31, 1998, the twelve existing casino facilities offered approximately
1,212,000 square feet of gaming space, a 3.3% increase over the casino square
footage as of December 31, 1997 of approximately 1,173,000 square feet. This
increase was primarily due to a casino expansion at Caesars Atlantic City
Casino, which added approximately 800 slot machines to its existing casino in
the second quarter in 1998. The increase in casino square footage in 1997 over
1996 was approximately 8.6%, resulting from the opening of Bally's Wild Wild
West Casino in July 1997. However, for the years ended December 31, 1998 and
1997, citywide gaming revenues, as reported, increased only 3.6% and 2.4%,
respectively, over prior year levels.

      The Atlantic City gaming market is not expected to experience significant
growth over the next several years, until Atlantic City transforms itself from a
"day-trip" market to a "destination resort." As a result of current high room
occupancy rates, a more favorable regulatory climate, the reduced threat of
competition from potential new gaming jurisdictions, and significant
infrastructure developments making Atlantic City more accessible, over $4.6
billion of new investment has been announced or recently completed in the
Atlantic City gaming market. In addition to recent increases in casino space and
hotel rooms at the existing casinos, several Las Vegas casino operators have
announced plans to construct new casinos in Atlantic City.

      In addition to the major casino expansions and the announced new casinos,
major infrastructure improvements have begun. A new $268 million convention
center, which was completed in May 1997, contains approximately 500,000 square
feet of exhibition space, 45 meeting rooms, food service facilities, and a
1,600-car underground parking garage. The new convention center is the largest
exhibition space between Boston and Atlanta. A 500-room non-casino hotel, which
is linked to the new convention center by an elevated walkway, opened in
November 1997. The development of the corridor which links the convention center
to the boardwalk area is complete, and features a wide, landscaped boulevard
with a reflecting pool, an expanded park area, and a 60-foot lighthouse which is
illuminated each night by a light show. In February 1997, construction of the
new $7.5 million bus terminal, which is a major component of this corridor, was
completed. The State of New Jersey is also implementing a capital plan of
approximately $125 million to upgrade and expand the Atlantic City International
Airport. Construction of a $300 million tunnel, which will provide access from
the Atlantic City Expressway to the marina casino district, began in late 1998.


                                        8

<PAGE>



      All casinos in Atlantic City are part of hotels which offer dining,
entertainment, and other guest facilities. As the size of the gaming facilities
continue to grow, the need for additional hotel rooms has become evident. During
1996, the number of hotel rooms available citywide increased with the opening of
the Trump World's Fair casino (approximately 500 rooms) and the Tropicana's new
600-room hotel tower. Several existing Atlantic City casinos also increased
their hotel space in 1997, including Harrah's (approximately 400 rooms), Hilton
(approximately 300 rooms), and Caesars (approximately 600 rooms), for a total
increase in 1997 of approximately 1,500 hotel rooms. Competition among the
existing casino-hotels is based on factors such as promotional allowances and
incentives; the attractiveness of the casino area; advertising; customer
service; the availability, quality, and price of rooms, food, and beverage; ease
and availability of parking and accessing the facility; and entertainment.

       The Atlantic City business is seasonal, with the highest level of
activity occurring during the summer months, and the lowest level of activity
during the winter months. The primary markets for Atlantic City casino patrons
are Philadelphia, New Jersey and New York City, together with the secondary
markets of central Pennsylvania, Delaware, Baltimore and Washington, D.C.
Casinos offer incentives, in the form of cash and complimentaries for rooms,
food and beverages, to their customers based on their casino play. In recent
years, competition for, and as a result, incentives offered to, customers has
increased significantly. Many Atlantic City casino patrons arrive by bus and
stay for approximately six hours. Competitive factors in Atlantic City require
the payment of cash incentives and coupons for use towards the price of meals to
patrons arriving under bus programs sponsored by the casino operators.
Competition for bus patrons intensified in 1996, in the form of higher coin
incentives; New Claridge was forced to match the citywide increases, thus
increasing its per patron average coin cost to approximately $19 in 1996 from
approximately $13 in 1995. New Claridge relied heavily on attracting patrons who
travel to Atlantic City by bus because the Claridge previously lacked a
self-parking facility, and therefore had to remain competitive with other casino
operators in regards to the incentives offered. Even with its 1,200-space
parking facility, New Claridge continued to rely on its bus customers as a
significant source of business in 1997 and 1998. In 1997, citywide bus package
pricing competition eased somewhat; the average coin cost per patron arriving by
bus to the Claridge decreased to $16 in 1997. However, in 1998, bus package
pricing competition began to increase again, fueled by the expansion at Caesars
Atlantic City Casino (which added approximately 800 slot machines in early
1998), as well as the opening of Bally Park Place's bus transportation center in
the third quarter of 1998. In response to increasing bus package pricing,
beginning in the fall of 1998, New Claridge redirected its marketing efforts to
reduce the number of customers who arrive by bus, and, thereby, related costs.
In the fourth quarter of 1998, 130,000 passengers were brought to the Claridge
by bus, compared to 207,000 bus passengers in the same period of 1997, a
reduction of approximately 37%. Instead, efforts are being directed toward the
mid-level slot customer through the use of direct marketing promotions and
advertising, as well as the continued efforts to increase the table games
segment of the business.

      The Claridge has positioned itself as the "smaller, friendlier"
alternative to the other Atlantic City casinos. This strategy, implemented in
1989, is designed to capitalize on the Claridge's unique physical facility,
which the Corporation believes retains the atmosphere of a grand hotel, and on
the Claridge's smaller, more intimate size relative to the larger Atlantic City
casinos. By emphasizing an environment that is intimate, friendly and
service-oriented, the Claridge targets a market niche different than that of a
majority of its competitors. The Claridge seeks to attract and retain a customer
base whose wagering spans the same market segments serviced by other casino
hotels, but primarily targets the middle, leaving the high-end business to its
competitors. New Claridge believes it is uneconomical to pursue the high-end
market as its core business because of the high maintenance cost and potential
volatility in table games "hold" percentages (the ratio of win to the amount of
gaming chips purchased by patrons). The majority of the Claridge's casino
revenue is generated by slot machine play, although efforts have been taken in

                                        9

<PAGE>



recent years to increase table games play. In 1997, 76% of the Claridge's casino
revenue came from slot play as compared to 69% reported for all Atlantic City
properties. In 1998, 74% of the Claridge's casino revenue was generated from
slot play, compared to 70% for all Atlantic City casinos.

      The key elements of New Claridge's marketing plan include the use of
complimentaries, promotional activities, entertainment events, player
development hosts, a bus program, and the use of commissioned agents to attract
groups from outside the company's traditional market areas. New Claridge also
operates a direct marketing program to attract and retain customers. New
Claridge's Compcard Gold program, which allows patrons to earn various
complimentaries, including coins for slot machine play and gaming chips for
table play, based on their levels of gaming activity, provides a valuable
database of information on playing preferences, frequency and denominations of
play, and the amount of gaming revenues produced by gaming patrons. Because of
the expanded facilities and amenities now offered at the Claridge, the "Because
Smaller is Friendlier" positioning statement was changed to "Smaller, Friendlier
and So Much More." This position retains the equity in the intimacy-seeking
patron, but extends it to communicate that the Claridge now has a facility
capable of comfortably servicing a larger customer base, and offering the same
amenities and entertainment found at larger Atlantic City casino hotels.

      Competition in Atlantic City also extends to the employment market. The
Commission has promulgated regulations which require staffing levels at Atlantic
City casinos which are higher than those for casino-hotels in Nevada. In
addition, although the January 1995 amendments to the Act (see Item 1. Business
- "Gaming Regulation and Licensing" below) have eased the licensing requirements
for some employees, all of New Claridge's casino employees must be licensed.
Partly as a result of the licensing requirements, there has been intense
competition for experienced casino employees in Atlantic City. Difficulties in
hiring personnel licensed by the Commission have elevated labor costs, and
licensed personnel frequently leave their current positions for higher paying
jobs in other casinos. In addition, the expansion of casino gaming into other
jurisdictions has increased the competition for experienced casino management
personnel.

      Casino competition outside of New Jersey includes land-based casinos,
river boat gaming, slot machines at racetracks, and Indian gaming. By far, the
most competitive threat to Atlantic City has been the Indian gaming operations
at Foxwoods and the Mohegan Sun casinos in Connecticut, and the slot machine
facilities at the Delaware racetracks. The two Indian gaming casinos in
Connecticut, with a combined total of approximately 8,700 slot machines as of
December 31, 1998, reported total slot win of $1.1 billion for 1998, an increase
of 18% over 1997 slot revenue of $945 million. In Delaware, the three tracks
that are currently authorized to offer slot machine gaming had a combined total
of approximately 3,000 slot machines as of the end of 1998. These machines
generated $350.8 million of slot revenue during the year, an increase of 17%
over 1997 revenue. The Pennsylvania Senate recently voted against a bill which
would have allowed the state's voters to consider, in a non-binding referendum,
the authorization of riverboat casinos, slot machines at racetracks, and video
poker in drinking establishments. It is unlikely that Pennsylvania's Legislature
will consider another gambling bill while the current Governor, whose term ends
in January 2003, is in office. However, the effect of any future legalization of
casino gaming in Pennsylvania on the Atlantic City market would depend on the
form and scope of such gaming.

Gaming Regulation and Licensing

      a. The New Jersey Casino Control Commission and Division of Gaming
Enforcement. The ownership and operation of casino-hotel facilities in Atlantic
City are subject to extensive state regulation under the Act. No casino-hotel
may operate in Atlantic City unless necessary corporate and individual

                                       10

<PAGE>



officer, director and employee licenses are obtained from the Commission. The
Commission is authorized under the Act to adopt regulations covering a broad
spectrum of gaming-related activities.

      The Act also establishes a Division of Gaming Enforcement (the "Division")
to investigate all applications for licenses, enforce the provisions of the Act
and the regulations thereunder, and prosecute before the Commission all
proceedings for violations of the Act or any regulations thereunder. The
Division conducts audits and continually reviews casino operations, maintains
information with respect to any changes in ownership of the casino-hotel and
conducts investigations of casino owners and investors when appropriate.

      Since 1991, changes to the Act have been enacted which have reduced
regulation of the casino industry; such changes have included the implementation
of 24-hour gaming, the introduction of new types of games, and the introduction
of simulcast wagering. In January 1995, significant amendments to the Act were
signed into law, which were intended to further reduce the regulation of the
Atlantic City casino industry. These amendments included changes regarding (i)
the authority and responsibilities of the Commission and the Division; (ii) the
licensing requirements of employees, casinos, and employees of industries which
service the casinos; (iii) the operation of the casinos; and (iv) the operation
of the CRDA.

      b. Licensing Requirements. The Act provides that various categories of
persons or entities must hold casino licenses. The Act also provides that each
officer, director and person who directly or indirectly holds any beneficial
interest or ownership in a casino licensee; or any person who, in the opinion of
the Commission, has the ability to control a casino licensee or elect a majority
of the board of directors; or each principal employee or any other employee of a
casino licensee (and any lender to or underwriter, agent or employee of the
licensee) who the Commission may consider appropriate for approval or
qualification, be qualified for approval pursuant to the provisions of the Act.
In addition, all contracts and leases entered into by the licensee may, upon
request of the Commission, must be submitted to the Commission, are subject to
its review, and, if found unacceptable, are voidable. All enterprises which
provide gaming-related services to the licensee must be licensed. All other
enterprises dealing with the licensee must register with the Commission, which
may require that they be licensed if they do $75,000 or more per year in
business with a single licensee, and $225,000 or more per year if with more than
one licensee.

      New Claridge holds a casino license because it carries on the casino
business of the Claridge and owns the Casino Assets. As a result, New Claridge's
officers and directors are subject to Commission qualification. The Corporation,
as the sole owner of the stock of New Claridge, is also required to be
qualified. As a part of its determination of the Corporation's qualification,
the Commission will require the qualification of each officer, each director,
and each person who directly or indirectly holds any beneficial interest or
ownership in the Corporation, and who the Commission requires to be qualified,
or any person who, in the opinion of the Commission, has the ability to control
the Corporation or elect a majority of its Board of Directors; or each principal
employee or any other employee whom the Commission may consider appropriate for
approval or qualification. The Commission has determined that no stockholder of
the Corporation owning less than 5% of its stock will be required to be
qualified unless the Commission determines that such stockholder has the ability
to control the Corporation or elect a majority of its Board of Directors. The
names and addresses of all stockholders have been supplied to the Commission and
any changes known to the Corporation are reported when they occur.

      c. Licensing Status. The Commission issues casino licenses, which, as
amended January 1995, are renewable every four years, subject to a series of
requirements including a requirement of demonstrating financial viability. On
September 22, 1995, New Claridge was issued a four-year casino license by the

                                       11

<PAGE>



Commission for the period commencing September 30, 1995.

      d. Investigations and Disqualifications. The Commission may find any
holder of any amount of securities of the Corporation not qualified to own
securities of the Corporation. Further, as required by New Jersey, the charter
and the by-laws of the Corporation and New Claridge provide that securities of
the Corporation and New Claridge are held subject to the condition that if a
holder is found to be disqualified by the Commission the holder must dispose of
the securities of the Corporation or New Claridge, as the case may be. The
Corporation will periodically report the names and addresses of owners of record
of Class A Stock to the Commission as is required for all publicly traded
holding companies that have wholly-owned subsidiaries holding casino licenses.

      e. Casino Fees and Taxes. The Act provides for a casino license issue fee
of not less than $200,000, based upon the cost of the investigation and
consideration of the license application, and renewal fee of not less than
$200,000, as amended in January 1995, based upon the cost of maintaining control
and regulatory activities. The renewal fee is charged to the casino licensee on
a monthly basis, based on the cost of actual investigatory time spent monitoring
activities at the casino hotel. In addition, a licensee is subject to (i) a tax
of eight percent (8%) of gaming revenues less the provision for uncollectible
accounts; (ii) an annual license fee of $500 on each slot machine; and (iii) an
alcoholic beverage fee computed on the basis of the cost of investigatory time
spent monitoring each beverage outlet.

      The Act as amended in December 1984 further provides for the imposition of
an investment obligation pursuant to criteria set forth in the Act, or the
payment of an alternative tax. The investment obligation is 1.25% of the total
gaming revenues (which are defined as the total revenues derived from gaming
operations less the provision for uncollectible accounts) for each calendar
year. If the casino licensee opts not to make an investment, it is assessed an
alternative tax of 2.5% of total gaming revenues less the provision for
uncollectible accounts. The licensee has two options in satisfying its
investment obligation; it can make a direct investment in a project approved by
the CRDA, which is the agency responsible for administering this portion of the
Act, or it can buy bonds issued by the CRDA which will, if tax exempt, bear
interest at the rate of 66 and 2/3% of the average rate of the Bond Buyer Weekly
25 Revenue Bond Index for the 26 weeks preceding the issue of the bonds. If the
bonds are not tax exempt they will bear interest at the rate of 66 and 2/3% of
the average rate of Moody's A Rated Utility Index for the 26 weeks preceding the
issue of the CRDA bonds. The investment obligation must be paid on the fifteenth
day of the first, fourth, seventh, and tenth months of each year based on the
estimated gaming revenues for the three month period immediately preceding the
first day of those months. The alternative tax must be paid not later than April
30 of the following year.

      New laws and regulations as well as amendments to existing laws and
regulations relating to gaming activities in Atlantic City are adopted from time
to time. Effective July 1, 1993, the New Jersey state legislature passed a law
requiring the payment of parking fees by casinos in New Jersey in the amount of
$2.00 per day for each motor vehicle parked in a casino parking space. In 1992
the New Jersey state legislature passed a law requiring the payment of a tourism
marketing fee of $2.00 per occupied room by casino hotels in Atlantic City.

Employees

      As of December 31, 1998, New Claridge employed approximately 2,150
persons, of whom approximately 760 are represented by labor unions.
Approximately 650 of the 760 are represented by the Hotel, Restaurant Employees
and Bartender International Union, AFL-CIO, Local 54. In September 1994, the
Corporation's collective bargaining agreement covering the employees represented
by Local 54 was

                                       12

<PAGE>



renewed, together with the collective bargaining agreements of all Atlantic City
casinos with respect to Local 54, for a period of five years. The Corporation's
collective bargaining agreement covering the approximately 650 employees
represented by Local 54 is scheduled to expire in September 1999. The collective
bargaining agreements of all Atlantic City properties with respect to Local 54
also expire at that time.

      The management of the Claridge believes that its employee relations are
generally satisfactory. All of the employees represented by labor unions are
covered by collective bargaining agreements which prohibit work stoppages during
their terms.

Item 2. PROPERTIES

      The Claridge hotel was constructed in 1929 at the northeastern end of
Absecon Island, on which Atlantic City is located. After remodeling,
modernization and expansion at a cost of approximately $138 million, the
Claridge opened as a casino-hotel in July 1981. Located in the Boardwalk Casino
section of Atlantic City on Brighton Park, approximately 550 feet north of the
Boardwalk, the Claridge occupies three parcels of property.

      The casino-hotel, situated on the main parcel (41,408 square feet with 138
feet fronting the park and 300 feet deep), is a concrete steel frame structure,
26 stories high at its highest point. The valet-parking garage, situated on an
adjacent parcel of land (21,840 square feet) west of the casino-hotel site, is
an eight-level reinforced concrete ramp structure, built in 1981. Including the
bus drive-through area, a bus patron waiting room and an electrical room, it
totals an area of 197,100 square feet and provides parking for approximately 475
vehicles. In 1996, New Claridge completed the construction of a self-parking
garage, located on a parcel of land (29,120 square feet) connected to the
existing valet-parking garage. The combined garage facility provides parking for
approximately 1,200 vehicles. The office building, situated on an adjacent
parcel of land (7,766 square feet), is a two-story reinforced concrete and brick
structure with a flat roof. Constructed about 50 years ago, its interior has
been modernized. The building is utilized as an administration facility, and
totals an area of 14,020 square feet. With the exception of the self-parking
garage, all of the facilities discussed are owned by the Partnership and are
leased to New Claridge under the Operating Lease and the Expansion Operating
Lease. The self-parking garage and the property on which it is located are owned
by New Claridge.

Item 3.  LEGAL PROCEEDINGS

      On July 10, 1996, ten days after its opening, a fatal accident occurred at
New Claridge's self-parking garage, in which the vehicle of two patrons breached
a cable restraint system, permitting their vehicle to drive through the side
wall of the self-parking garage. The vehicle fell four stories to the sidewalk
and street below, killing both occupants. As a result, New Claridge's
self-parking garage was closed until the end of September 1996, while various
investigations sought to determine the cause of the accident. At the same time,
New Claridge determined to remove the exterior wall cable restraint system and
replace it with a rigid I-beam barrier system.

      New Claridge retained the law firm of Zelle and Larson LLP of Minneapolis,
Minnesota to assist in the recovery of certain expenses incurred in reopening
the self-parking garage and potential lost profit claims. On July 22, 1997, New
Claridge filed a Complaint and Demand for Arbitration in the amount of $10
million against the general contractor and the architect for the garage,
alleging negligence, breach of warranty and breach of contract in the design and
construction of the garage. In February 1999, the Corporation and New Claridge
entered into a settlement agreement of approximately $2.3 million in the

                                       13

<PAGE>



arbitration proceedings.

      A wrongful death action was commenced by the estates of the two patrons
who died in the July 1996 accident in the self-parking garage. New Claridge is
fully insured and indemnified for any financial liability that may result due to
either an award to or a negotiated settlement with the plaintiffs in this
action.

      During 1995, the Corporation received notice from the Internal Revenue
Service ("IRS") asserting deficiencies in Federal corporate income taxes for the
Corporation's 1990 and 1991 taxable years. Many of the proposed adjustments to
the Corporation's consolidated tax returns have been settled with no adverse
impact to the Corporation's consolidated financial statements. There is a
remaining IRS asserted deficiency for the 1990 and 1991 taxable years. In
October 1996, the IRS sent the Corporation a statutory notice of deficiency for
the Corporation's 1990 and 1991 taxable years. In January 1997, the Corporation
filed a petition with the United States Tax Court (the "Court") requesting a
redetermination of the asserted deficiency. In January 1999, the Corporation
reached a settlement agreement with the IRS District Counsel, which was
submitted to the Court on January 25, 1999. On March 4, 1999, the Court
confirmed this settlement. This settlement agreement does not have a material
impact on the Corporation's consolidated financial statements.

      The Corporation and its subsidiaries are not parties to any other material
litigation other than ordinary routine litigation which is incidental to its
business.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

                                       14

<PAGE>



                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS

      All issued and outstanding shares of the Corporation have been offered and
sold in reliance on exemptions from the registration requirements of the
Securities Act of 1933 as amended (the "Securities Act"). Therefore, there is no
established trading market for any class of shares of the Corporation. In
October 1983, 562,500 shares of Class A Stock were sold to Oppenheimer Holdings,
Inc., and certain officers and employees of Oppenheimer & Co., Inc., (placement
agent for the Partnership and the Corporation) at their par value, $.001 per
share, and 4,500,000 shares of Class A Stock were privately offered and sold at
$1.2336306 per share. At the same time, 562,500 shares of Class B Stock were
sold to Webb at their par value, $.001 per share. On March 24, 1989, Oppenheimer
Holdings, Inc. returned to the Corporation all of its shares (273,938) of the
Corporation's Class A Stock. On June 16, 1989, all of the outstanding shares of
the Corporation's Class B Stock, all of which was owned by Webb, was returned to
the Corporation and cancelled. As of February 16, 1999, there were approximately
491 holders of record of the Class A Stock. The Contingent Payment Rights (see
Item 1. Business - "Contingent Payment") received by Releasing Investors may or
may not be securities. The Corporation, the Partnership and Webb filed a
registration statement under the Securities Act with respect to the Contingent
Payment Rights as if they were securities and each of the Corporation, the
Partnership and Webb were an issuer of such securities. However, by such action
none of the Corporation, the Partnership or Webb admitted that the Contingent
Payment Rights are securities or that any of them is the issuer of any such
securities. There is no market for the Contingent Payment Rights.

      The Indenture restricts the declaration or payment of dividends or
distributions or redemptions of capital stock by the Corporation and its
subsidiaries, other than (i) dividends or distributions payable in equity
interests of the Corporation or such subsidiaries; (ii) dividends or
distributions payable to the Corporation or any wholly-owned subsidiary; or
(iii) dividends by a subsidiary on its common stock if such dividends are paid
pro-rata to all holders of such common stock.

      In addition, the Corporation and the Partnership have agreed not to make
any distributions to the holders of their equity securities, whether derived
from operations or from sale or refinancing proceeds, until the Contingent
Payment has been satisfied (see Item 1. Business - "Contingent Payment").



                                       15

<PAGE>



Item 6. SELECTED FINANCIAL DATA

      The following table summarizes certain selected consolidated financial
data for the years ended December 31, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
<CAPTION>

                                               1998             1997            1996             1995              1994
                                               -----            ----            ----             ----              ----
                                                            (in thousands except per share data)
Income Statement Data

<S>                                          <C>                 <C>             <C>              <C>             <C>    
Net revenues                                 $  191,000          192,753         193,311          203,348         190,755

Net loss                                     $   (9,415)          (5,979)        (15,389)          (1,908)         (6,901)

Net loss per share                           $    (1.89)           (1.20)          (3.05)            (.38)          (1.37)

Balance Sheet Data at Year End

Total assets                                 $  131,776          150,380         164,163          189,074         190,484

Current assets                                 $ 18,403           37,096          31,753           55,542          59,426

Current liabilities                            $ 42,088           41,234          39,027           40,420          37,003

Long-term debt, net of
 note payable and
 current installments
 of long-term debt                             $ 85,170           85,023          85,000           85,000          85,000


Stockholders' (deficiency) equity             $ (25,228)         (15,813)         (9,834)           5,555           7,463

</TABLE>

                                       16

<PAGE>



Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

Results of Operations for the Year Ended December 31, 1998

        The Corporation had a net loss of $9,415,000 for the year ended December
31, 1998, compared to a net loss of $5,979,000 for the year ended December 31,
1997.

        Total Claridge casino revenues during 1998 were $166,010,000, a slight
increase over 1997 total casino revenues of $165,371,000. Citywide casino
revenues, as reported, for the year ended December 31, 1998 increased 3.6% over
1997 revenues. As of December 31, 1998, the twelve existing casino facilities
offered approximately 1,212,000 square feet of gaming space, a 3.3% increase
over the casino square footage as of December 31, 1997 of approximately
1,173,000 square feet. This increase was primarily due to a casino expansion at
Caesars Atlantic City Casino ("Caesars"), which added approximately 800 slot
machines to its existing casino in the second quarter of 1998.

        New Claridge's table games revenue for 1998 was $43,762,000, reflecting
an 11.5% increase over 1997 table games revenue of $39,256,000. Table games drop
(the amount of gaming chips purchased by patrons) increased 16.1% in 1998 over
the 1997 drop; however, the hold percentage (the percentage of win to drop)
declined, to 13.7% in 1998, from 14.2% in 1997. The increase in table games drop
is attributable to ongoing efforts to increase that segment of New Claridge's
casino business, through various marketing programs aimed at domestic Asian
table games business, junket business, and player development programs. Citywide
table games drop, as reported, decreased slightly in 1998 from 1997 levels;
however, the citywide hold percentage increased to 15.8% (from 15.5% in 1997),
resulting in an increase in citywide table games revenue of 1.9% in 1998 over
the prior year.

        New Claridge's slot machine revenues during 1998 were $122,248,000, a
decrease of 3.1% from 1997 slot machine revenues. Citywide slot machine
revenues, as reported, increased 3.9% in 1998 over 1997 revenues. However, as a
result of the 4.9% increase in the average number of slot machines available
citywide (primarily resulting from the casino expansion at Caesars), the
citywide win per machine per day actually decreased 1.4% from 1997 levels. The
average number of slot machines at the Claridge in 1998 was in line with the
1997 average, while New Claridge's win per slot machine per day decreased 3.1%.

        Citywide competition for attracting customers who arrive in Atlantic
City by bus continued to accelerate in the second half of 1998, as companies
struggled to increase revenues to support recently expanded properties, such as
the opening of Caesars and the new bus center at Bally's Park Place Casino. As a
result, coin incentives issued to bus customers increased. During the fourth
quarter of 1998, New Claridge redirected its bus program to reduce the number of
customers who arrive by bus, and, thereby, related costs. During 1998, 842,000
casino customers arrived at the Claridge by bus, and were issued $13,500,000 in
coin incentives, for an average incentive per passenger of $16. This compares to
the 955,000 bus customers who arrived at the Claridge in 1997 and were issued a
total of $15,023,000 of coin incentives, also an average of $16 per passenger.
Marketing efforts have been directed toward the mid-level slot customer through
the use of direct promotions and advertising. Through these direct marketing
programs, New Claridge offers promotional incentives to its customers (in the
form of coin to play slot machines and gaming chips to play table games) based
on their level of gaming activity. Promotional incentives issued through these
programs in 1998 totalled $11,612,000, compared to $11,366,000 in 1997.

        Hotel revenues in 1998 were $9,576,000, an increase of 1.3% over 1997
revenues of $9,456,000. Hotel occupancy in 1998 was 89%, slightly lower than the
91% occupancy in 1997; however, the average room rate

                                       17

<PAGE>



in 1998 increased to $59, from $58 in 1997. Food and beverage revenues in 1998
were $18,989,000, reflecting a 3.2% decrease from prior year revenues of
$19,609,000; this decrease was primarily due to a reduction in complimentary
beverages served on the casino floor. Although food revenues in 1998 were in
line with the prior year, the number of covers (meals served) decreased to
1,163,000, from 1,364,000 in 1997, while the average price per cover increased
to $11.22 in 1998 from $9.56 in 1997. The reduction in the number of covers was
reflected primarily in the buffet; this outlet was temporarily closed in early
1998 for renovations, and was permanently closed at the end of November 1998 as
part of the refocusing of marketing efforts away from the bus program.
Promotional allowances, which represent the value of goods and services provided
free of charge to customers under various marketing programs, increased 4.1 % in
1998 to $20,056,000, from $19,272,000 in 1997.

        Total costs and expenses during 1998 of $200,415,000 were slightly
higher than 1997 expenses. Casino operating expenses of $102,150,000 increased
5.6% over 1997 expenses, resulting from higher payroll costs and marketing costs
related to the initiatives to increase table games business, higher costs of
providing promotional allowances, and higher slot equipment rental costs as a
result of the limited capital expenditure funding available and certain popular
varieties of slots being available for lease only. Hotel and food and beverage
expenses during 1998 decreased 15.9% from 1997 expenses, primarily due to lower
cash revenues. Rent expense to the Partnership of $26,374,000 is lower than 1997
expense of $30,554,000 resulting primarily from increased abatements of rent,
which are recorded as a reduction to rent expense; during 1998, approximately
$11.1 million of rent was abated, compared to approximately $9.0 million in
1997.

        For the year ended December 31, 1998, the Corporation recorded an income
tax benefit of $4,391,000, which represents the tax benefit likely to be
realized as a result of the carry forward of Federal net operating losses,
offset by an increase in the valuation allowance of $4,391,000. For the year
ended December 31, 1997, the Corporation recorded an income tax benefit of
$2,311,000, which represents the tax benefit likely to be realized as a result
of the carry forward of Federal net operating losses, offset by an increase in
the valuation allowance of $2,311,000.

Results of Operations for the Year Ended December 31, 1997

        The Corporation had a net loss of $5,979,000 for the year ended December
31, 1997, compared to a loss of $20,787,000 before an income tax benefit of
$5,398,000 for the year ended December 31, 1996. For the year ended December 31,
1997, the Corporation recorded an income tax benefit of $2,311,000, offset by an
increase in the valuation allowance of $2,311,000.

        During 1997, New Claridge's casino revenues were $165,371,000, an
increase of 1.2% over total 1996 casino revenues of $163,369,000. Citywide
casino revenues, as reported, for the year ended December 31, 1997, increased
2.4% over 1996 revenues. As of December 31, 1997, the twelve existing casino
facilities offered approximately 1,173,000 square feet of gaming space
(including the addition of Bally's Wild Wild West Casino on July 1, 1997), an
8.6% increase over the casino square footage as of December 31, 1996 of
approximately 1,080,000. In addition, the number of hotel rooms available
citywide increased, resulting from additions at Harrah's (approximately 400
rooms), Caesars (approximately 600 rooms), and the Hilton (approximately 300
rooms), as well as the 500-room non-casino hotel linked to the new convention
center.

        New Claridge's table games revenue for 1997 was $39,256,000, a decrease
of 2.8% from 1996 table games revenue of $40,374,000. Although table games drop
during 1997 increased 1.2% over 1996 levels, the hold percentage decreased to
14.2% in 1997 from 14.8% in 1996. Citywide table games drop, as reported,
increased 3.0% during 1997 over 1996 levels, while citywide table games revenue
decreased slightly from 1996 revenues, resulting from a reduction in the
citywide hold percentage, to 15.5% in 1997, from 15.9% in 1996.

                                       18

<PAGE>




        New Claridge's slot machine revenue during 1997 was $126,115,000,
reflecting an increase of 2.5% over 1996 revenues of $122,995,000. Citywide slot
machine revenue during 1997, as reported, increased 3.6% over 1996 revenues. The
number of slot machines available citywide increased 7.3%, primarily as a result
of the opening of Bally's Wild Wild West Casino on July 1, 1997, while the
average number of slot machines available at the Claridge decreased 6.0% from
1996 as a result of a reconfiguration of the casino floor in early 1997 which
provided a more comfortable atmosphere for casino patrons. As a result, New
Claridge's average win per slot machine per day was $197 in 1997, an increase of
8.8% over 1996, compared to a 3.1% decline in the 1997 citywide average win per
slot machine per day, to $220.

        During 1997, competition for attracting bus passengers in Atlantic City
eased somewhat, as evidenced by reductions in the average coin packages offered
to patrons. In 1997, approximately 955,000 casino patrons arrived at the
Claridge by bus and were issued $15,023,000 in coin incentives, resulting in an
average coin incentive per passenger of $16. This compares to 1,015,000 bus
passengers arriving at the Claridge in 1996, at an average coin incentive per
passenger of $19, for a total of $19,495,000 of coin incentives. Promotional
incentives issued through New Claridge's direct marketing programs in 1997
totalled $11,366,000, compared to $11,031,000 in 1996.

        Hotel revenues earned in 1997 of $9,456,000 were 3.3% higher than 1996
revenues of $9,150,000. Hotel occupancy in both 1997 and 1996 was 91%, while the
average room rate was $58 and $56, respectively. Food and beverage revenues
earned during 1997 were $19,609,000, reflecting a 4.8% decline from 1996
revenues. This decrease was due primarily to a reduction in the number of covers
in 1997 to 1,364,000 from 1,735,000 covers in 1996, offset somewhat by an
increase in the average price per cover to $9.56 in 1997 from $8.08 in 1996. The
decrease in volume was due primarily to a decline in buffet business, as well as
the outsourcing of New Claridge's "fast food" restaurant in late 1996.
Promotional allowances increased slightly during 1997 to $19,272,000, from
$19,241,000 in 1996.

        Total costs and expenses for the year ended December 31, 1997 were
$198,732,000, reflecting a 7.2% decrease from 1996 expenses. Casino expenses of
$96,760,000 were 3.5% lower than 1996 expenses as a result of the lower bus
program coin incentives paid, as well as lower payroll costs resulting from
reduced staffing levels initiated as part of New Claridge's cost containment
efforts. Food and beverage expenses of $9,811,000 were 10.3% lower than 1996
expenses, due to lower payroll and other operating costs as a result of the
reduced volume in the restaurants and cost containment efforts. General and
administrative expenses of $27,157,000 decreased 11.1% from 1996 levels, due to
lower advertising expenditures and decreased payroll costs resulting from lower
staffing levels; 1997 expenses included approximately $1.3 million for financial
and legal services related to the Corporation's attempted reorganization early
in the year. Interest expense in 1997 was higher than 1996 due to the
capitalization of interest during the construction of the self-parking garage
facility in 1996. Rent expense to the Partnership in 1997 of $30,554,000 was
lower than 1996 expense due to the abatement of rent pursuant to the March 1,
1997 amendments to the Operating Lease and Expansion Operating Lease (see
"Liquidity and Capital Resources"). For the year ended December 31, 1997, the
reduction to lease expense resulting from the abatement of rent was
approximately $9 million.

        For the year ended December 31, 1997, the Corporation recorded an income
tax benefit of $2,311,000,which represents the tax benefit likely to be realized
as a result of the carry forward of Federal net operating losses, offset by an
increase in the valuation allowance of $2,311,000. For the year ended December
31, 1996, the Corporation recorded an income tax benefit of $5,398,000, which
represents the tax benefit likely to be realized as a result of the carry
forward of Federal net operating losses, net of an increase in the valuation
allowance of $2,460,000 and increased deferred tax credits.



                                       19

<PAGE>



Liquidity and Capital Resources

        On January 31, 1994, the Corporation completed an offering of $85
million of Notes (see Item 1. Business - "Corporate Structure"). The Notes are
secured by (i) a non-recourse mortgage granted by the Partnership representing a
first lien on the Hotel Assets; (ii) a pledge granted by the Corporation of all
outstanding shares of capital stock of New Claridge; and (iii) a guarantee by
New Claridge. New Claridge's guarantee of the Notes is secured by a collateral
assignment of the second lien Expandable Wraparound Mortgage, and by a lien on
the Claridge's gaming and other assets, which lien will be subordinated to liens
that may be placed on those gaming and other assets to secure any future
revolving credit line arrangement. On January 28, 1997, New Claridge entered
into an agreement to subject the new self-parking garage to the lien of the
mortgage; such lien will not be subordinated to any liens which may be placed on
New Claridge's gaming and other assets to secure any future revolving credit
line arrangement. Interest on the Notes is payable semiannually on February 1
and August 1 of each year.

        The net proceeds of the Notes, totalling $82.2 million, were used as
follows: (i) to repay the then outstanding debt of the Corporation under the
Revolving Credit and Term Loan Agreement of approximately $35 million, including
the outstanding balance of the Corporation's revolving credit line, which was
secured by a first mortgage; (ii) to expand the casino capacity of the Claridge
by 12,000 square feet in 1994, including the addition of approximately 500 slot
machines and the relocation of two restaurants and their related kitchens, at a
cost of approximately $12.7 million; (iii) to purchase property in 1995 and
construct on that property a self-parking garage, which opened in 1996, at a
cost (excluding capitalized interest of approximately $2.2 million) of
approximately $28 million (of which approximately $7.5 million represents the
cost of acquiring the land and approximately $20.5 million represents costs
attributable to building the garage facility); and (iv) to acquire the
Contingent Payment Option (see Item 1. Business - "Contingent Payment") at a
cost of $1 million. With the completion of the construction of the self-parking
garage, the proceeds of the offering of the Notes had largely been expended.

        Beginning in 1995, and annually thereafter, the Corporation is required
to make an offer ("Excess Cash Offer") to all holders of Notes, to purchase at
100% of par (plus accrued and unpaid interest, if any, to the purchase date),
the maximum amount of Notes that may be purchased with 50% of the Corporation's
"Excess Cash" (as defined in the Indenture), from the preceding year. If less
than $5 million is available to make such payments (i.e. if Excess Cash is less
than $10 million), no such offer needs to be made. The commencement date of any
required Excess Cash Offer must be not later than 30 days after the publication
of the Corporation's audited financial statements for the immediately preceding
fiscal year. For the year ended December 31, 1998, the Corporation's Excess Cash
was less than $10 million, and therefore the Corporation is not required to make
an Excess Cash Offer in 1998.

        At December 31, 1998, the Corporation had a working capital deficiency
of $23,685,000, as compared to a working capital deficiency of $4,138,000 at
December 31, 1997. The increase in the working capital deficiency is principally
attributable to a decrease in receivables of $15,906,000 (primarily due to a
decrease in the current portion of the Expandable Wraparound Mortgage due from
the Partnership resulting from principal payments received), a decrease in cash
and cash equivalents of $2,626,000, a decrease in prepaid expenses and other
current assets of $200,000, an increase in other current liabilities of
$209,000, an increase in accounts payable of $333,000, and an increase in the
current portion of long term debt (which represents capital lease obligations)
of $312,000. Current liabilities at December 31, 1998 and 1997 included deferred
rental payments of $15,078,000, and the $3.6 million loan from the Partnership
plus accrued interest thereon of $4,122,000 and $3,690,000 at December 31, 1998
and 1997, respectively. The deferred rental payments and $3.6 million loan will
only be payable upon (i) a sale or refinancing of the Claridge; (ii) full or
partial satisfaction of the Expandable Wraparound Mortgage; and (iii) full
satisfaction of any first mortgage then in

                                       20

<PAGE>



place. If these amounts were not included in current liabilities, the
Corporation's working capital deficiency at December 31, 1998 would have been
$885,000 and the Corporation would have had working capital of $18,230,000 at
December 31, 1997.

        For the year ended December 31, 1998, cash flows used in operating
activities were $16,735,000, compared to cash flows used in operating activities
of $11,543,000 for the year ended December 31, 1997. The increase in cash used
in operating activities was primarily due to the increase in pre-tax net loss.
Cash flows provided by investment activities for the year ended December 31,
1998 were $14,343,000, compared to cash flows provided by investment activities
of $15,451,000 for the year ended December 31, 1997. Cash flows provided by
investment activities in 1998 and 1997 were primarily from the receipt of
Expandable Wraparound Mortgage principal payments. In addition, cash flows in
1998 included the approximately $1.8 million in proceeds received from PDS for
the sale of certain slot machines under a sale lease-back arrangement. Cash
flows used by financing activities in 1998 and 1997 represent payments of
capital lease obligations for certain gaming equipment.

        For the year ended December 31, 1998, the Corporation's "Adjusted
EBITDA" was $8,554,000, compared to $12,432,000 for the year ended December 31,
1997. "EBITDA" represents earnings before interest expense, income taxes,
depreciation, amortization, and other non-cash items. "Adjusted EBITDA" is equal
to "EBITDA" plus rent expense to the Partnership, less interest income from the
Partnership, less "Net Partnership Payments", which represent the Corporation's
net cash outflow to the Partnership. Adjusted EBITDA is used by the Corporation
to evaluate its financial performance in comparison to other gaming companies
with more traditional financial structures. Adjusted EBITDA may be used as one
measure of the Corporation's historical ability to service its debt, but should
not be considered as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) as an indicator of
operating performance, or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles) as a measure of
liquidity, or to other consolidated income or cash flow statement data, as are
determined in accordance with generally accepted accounting principles. For the
year ended December 31, 1998, the ratio of earnings (defined as pre-tax income
(loss) from continuing operations, adjusted to exclude fixed charges consisting
of interest expense, interest capitalized, and such portion of rental expense as
can be demonstrated to be representative of the interest factor) to fixed
charges decreased to .52, from .71 in 1997, and compared to .06 in 1996. The
deficiency of earnings to fixed charges in 1998, 1997 and 1996 was $9,358,000,
$5,922,000, and $21,828,000, respectively. Refer to the independent auditors'
report regarding going concern of the Corporation. Management of the Corporation
is considering various refinancing alternatives, including a sale of the
Corporation, or a restructuring of its financial obligations.

        During 1995, the cash provided by operations of the Claridge was
sufficient to meet the Corporation's obligations to pay interest on the Notes,
as well as to make moderate capital improvements. Commencing in the latter part
of 1995, however, competition in the Atlantic City casino market for bus
customers, a principal source of customers for the Claridge at the time,
increased; this competition intensified even more during 1996 as additional
casino square footage was added, principally due to the opening of the Trump
World's Fair casino. During 1996, the average coin incentive issued per bus
patron at the Claridge increased to approximately $19, from approximately $13 in
1995. Total cash incentives issued to Claridge's casino patrons (in the form of
coin to play slot machines and gaming chips to play table games) increased to
approximately $30.5 million in 1996, from approximately $25.2 million in 1995.
While the Corporation's promotional costs increased significantly, total casino
revenues in 1996 actually decreased from 1995 levels. It had been the
expectation of the Corporation that, upon the opening of its new self-parking
garage, the Corporation would be able to reduce its reliance on the bus patron
market; however, the Corporation was forced to close the garage facility on July
10, 1996, only ten days after its opening, following a fatal accident. Because
the facility was not able to reopen until the end of September 1996, the
Corporation lost any possible benefit of the facility during the normally busy

                                       21

<PAGE>



summer season. In addition, severe winter weather in the first quarter of 1996
adversely affected revenues. As a result, the Corporation experienced a net loss
for 1996 of $15.4 million, compared to a net loss of $1.9 million in 1995.

        The Corporation has experienced recurring losses and deterioration in
its cash flow since 1996. Since the Corporation does not have substantial cash
reserves or access to a line of credit, the Corporation needed to experience
significant improvement in operating results in 1997 over 1996 levels in order
to meet its on-going obligations, including the interest due on the Notes.
Operating results in 1997 did improve over 1996 levels, due primarily to the
positive impact of the availability of the self-parking garage, lower bus
package pricing, limited capital expenditures, and other cost containment
initiatives. However, operating results in 1998 fell below 1997 levels due to
increased competition for casino customers. In 1998, the Corporation experienced
a net loss of $9.4 million, compared to a net loss of $6.0 million in 1997. In
the fall of 1998, New Claridge redirected its bus program to reduce the number
of customers who arrive by bus, and, thereby, related costs. Total coin issued
to bus passengers in 1998 was $13.5 million, compared to $15.0 million of coin
issued to bus passengers in 1997. Marketing efforts are being directed toward
the mid-level slot customer through the use of promotions and advertising.
Additionally, management continues to conserve cash through various cost
containment measures. Management is also considering various refinancing
alternatives, including a sale of the Corporation, or a restructuring of its
financial obligations.

        In view of the operating results of New Claridge in 1998, and in order
to meet its obligations, management of the Corporation took several steps to
enhance its cash position, through both operational changes, including the
previously mentioned redirection of the bus program, and certain transactions
with PDS and CRDA, as further discussed below.

        In December 1997, New Claridge obtained a commitment from PDS for a sale
lease-back facility (the "Facility"). Under the terms of the Facility, New
Claridge could sell certain of its slot machines to PDS under a sale lease-back
arrangement, for a specified amount per slot machine. In February 1998, New
Claridge sold 370 slot machines to PDS for approximately $1 million under this
Facility. The machines were then leased back to New Claridge under an operating
lease arrangement for two years. After two years, New Claridge has an option to
either purchase the machines, renew the lease arrangement for twelve months, or
return the equipment to PDS. In December 1998, New Claridge completed the sale
of an additional 379 slot machines to PDS for approximately $776,000, under
terms similar to those described above. No additional financing is available
under this Facility.

        In October 1998, the CRDA approved the direct investment of New Claridge
funds, already on deposit with the CRDA, and the completion of certain donations
of New Claridge funds also already on deposit. These transactions resulted in
the receipt by New Claridge of approximately $930,000 from the CRDA in December
1998.

        In addition, in February 1999, the Corporation and New Claridge agreed
to a settlement of approximately $2.3 million in the arbitration proceedings
concerning the accident which took place in New Claridge's self-parking garage
in July 1996. The settlement proceeds were received by New Claridge in late
February 1999.

        As a result of these transactions, on March 2, 1999, New Claridge was
able to pay the interest that was due on the Notes on February 1, 1999, under
the 30-day grace period allowed in accordance with the terms of the Indenture.

         New Claridge is obligated under the Operating Lease to lend the
Partnership, at an annual interest rate of 14%, any amounts necessary to fund
the cost of furniture, fixtures and equipment replacements. The

                                       22

<PAGE>



Expandable Wraparound Mortgage, granted by the Partnership to New Claridge, by
its terms may secure up to $25 million of additional loans to the Partnership
from New Claridge to finance the replacements of furniture, fixtures and
equipment, facility maintenance, and engineering shortfalls. The advances to the
Partnership are in the form of FF&E Loans and are secured by the Hotel Assets.
One half of the FF&E Loan principal is due in the 48th month following the
advance, with the remaining balance due in the 60th month following the date of
issuance. In connection with the offering of $85 million of First Mortgage Notes
on January 31, 1994, the Corporation agreed to use not less than $8 million from
the net proceeds of the offering to finance internal improvements to the
Claridge, which were funded through additional FF&E Loans. In connection
therewith, the Expandable Wraparound Mortgage Loan agreement as well as the
Operating Lease, and the Expansion Operating Lease were amended to provide that
the principal on these additional FF&E Loans will be payable at final maturity
of the Expandable Wraparound Mortgage. New Claridge is obligated to pay as
additional rent to the Partnership the debt service on the FF&E Loans.

        The Expandable Wraparound Mortgage requires monthly principal payments
to be made by the Partnership to New Claridge, commencing in the year 1988 and
continuing through the year 1998, in escalating amounts totalling $80 million.
The Expandable Wraparound Mortgage bears interest at an annual rate equal to 14%
with the deferral until maturity of $20 million of certain interest payments
which accrued between 1983 and 1988. In addition, in 1986 the principal amount
secured by the Expandable Wraparound Mortgage was increased to provide the
Partnership with funding for the construction of an expansion improvement, which
resulted in approximately 10,000 square feet of additional casino space and a
3,600 square foot lounge. Effective August 28, 1986, the Partnership commenced
making level monthly payments of principal and interest calculated to provide
for the repayment in full of the principal balance of this increase in the
Expandable Wraparound Mortgage by September 30, 1998. Under the terms of the
Expandable Wraparound Mortgage, New Claridge is not permitted to foreclose on
the Expandable Wraparound Mortgage and take ownership of the Hotel Assets so
long as a senior mortgage is outstanding. The face amount outstanding of the
Expandable Wraparound Mortgage at December 31, 1998 (including the outstanding
FF&E Loans and the $20 million of deferred interest) was $86.2 million.

        Effective March 1, 1997, the Corporation, New Claridge, and the
Partnership entered into a restructuring agreement, pursuant to which New
Claridge agreed to use its best efforts to cause the Wraparound Modification,
that is permitted by, or is in compliance with, the terms of the Indenture. The
Wraparound Modification, if so permitted, will provide for an extension of the
maturity date of the Expandable Wraparound Mortgage from September 30, 2000 to
January 1, 2004. If the Wraparound Modification is not permitted by or in
compliance with the terms of the Indenture, New Claridge has agreed to effect
the Wraparound Modification at such time as the Notes are no longer outstanding.
In addition to the modification to the Expandable Wraparound Mortgage, the
Corporation, New Claridge, and the Partnership agreed to modify certain terms of
the Operating Lease and Expansion Operating Lease agreements, as discussed
below.

        Effective September 30, 1998, the Corporation, New Claridge, and the
Partnership agreed to amend the March 1997 restructuring agreement to provide
for an extension of the maturity date of the Expandable Wraparound Mortgage to
January 1, 2005. In addition, the Expandable Wraparound Mortgage Agreement and
Note were amended to defer the principal payments which were payable during the
fourth quarter of 1998 (totalling $3.5 million) to the earlier of (i) the
maturity date of the Expandable Wraparound Mortgage Agreement and Note; (ii)
such earlier date, if any, as the entire principal amount of the Expandable
Wraparound Mortgage becomes due and payable; or (iii) the date on which any
merger, consolidation or similar transaction to which the Corporation or New
Claridge is a party, or any sale of all or substantially all of the assets of
the Corporation or New Claridge is consummated, or any change of control of the
Corporation or New Claridge, occurs.


                                       23

<PAGE>



        The Hotel Assets are owned by the Partnership and leased by the
Partnership to New Claridge under the terms of an Operating Lease originally
entered into on October 31, 1983, and an Expansion Operating Lease, which
covered the expansion improvements made to the Claridge in 1986. The initial
terms of both leases expired on September 30, 1998; each lease provides for
three ten-year renewal options at the election of New Claridge. In connection
with the March 1997 restructuring agreement, New Claridge agreed to exercise the
first of the ten-year renewal options, extending the term of the Operating Lease
and Expansion Operating Lease through September 30, 2008.

        Basic rent during the renewal term of each lease is calculated pursuant
to a defined formula, with such rent for the lease year commencing October 1,
1998 through September 30, 1999 not to be more than $29.5 million nor less than
$24 million for the Operating Lease, and not to be more than $3 million nor less
than $2.5 million for the Expansion Operating Lease. In addition, in each
subsequent lease year, rent will be calculated pursuant to a defined formula,
but may not exceed 10% more than the basic rent for the immediately preceding
lease year. Basic rent, as calculated pursuant to the defined formula for the
lease year commencing October 1, 1998 will be $24 million for the Operating
Lease and $2.5 million for the Expansion Operating Lease.

        New Claridge is also required to pay, as additional rent, certain
amounts including certain taxes, insurance, and other charges related to the
occupancy of the land and Hotel Assets, certain expenses and debt service
related to furniture, fixture and equipment replacements and building
improvements, and the general and administrative costs of the Partnership.

        Effective with the consummation of the restructuring in June 1989, the
Operating Lease Agreement and Expansion Operating Lease Agreement were amended
to provide for the deferral of $15.1 million of rental payments due during the
period July 1, 1988 through the beginning of 1992, and to provide for the
abatement of $38.8 million of basic rent payable through 1998, thereby reducing
the Partnership's cash flow to an amount estimated to be necessary to meet the
Partnership's cash requirements. Lease expense (which had been recognized on
leveled basis in accordance with Statement of Financial Accounting Standards No.
13) was reduced prospectively as a result of the abatements provided for in
connection with the June 1989 restructuring. During the third quarter of 1991,
the maximum deferral of rent was reached. On August 1, 1991, the Operating Lease
and Expansion Operating Lease were amended further to revise the abatement
provisions so that, commencing January 1, 1991, for each calendar year through
1998, the lease abatements could not exceed $10 million in any one calendar
year, and $38.8 million in the aggregate. All of the $38.8 million of available
rent abatements were fully utilized by the end of March 1997.

        The Fifth Amendment to the Operating Lease and the Fourth Amendment to
the Expansion Operating Lease, which were effective on March 1, 1997, provided
for the abatement of $867,953 of basic rent and for the deferral of $1,300,000
of basic rent on March 1, 1997, and provide for additional abatements of basic
rent, commencing on April 1, 1997, as necessary to reduce the Partnership's cash
flow to an amount necessary only to meet the Partnership's cash requirements
through December 31, 1998. The $1.3 million of basic rent deferred on March 1,
1997 is to be paid to the Partnership in monthly installments of $25,000 for the
period April 1, 1997 through December 31, 1997, and monthly installments of
$50,000 for the year 1998 and thereafter until paid in full (subject to
acceleration under certain circumstances).

        Under the terms of the Operating Lease, as amended effective March 1,
1997, New Claridge had an option to purchase (the "Purchase Option"), on
September 30, 1998, the Hotel Assets and the underlying land. To exercise the
Purchase Option, New Claridge was required to give notice to the Partnership, at
least nine months prior to the option date, of its election to do so. Based on
its financial situation, New Claridge did not give such notice to the
Partnership in respect of the September 30, 1998 option date. However, New
Claridge may also exercise an option, on September 30, 2003, to purchase the
Hotel Assets and the underlying land, on

                                       24

<PAGE>



January 1, 2004, for their fair market value at the time the option is
exercised.

        Effective September 30, 1998, the Operating Lease and Expansion
Operating Lease were further amended, to allow for the deferral of $1.1 million
of rent in either February 1999 or March 1999, dependent upon certain conditions
being met. These conditions, which must have occurred prior to March 2, 1999,
include (i) New Claridge having received the proceeds in connection with its
settlement of the parking garage litigation; and (ii) the Corporation or New
Claridge having paid the interest that was due on the Notes on February 1, 1999.
New Claridge received the proceeds from the settlement of the parking garage
litigation in February 1999, and paid the interest due on the Notes on March 2,
1999, within the 30-day grace period allowed in accordance with the terms of the
Indenture. The $1.1 million of basic rent deferred in 1999 is to be paid to the
Partnership in monthly installments of $25,000 commencing January 1, 2000 until
paid in full (subject to acceleration under certain circumstances). This
amendment also provides for additional abatements of rent, through December 31,
2004, as necessary to reduce the Partnership's cash flow to an amount necessary
only to meet the Partnership's cash requirements; these abatements, however, are
to be reduced by specified amounts for each period commencing January 1, 2000
and ending December 31, 2004 ($83,333 per month in 2000, $130,000 per month in
2001, $180,000 per month in 2002 and 2003, and $130,000 per month in 2004).

        In addition to the deferral and abatements of rent provided for in the
Sixth Amendment, the amendment provides for the payment of $3.5 million of
additional basic rent on the earlier of (i) the maturity date of the Expandable
Wraparound Mortgage Note; (ii) such earlier date, if any, as the entire
principal amount of the Expandable Wraparound Mortgage becomes due and payable;
or (iii) the date on which any merger, consolidation, or similar transaction to
which the Corporation or New Claridge is a party, or any sale of all or
substantially all of the assets of the Corporation or New Claridge is
consummated, or any change in control of the Corporation or New Claridge occurs.

        If the Partnership should fail to make any payment due under the
Expandable Wraparound Mortgage, New Claridge may exercise a right of offset
against rent or other payments due under the Operating Lease and Expansion
Operating Lease to the extent of any such deficiency.

        No tax benefit was recorded for the years ended December 31 1998 and
1997, due to the increase in the valuation allowance provided, resulting from
the uncertainty of realizing any tax benefit in future periods as a result of
the current financial condition of the Corporation (see Item 1. Business -
"Current Developments"). The components of income tax expense did not change
significantly from the prior years except for the increase in the valuation
allowance of $4,391,000 and $2,311,000, which was provided against deferred tax
assets as of December 31, 1998 and 1997, respectively.

        Management of the Corporation is aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"year 2000" problem is the result of computer programs which were written using
two digits rather than four to define the applicable year, which could cause
certain systems to recognize the year 2000 as the year 1900. The Corporation has
assessed its hardware, software, and other non-Information Technology ("IT")
systems, and believes it has a plan in place to address year 2000 issues on a
timely basis. The Corporation's management anticipates using primarily internal
staff to identify, correct, and test the systems for year 2000 compliance,
which, therefore, will not likely result in incremental costs, but rather will
represent a redeployment of existing IT resources. While non-essential, non-year
2000 IT projects may be delayed, adequate resources are available to address
essential non-year 2000 projects, such as regulatory requirements and marketing
programs. The total cost of addressing year 2000 issues is estimated to be
approximately $2.3 million. Approximately 70% of the total cost relates to
labor, while the remaining 30% relates to the cost of supplies, equipment,
software and hardware. Through December 31, 1998, the Corporation has spent
approximately $800,000, or 35% of the anticipated total year 2000 project cost.
The Corporation does

                                       25

<PAGE>



not expect the amounts required to be expensed related to correcting the year
2000 problem to have a material effect on its financial position or results of
operations. Although management of the Corporation anticipates completion of
this project by the end of 1999, there can be no assurances of this. If the
modifications are not completed timely, the year 2000 problem could have a
material impact on the Corporation's ability to conduct its business.

        In addition to addressing its internal systems, the Corporation is
contacting its significant vendors concerning their year 2000 readiness, and is
formulating contingency plans in the event that certain vendors are not able to
fulfill their obligations to the Corporation.

Recently Issued Accounting Pronouncements

        On January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 establishes standards for disclosures
about segments of a company and provides different information about the
different type of business activities in which a company engages, and the
different economic environments in which it operates. This statement supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise". The
adoption of SFAS 131 did not have an effect on the Corporation's financial
statements, since the Corporation operates in only one segment.

Factors Which May Influence the Corporation's Future Operating Results

        The Atlantic City gaming market is not expected to experience
significant growth beginning over the next several years, until Atlantic City
transforms itself from a "day-trip" market to a "destination resort." As a
result of current high room occupancy rates, a more favorable regulatory
climate, the reduced threat of competition from potential new gaming
jurisdictions, and significant infrastructure developments making Atlantic City
more accessible, significant new investments are planned, including the
expansion of existing casinos and the construction of several new casinos. As
more of these facilities are opened, it is possible that the increased casino
capacity will not be absorbed as quickly as it is opened, and competition for
gaming patrons will heighten.

        In addition to the expansion of the Atlantic City gaming market, casino
activity outside of Atlantic City could have an impact on the Corporation's
future operating results. Although the expansion of legalized gaming throughout
the United States slowed somewhat during 1997 and 1998, current operations in
certain markets, most notably Indian gaming in Connecticut and slot machine
facilities at the Delaware racetracks, have had, and may continue to have, an
impact on the Atlantic City casino industry. In 1998, the three racetracks in
Delaware which offer slot machines reported revenues of $350.8 million, an
increase of 17% over 1997 revenues of $298.9 million. A bill, which was passed
in 1998 by the Delaware State Legislature, increased the number of slot machines
authorized at any of the three licensed facilities from the previous maximum of
1,000 machines to a new maximum of 2,000 machines. This will allow the Delaware
facilities to rival the slot capacity of many of the casinos in Atlantic City.
The Foxwoods Casino and the Mohegan Sun Resort in Connecticut reported total
slot win of $1.1 billion in 1998, an increase of 18% over 1997 slot revenues of
$945 million. In addition, although New York and Pennsylvania have not, to date,
been successful in legalizing casino gaming, management believes that, should
casino gaming be legalized in the future in those states, the effects on
Atlantic City casinos and on the Claridge would depend on the form and scope of
such gaming.


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<PAGE>



Item 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        No effect.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The Financial Statements and Financial Statement Schedules are set forth
at pages F-1 to F-29 of this report.

Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


                                       27

<PAGE>



                                    PART III


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THIS REGISTRANT

         Name                                Office                       Age
         ----                                ------                       ---
         Robert M. Renneisen         Chairman, President, Director        52
         James M. Montgomery         Vice Chairman, Director              59
         David W. Brenner            Director                             63
         Shannon L. Bybee            Director                             60
         A. Bruce Crawley            Director                             53
         Ned P. DeWitt               Director                             59
         Mark H. Sayers              Director                             49
         Jean I. Abbott              Executive Vice President             43
         Frank A. Bellis, Jr.        Senior Vice President,  Secretary    45
         Albert T. Britton           Executive Vice President             42
         Glenn S. Lillie             Vice President                       50
                                                                           
Business Experience                                                       

           Mr. Renneisen has served as Chairman of the Board of Directors of the
Corporation since June 1998, as President of the Corporation since June 1992,
and as Chief Executive Officer of the Corporation and New Claridge since July
1993. He was Vice Chairman of New Claridge from June 1994 to June 1998. Mr.
Renneisen was Executive Vice President of the Corporation from June 1991 to June
1992. He served as President of New Claridge from January 1991 to January 1996.
He was Chief Operating Officer of New Claridge from January 1991 to July 1993.
Mr. Renneisen was Executive Vice President of New Claridge, responsible for
marketing and later casino operations from February 1988 to January 1991. Prior
to joining New Claridge, Mr. Renneisen served from January 1987 to December 1987
as Vice President of Marketing of Treasure Island Hotel and Casino in St.
Maarten. From June 1986 to May 1987, he served as President of Renneisen,
Kincade & Associates, Inc. of Las Vegas, Nevada, a marketing consulting firm. He
was Senior Vice President of Marketing of the Tropicana Hotel and Casino in
Atlantic City from May 1982 to August 1984.

           Mr. Montgomery has served as Vice Chairman of the Board of Directors
of the Corporation since June 1998, and has been a member of the Board of
Directors of the Corporation since March 1995. Since 1978, he has served as
President of Houze, Shourds, and Montgomery, Inc., a management consulting firm
located in Long Beach, California. Prior to 1978, Mr. Montgomery held various
managerial positions with Rohr Industries, Inc. and Rockwell International.

           Mr. Brenner has served as a member of the Board of Directors of the
Corporation since February 1991, and was Chairman of the Board of Directors from
August 1993 to June 1998. He served as President of the Philadelphia Sports
Congress from January 1987 through June 1994. Mr. Brenner served as Chairman of
the Hospital and Higher Education Facilities Authority of Philadelphia from
January 1986 to June 1992, as Director of Commerce of the City of Philadelphia
from January 1984 to September 1986, and as Director of Finance from April 1991
through December 1991. He was with the accounting firm of Arthur Young & Company
from 1957 to September 1983. He was managing partner of the Philadelphia office
of Arthur Young from November 1969 until March 1980.

         Mr. Bybee has served as a member of the Board of Directors of the
Corporation since July 1988. He currently is Associate Professor for Gaming
Management, Law & Regulation, at University of Nevada Las Vegas. From July 1993


                                       28

<PAGE>



to August 1994, Mr. Bybee served as President and Chief Operating Officer for
United Gaming, Inc. Mr. Bybee was the Corporation's Chairman of the Board from
November 1988 to July 1993, and from August 1988 to October 1988. In June 1989,
Mr. Bybee was appointed to serve as the Chief Executive Officer of the
Corporation and New Claridge, a position he held through July 1993. From 1983 to
1987, he was Senior Vice President of Golden Nugget, Incorporated which operated
the Golden Nugget Casino Hotel in Atlantic City. From 1981 to 1983, Mr. Bybee
was President of GNAC Corporation, which operated the Golden Nugget Casino Hotel
in Atlantic City.

           Mr. Crawley has served as a member of the Board of Directors of the
Corporation since February 1995. He currently serves as President and Director
of Public Relations and Marketing Services for Crawley, Haskins & Rodgers, a
Philadelphia based public relations and advertising firm. Prior to establishing
his own firm in May 1989, Mr. Crawley was employed at First Pennsylvania Bank
and First Pennsylvania Corporation, where he served as Senior Vice President and
Director of Public and Investor Relations. He also served, from 1976 to 1979, as
Vice President and Director of Advertising for First Pennsylvania Bank and First
Pennsylvania Corporation.

           Mr. DeWitt has served as a member of the Board of Directors of the
Corporation since May 1995. Since July 1997, Mr. DeWitt has been Chairman and
Chief Executive Officer of U'Race Corporation. Mr. DeWitt served as President,
Chief Executive Officer, and a member of the Board of Directors of LBE
Technologies, Incorporated, in Saratoga, California, from November 1994 to
February 1997. From November 1993 to August 1994, he served as President of SEGA
Enterprises, (USA) in Redwood City, California. Mr. DeWitt also served as
President of the Entertainment Group of Madison Square Garden from July 1990 to
August 1991, and as President of Source Service Corporation from December 1986
to April 1989. He also served, from 1973 through 1982, as President and Chief
Executive Officer of Six Flags Corporation.

         Mr. Sayers has served as a member of the Board of Directors of the
Corporation since February 1990. Mr. Sayers has served as Vice President of EMES
Management Corporation, a real estate management and development company, of New
York, New York, since February 1976.

           Ms. Abbott has served as Executive Vice President of Finance and
Corporate Development of New Claridge since September 1997. From September 1996
to August 1997, she served as Executive Vice President of Operations, and from
July 1995 to August 1996, she was Executive Vice President of Marketing and
Casino Operations. Ms. Abbott served as a member of the Board of Directors of
the Corporation from August 1989 to June 1994, and served as a consultant to the
Corporation until March 26, 1994, at which time she became a Vice President of
New Claridge. From October 1992 to July 1993, Ms. Abbott was Finance Director
for the United Way of Atlantic County. She was Assistant Professor at Stockton
State College from September 1989 to June 1991. She served as Senior Vice
President, Treasurer of the Corporation and Senior Vice President, Controller of
New Claridge from May 1987 to September 1989. She was Vice President, Controller
of New Claridge from October 1985 to May 1987 and she was Director of Finance of
New Claridge from April 1984 to October 1985. From October 1980 through April
1984, Ms. Abbott held various executive positions with New Claridge and its
corporate predecessor.

           Mr. Bellis has served as Vice President, General Counsel and
Secretary to the Corporation since August 1993. He also has served as Senior
Vice President and General Counsel of New Claridge since February 1994, as Vice
President and General Counsel of New Claridge from September 1992 to February
1994, and as Secretary of New Claridge since August 1993. Previously, from May
1985 to August 1992, Mr. Bellis was Corporate Counsel and Secretary to
Inductotherm Industries, Inc., Rancocas, New Jersey. During 1984 and 1985, Mr.
Bellis was Associate General Counsel for New Claridge. Prior to joining New
Claridge, he was a Deputy Attorney General in the New Jersey Division of
Criminal Justice in the State Attorney General's office.

                                       29

<PAGE>




           Mr. Britton has served as Executive Vice President of the Corporation
since June 1994 and as President and Chief Operating Officer of New Claridge
since January 1996. He served as Executive Vice President and General Manager of
New Claridge from February 1994 through July 1995, and as Executive Vice
President from August 1995 through December 1995. He served as a Vice President
of the Corporation from June 1992 to June 1994, and as Executive Vice President
of Operations of New Claridge from December 1992 to February 1994. He was Senior
Vice President of Operations of New Claridge from December 1991 to December
1992, and Vice President of Casino Operations from June 1990 to November 1991.
From July 1981 through June 1990, Mr. Britton has held various positions in both
accounting and casino operations with New Claridge and its corporate
predecessor.

           Mr. Lillie has served as Vice President of the Corporation from June
1992 and as Vice President of Marketing Communications of New Claridge since
December 1995. He served as Vice President of Public Affairs of New Claridge
from February 1990 to December 1995. He was Vice President of Marketing
Communications of New Claridge from April 1985 to February 1990, Director of
Public Relations from March 1982 to January 1983, and Training Manager from
November 1980 to February 1982. From February 1983 to April 1985, Mr. Lillie was
employed as the Director of Public Relations of the Tropicana Hotel and Casino
in Atlantic City.

           Further information regarding the directors and certain executive
officers of the Corporation and/or New Claridge is incorporated by reference to
the information contained under the caption "Voting" in the Corporation's Proxy
Statement for the Annual Meeting of Shareholders to be held on June 8, 1999.

Item 11.   EXECUTIVE COMPENSATION

           Information contained under the caption "Executive Compensation" in
the Corporation's Proxy Statement for the Annual Meeting of Shareholders to be
held on June 8, 1999 is incorporated herein by reference.

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         As of December 31, 1998, there were no beneficial owners of more than
5% of the Corporation's Class A Stock.

           On February 12, 1992, the Corporation's Board of Directors approved a
Long Term Incentive Plan which provided for the grant to certain key officers of
the Corporation and/or New Claridge of the 273,938 shares which were held as
treasury shares by the Corporation. These shares were issued to the key
employees upon approval by the Commission on April 15, 1992, and upon receipt
the transfer of, and right to continue to hold the shares, are subject to
certain vesting restrictions.

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           The Partnership has a direct material interest in the Expandable
Wraparound Mortgage Loan Agreement, the Operating Lease and the Expansion
Operating Lease together with amendments thereto. See Item 1.
Business - "Corporate Structure."


                                       30

<PAGE>



                                     PART IV


Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

           (a)(1)and(2): The response to this portion of Item 14 is submitted as
                  a separate section of this report beginning on page F-1. All
                  other schedules have been omitted as inapplicable, or not
                  required, or because the required information is included in
                  the Consolidated Financial Statements or notes thereto.

            (a)(3) Exhibits. The exhibits required to be filed as part of this
                   annual report on Form 10-K are listed in the attached Index
                   to Exhibits.

            (b)    Reports on Form 8-K. The Corporation filed no reports on Form
                   8-K during the last quarter of the period covered by this
                   report.

            (c)    Index to Exhibits and Exhibits filed as a part of this
                   report.

                   3(a)    Certificate of Incorporation of the Corporation.
                           Incorporated by reference to Exhibit 3(a) to Form
                           10-K for the year ended December 31, 1995.

                   3(b)    By-Laws of the Corporation as amended. Incorporated
                           by reference to Exhibit 3(b) to Form 10-K for the
                           year ended December 31, 1995.

                   3(c)    Certificate of Amendment of The Certificate of
                           Incorporation of the Corporation dated June 15, 1989.
                           Incorporated by reference to Exhibit 3(c) to Form
                           10-K for the year ended December 31, 1995.

                   3(d)    Certificate of Amendment of The Certificate of
                           Incorporation dated June 26, 1991. Incorporated by
                           reference to Exhibit 3(d) to Form 10-K for the year
                           ended December 31, 1995.

                   4(a)    Form of Indenture (including the Guarantee of The
                           Claridge at Park Place, Incorporated). Incorporated
                           by reference to Exhibit 4.1 to Pre-Effective
                           Amendment No. 2 to Form S-1 Registration Statement
                           (file number 33-71550) dated January 18, 1994.

                   4(b)    Form of 11 3/4% First Mortgage Note due 2002
                           certificate. Incorporated by reference to Exhibit 4.2
                           to Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.

                  10(a)    Operating Lease Agreement between New Claridge and
                           Atlantic City Boardwalk Associates, L.P. Incorporated
                           by reference to Exhibit 10(a) to Form 10-K for the
                           year ended December 31, 1995.

                  10(b)    Expandable Wraparound Mortgage and Security Agreement
                           between New Claridge and Atlantic City Boardwalk
                           Associates, L.P. Incorporated by reference to Exhibit
                           10(b) to Form 10-K for the year ended December 31,
                           1995.



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<PAGE>



                  10(c)    Expandable Wraparound Mortgage Loan Agreement between
                           New Claridge and Atlantic City Boardwalk Associates,
                           L.P. Incorporated by reference to Exhibit 10(c) to
                           Form 10-K for the year ended December 31, 1995.

                  10(h)    Expansion Operating Lease Agreement between New
                           Claridge and Atlantic City Boardwalk Associates, L.P.
                           Incorporated by reference to Exhibit 10(h) to Form
                           10-K for the year ended December 31, 1995.

                  10(i)    First Supplemental Amendment to Expandable Wraparound
                           Mortgage and Security Agreement between New Claridge
                           and Atlantic City Boardwalk Associates, L.P.
                           Incorporated by reference to Exhibit 10(i) to Form
                           10-K for the year ended December 31, 1995.

                  10(j)    First Supplemental Amendment to Expandable Wraparound
                           Mortgage Loan Agreement between New Claridge and
                           Atlantic City Boardwalk Associates, L.P. Incorporated
                           by reference to Exhibit 10(j) to Form 10-K for the
                           year ended December 31, 1995.

                  10(n)    Restructuring Agreement, among The Claridge Hotel and
                           Casino Corporation, The Claridge at Park Place,
                           Incorporated, Del Webb Corporation, Del E. Webb New
                           Jersey, Inc., Atlantic City Boardwalk Associates,
                           L.P. and First Fidelity Bank, National Association,
                           New Jersey, dated October 27, 1988. Incorporated by
                           reference to Exhibit 10(n) to Form 10-K for the year
                           ended December 31, 1995.

                  10(x)    Long Term Management Incentive Plan of The Claridge
                           Hotel and Casino Corporation effective January 1,
                           1992. Incorporated by reference to Exhibit 10(x) to
                           Form 10-K for the year ended December 31, 1995.

                  10(ab)   Amendment to Operating Lease Agreement and Expansion
                           Operating Lease Agreement between New Claridge and
                           Atlantic City Boardwalk Associates, L.P., dated June
                           15, 1989. Incorporated by reference to Exhibit 10.5
                           to Form S-1 Registration Statement (file number
                           33-71550) dated November 12, 1993.

                  10(ac)   Second Amendment to Operating Lease Agreement and
                           Expansion Operating Lease Agreement between New
                           Claridge and Atlantic City Boardwalk Associates,
                           L.P., dated March 27, 1990. Incorporated by reference
                           to Exhibit 10.6 to Form S-1 Registration Statement
                           (file number 33-71550) dated November 12, 1993.

                  10(ad)   Third Amendment to Operating Lease Agreement and
                           Expansion Operating Lease Agreement between New
                           Claridge and Atlantic City Boardwalk Associates,
                           L.P., dated August 1, 1991. Incorporated by reference
                           to Exhibit 10.7 to Form S-1 Registration Statement
                           (file number 33-71550) dated November 12, 1993.

                  10(ae)   First Amendment to Expandable Wraparound Mortgage
                           Loan Agreement between New Claridge and Atlantic City
                           Boardwalk Associates, L.P., dated March 17, 1986.
                           Incorporated by reference to Exhibit 10.8 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           November 12, 1993.



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<PAGE>



                  10(af)   Second Amendment to Expandable Wraparound Mortgage
                           Loan Agreement between New Claridge and Atlantic City
                           Boardwalk Associates, L.P., dated June 15, 1989.
                           Incorporated by reference to Exhibit 10.9 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           November 12, 1993.

                  10(ag)   Second Amendment to Expandable Wraparound Mortgage
                           and Security Agreement between New Claridge and
                           Atlantic City Boardwalk Associates, L.P., dated June
                           15, 1989. Incorporated by reference to Exhibit 10.11
                           to Form S-1 Registration Statement (file number
                           33-71550) dated November 12, 1993.

                  10(ah)   The 1992 Claridge Management Incentive Plan.
                           Incorporated by reference to Exhibit 10.18 to Form
                           S-1 Registration Statement (file number 33-71550)
                           dated November 12, 1993.

                  10(ai)   The 1993 Claridge Management Incentive Plan.
                           Incorporated by reference to Exhibit 10.19 to Form
                           S-1 Registration Statement (file number 33-71550)
                           dated November 12, 1993.

                  10(aj)   Form of Mortgage, Assignment of Leases and Rents,
                           Security Agreement and Financing Statement.
                           Incorporated by reference to Exhibit 4.3 to
                           Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.

                  10(ak)   Form of Collateral Trust Agreement among the
                           Corporation, New Claridge, the Partnership and the
                           Collateral Trustee. Incorporated by reference to
                           Exhibit 4.4 to Pre-Effective Amendment No. 2 to Form
                           S-1 Registration Statement (file number 33-71550)
                           dated January 18, 1994.

                  10(al)   Form of Corporation Pledge Agreement between the
                           Corporation and the Collateral Trustee. Incorporated
                           by reference to Exhibit 4.5 to Pre-Effective
                           Amendment No. 2 to Form S-1 Registration Statement
                           (file number 33-71550) dated January 18, 1994.

                  10(am)   Form of New Claridge Pledge Agreement between New
                           Claridge and the Collateral Trustee. Incorporated by
                           reference to Exhibit 4.6 to Pre-Effective Amendment
                           No. 2 to Form S-1 Registration Statement (file number
                           33-71550) dated January 18, 1994.

                  10(an)   Form of New Claridge Cash Collateral Pledge Agreement
                           between New Claridge and the Collateral Trustee.
                           Incorporated by reference to Exhibit 4.7 to
                           Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.

                  10(ao)   Form of New Claridge Security Agreement between New
                           Claridge and the Collateral Trustee. Incorporated by
                           reference to Exhibit 4.8 to Pre-Effective Amendment
                           No. 2 to Form S-1 Registration Statement (file number
                           33-71550) dated January 18, 1994.

                  10(ap)   Form of New Claridge Trademark Security Agreement
                           between New Claridge and the Collateral Trustee.
                           Incorporated by reference to Exhibit 4.9 to
                           Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.


                                       33

<PAGE>



                  10(aq)   Form of Collateral Assignment of Expandable
                           Wraparound Mortgage and Security Agreement.
                           Incorporated by reference to Exhibit 4.10 to
                           Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.

                  10(ar)   Form of Collateral Assignment of Lessor's Interest in
                           Operating Leases. Incorporated by reference to
                           Exhibit 4.13 to Pre-Effective Amendment No. 2 to Form
                           S-1 Registration Statement (file number 33-71550)
                           dated January 18, 1994.

                  10(as)   Form of Subordination Agreement among the
                           Partnership, New Claridge and the Collateral Trustee.
                           Incorporated by reference to Exhibit 4.14 to
                           Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.

                  10(at)   Form of Assignment of Leases and Rents and Other
                           Contract Rights. Incorporated by reference to Exhibit
                           4.15 to Pre-Effective Amendment No. 2 to Form S-1
                           Registration Statement (file number 33-71550) dated
                           January 18, 1994.

                  10(bb)   Supplemental Executive Retirement Plan of The
                           Claridge at Park Place, Incorporated effective
                           January 1, 1994. Incorporated by referenece to
                           Exhibit 10(bb) to Form 10-K for the year ended
                           December 31, 1994.

                  10(bc)   Amendment to Long-Term Management Incentive Plan of
                           The Claridge Hotel and Casino Corporation effective
                           June 5, 1995. Incorporated by reference to Exhibit
                           10(bc) to Form 10-K for the year ended December 31,
                           1995.

                  10(bd)   Option Agreement between The Claridge Hotel and
                           Casino Corporation, Philip J. Dion, as Trustee for
                           the Valley of the Sun United Way, and Atlantic City
                           Boardwalk Associates, L.P., dated November 29, 1995.
                           Incorporated by reference to Exhibit 10(bd) to Form
                           10-K for the year ended December 31, 1995.

                  10(be)   Escrow Agreement between The Claridge Hotel and
                           Casino Corporation, Philip J. Dion, as Trustee for
                           the Valley of the Sun United Way, and IBJ Schroder
                           Bank & Trust Company dated November 29, 1995.
                           Incorporated by reference to Exhibit 10(be) to Form
                           10-K for the year ended December 31, 1995.

                  10(bf)   Side Agreement between The Claridge Hotel and Casino
                           Corporation, The Claridge at Park Place,
                           Incorporated, and Atlantic City Boardwalk Associates,
                           L.P. dated November 29, 1995. Incorporated by
                           reference to Exhibit 10(bf) to Form 10-K for the year
                           ended December 31, 1995.

                  10(bg)   First Amendment to the Option Agreement between The
                           Claridge Hotel and Casino Corporation, Philip J.
                           Dion, as Trustee for the Valley of the Sun United
                           Way, and Atlantic City Boardwalk Associates, L.P.
                           dated January 30, 1996. Incorporated by reference to
                           Exhibit 10(bg) to Form 10-K for the year ended
                           December 31, 1995.


                                       34

<PAGE>




                  10(bh)   First Amendment to the Side Agreement between The
                           Claridge Hotel and Casino Corporation, The Claridge
                           at Park Place, Incorporated, and Atlantic City
                           Boardwalk Associates, L.P. dated February 21, 1996.
                           Incorporated by reference to Exhibit 10(bh) to Form
                           10-K for the year ended December 31, 1995.

                  10(bp)   Spreader Agreement of a Certain Mortgage, Assignment
                           of Leases and Rents, Security Agreement and Financing
                           Statement by The Claridge at Park Place, Incorporated
                           in favor of IBJ Schroder Bank & Trust Company, as
                           Collateral Trustee, dated January 28, 1997.
                           Incorporated by reference to Exhibit 10(bp) to Form
                           10-K for the year ended December 31, 1996.

                  10(bq)   Spreader Agreement and Modification of Spreader
                           Agreement of a Certain Mortgage, Assignment of Leases
                           and Rents, Security Agreement and Financing Statement
                           by The Claridge at Park Place, Incorporated in favor
                           of IBJ Schroder Bank & Trust Company, as Collateral
                           Trustee, dated February 18, 1997. Incorporated by
                           reference to Exhibit 10(bq) to Form 10-K for the year
                           ended December 31, 1996.

                  10(br)   Fifth Amendment to Operating Lease Agreement and
                           Fourth Amendment to Expansion Operating Lease
                           Agreement between The Claridge at Park Place,
                           Incorporated and Atlantic City Boardwalk Associates,
                           L.P. effective March 1, 1997. Incorporated by
                           reference to Exhibit 10(br) to Form 10-K for the year
                           ended December 31, 1996.

                  10(bs)   Restructuring Agreement between The Claridge Hotel
                           and Casino Corporation, The Claridge at Park Place,
                           Incorporated and Atlantic City Boardwalk Associates,
                           L.P. effective March 1, 1997. Incorporated by
                           reference to Exhibit 10(bs) to Form 10-K for the year
                           ended December 31, 1996.

                  10(bt)   Amended Employment Agreement between Robert M.
                           Renneisen and The Claridge at Park Place,
                           Incorporated effective November 10, 1998.

                  10(bu)   Amended Employment Agreement between Albert T.
                           Britton and The Claridge at Park Place, Incorporated
                           effective November 10, 1998.

                  10(bv)   Amended Employment Agreement between Jean I. Abbott
                           and The Claridge at Park Place, Incorporated
                           effective November 10, 1998.

                  10(bw)   Amended Employment Agreement between Frank A. Bellis,
                           Jr. and The Claridge at Park Place, Incorporated
                           effective November 10, 1998.

                  10(bx)   Amended Employment Agreement between Glenn Lillie and
                           The Claridge at Park Place, Incorporated effective
                           November 10, 1998.

                  10(by)   Sixth Amendment to Operating Lease Agreement and
                           Fifth Amendment to Expansion Operating Lease
                           Agreement between The Claridge at Park Place,
                           Incorporated and Atlantic City Boardwalk Associates,
                           L.P. effective September 30, 1998.




                                       35

<PAGE>



                  10(bz)   Amendment to Restructuring Agreement between The
                           Claridge Hotel and Casino Corporation, The Claridge
                           at Park Place, Incorporated and Atlantic City
                           Boardwalk Associates, L.P. effective September 30,
                           1998.

                  10(ca)   Amendment to Wraparound Mortgage Agreement and Note
                           between The Claridge at Park Place, Incorporated and
                           Atlantic City Boardwalk Associates, L.P. effective
                           September 30, 1998.

                  10(cb)   Amendment to Exhibit A to the Long-Term Management
                           Incentive Plan of The Claridge Hotel and Casino
                           Corporation effective November 10, 1998.

                  12(a)    Statement of Computation of Ratio of Earnings to
                           Fixed Charges. Incorporated by reference to Exhibit
                           12.1 to Form S-1 Registration Statement (file number
                           33-71550) dated November 12, 1993.

                  12(b)    Statement of Computation of Ratio of Earnings to
                           Fixed Charges.

                  22(a)    Subsidiaries of the Corporation. Incorporated by
                           reference to Exhibit 22(a) to Form 10-K for the year
                           ended December 31, 1995.

                                       36

<PAGE>





                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                              CLARIDGE HOTEL AND CASINO CORPORATION

<TABLE>
<CAPTION>

<S>                        <C>                                <C>                                                              
Dated:  March 30, 1999     By:/s/ ROBERT M. RENNEISEN         By:/s/ JEAN I. ABBOTT
----------------------     --------------------------         ---------------------
                           Robert M. Renneisen                Jean I. Abbott
                           Chief Executive Officer            Chief Financial Officer and
                                                              Principal Accounting Officer
</TABLE>

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

            Signature                                   Capacity                             Date
            ---------                                   --------                             ----

<S>                                              <C>                                  <C>   
 /s/ ROBERT M. RENNEISEN   
-------------------------------                  Chairman, President, Director         March 30, 1999
Robert M. Renneisen                              (Chief Executive Officer)

 /s/ JAMES M. MONTGOMERY                         Vice Chairman, Director               March 30, 1999
-------------------------------
James M. Montgomery

 /s/ DAVID W. BRENNER                            Director                              March 30, 1999
-------------------------------                                                                  
David W. Brenner                                                                       
                                                                                       
/s/ SHANNON L. BYBEE                             Director                              March 30, 1999
-------------------------------                                                               
Shannon L. Bybee                                                                       
                                                                                       
 /s/ A. BRUCE CRAWLEY                            Director                              March 30, 1999
-------------------------------                                                                 
A. Bruce Crawley                                                                       
                                                                                       
/s/ NED P. DEWITT                                Director                              March 30, 1999
-------------------------------                                                             
Ned P. DeWitt                                                                          
                                                                                       
 /s/ MARK H. SAYERS                              Director                              March 30, 1999
-------------------------------                                                                  
Mark H. Sayers                                                                                               
                                      
 /s/ JEAN I ABBOTT                               Executive Vice President              March 30, 1999
---------------------------------                (Chief Financial Officer/
Jean I. Abbott                                   Treasurer/Principal      
                                                 Accounting Officer)      
                                                 
</TABLE>



                                       37

<PAGE>



           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULE





                                                                      Page
                                                                  Reference In
                                                                    Report on
                                                                    Form 10-K 
                                                                    ---------


Independent Auditors' Report..........................................  F-2

Consolidated Balance Sheets at December 31, 1998 and 1997.............  F-3

Consolidated Statements of Operations and Accumulated 
 (Deficit) Earnings for the Years Ended December 31, 1998, 
 1997 and 1996........................................................  F-4

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1998, 1997 and 1996....................................  F-5

Notes to Consolidated Financial Statements............................  F-7

Financial Statement Schedule:

         Schedule II - Valuation and Qualifying Accounts.............. F-29


         All other schedules for which provision is made in the applicable
         accounting regulations promulgated by the Securities and Exchange
         Commission are not required under the related instructions or are
         inapplicable and therefore have been omitted.


                                       F-1

<PAGE>





                          Independent Auditors' Report


The Board of Directors and Stockholders
The Claridge Hotel and Casino Corporation:


We have audited the consolidated financial statements of The Claridge Hotel and
Casino Corporation and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Claridge Hotel
and Casino Corporation and subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Corporation will continue as a
going concern. As discussed in Note 2 to the consolidated financial statements,
the Corporation has suffered recurring losses from operations and has
experienced diminishing liquidity as a result of a deterioration in its cash
flow and limited availability of working capital sources that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are discussed in Note 2. The consolidated financial
statements and financial statement schedule do not include any adjustments that
might result from the outcome of this uncertainty.



                                                  KPMG LLP
                                                  
Short Hills, New Jersey
March 5, 1999


                                       F-2

<PAGE>



           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
                          Consolidated Balance Sheets
                           December 31, 1998 and 1997
                             (dollars in thousands)

<TABLE>
<CAPTION>

                                                                   1998         1997  
                                                                ---------    ---------
Assets
Current Assets:
<S>                                                             <C>             <C>   
     Cash and cash equivalents                                  $   9,798       12,424
     Receivables, net (including $3,111 and $19,878 in 1998
       and 1997, respectively, due from Partnership) (note 4)       5,561       21,467
     Inventories                                                      309          270
     Prepaid expenses and other current assets                      2,735        2,935
                                                                ---------    ---------
         Total current assets                                      18,403       37,096
                                                                ---------    ---------

Property and equipment (note 5)                                    41,785       47,579
     Less accumulated depreciation and amortization               (12,408)     (15,485)
                                                                ---------    ---------
         Net property and equipment                                29,377       32,094
                                                                ---------    ---------

Long-term receivables due from Partnership (note 4)                79,593       75,465
Deferred charges at cost, less accumulated amortization             1,510        2,020
Other assets (note 6)                                               2,893        3,705
                                                                ---------    ---------
                                                                $ 131,776      150,380
                                                                =========    =========
Liabilities and Stockholders' Deficiency
Current Liabilities:
     Current maturities of long-term debt (note 9)              $     351           39
     Accounts payable                                               3,535        3,202
     Loan from the Partnership (note 7)                             3,600        3,600
     Other current liabilities (note 8)                            34,602       34,393
                                                                ---------    ---------
         Total current liabilities                                 42,088       41,234
                                                                ---------    ---------

Long-term debt (note 9)                                            85,170       85,023
Deferred rent due to Partnership (note 13)                          5,827       16,506
Deferred income taxes (note 12)                                     2,579        2,580
Other noncurrent liabilities (note 10)                             21,340       20,850

Commitments and contingent liabilities (notes 13 and 15)

Stockholders' deficiency (notes 16 and 17):
     Common stock
       Class A, par value $.001, authorized an
         issued 5,062,500 shares                                        5            5
     Additional paid-in capital                                     5,048        5,048
     Accumulated deficit                                          (30,281)     (20,866)
     Treasury stock, -0- and 91,770 Class A
       shares at cost in 1998 and 1997, respectively                  -0-          -0-
                                                                ---------    ---------
         Total stockholders' deficiency                           (25,228)     (15,813)
                                                                ---------    ---------
                                                                $ 131,776      150,380
                                                                =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                       F-3

<PAGE>

           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
    Consolidated Statements of Operations and Accumulated (Deficit) Earnings
              For the Years Ended December 31, 1998, 1997 and 1996
                      (in thousands except per share data)
<TABLE>
<CAPTION>

                                                           1998         1997         1996 
                                                        ---------    ---------    ---------
Revenue:
<S>                                                     <C>            <C>          <C>    
     Casino                                             $ 166,010      165,371      163,369
     Hotel                                                  9,576        9,456        9,150
     Food and beverage                                     18,989       19,609       20,602
     Interest from the Partnership                         12,039       14,230       16,007
     Interest, other                                          757          439          753
     Other                                                  3,685        2,920        2,671
                                                        ---------    ---------    ---------
                                                          211,056      212,025      212,552
     Less promotional allowances (note 11)                 20,056       19,272       19,241
                                                        ---------    ---------    ---------

         Net revenues                                     191,000      192,753      193,311
                                                        ---------    ---------    ---------

Costs and expenses:
     Casino                                               102,150       96,760      100,220
     Hotel                                                  2,470        2,570        2,673
     Food and beverage                                      7,948        9,811       10,938
     Other                                                  2,689        2,617        2,967
     Rent expense to the Partnership (note 13)             26,374       30,554       38,561
     Rent expense, other (note 13)                          1,253        1,283        1,484
     General and administrative                            27,662       27,157       30,539
     Gaming taxes                                          13,194       13,215       13,053
     Reinvestment obligation expenses (note 6)              2,474          684          836
     Provision for uncollectible accounts                   1,128          218          238
     Depreciation and amortization                          2,554        3,296        3,239
     Interest expense, other                               10,519       10,567        9,350
                                                        ---------    ---------    ---------

         Total costs and expenses                         200,415      198,732      214,098
                                                        ---------    ---------    ---------

Loss before income taxes                                   (9,415)      (5,979)     (20,787)
Income tax benefit (note 12)                                  -0-          -0-       (5,398)
                                                        ---------    ---------    ---------
Net loss                                                   (9,415)      (5,979)     (15,389)
                                                        ---------    ---------    ---------

Accumulated (deficit) earnings at beginning of period     (20,866)     (14,887)         502
                                                        ---------    ---------    ---------

Accumulated deficit at end of period                    $ (30,281)     (20,866)     (14,887)
                                                        =========    =========    =========

Net loss per share - basic and diluted (note 3(i))      $   (1.89)       (1.20)       (3.05)
                                                        =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-4

<PAGE>




           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
              For the Years Ended December 31, 1998, 1997 and 1996
                                 (in thousands)

<TABLE>
<CAPTION>


                                                         1998        1997        1996  
                                                       --------    --------    --------

Cash flows from operating activities:
<S>                                                    <C>           <C>        <C>     
     Net loss                                          $ (9,415)     (5,979)    (15,389)
     Adjustments to reconcile net loss to net cash
       used in operating activities:

       Depreciation and amortization                      2,554       3,296       3,239
       Deferred rent to the Partnership                 (10,679)    (11,504)     (2,737)
       Deferred interest receivable and
         discount from the Partnership                   (2,014)     (1,752)     (1,524)
       Reinvestment obligation expenses                   2,474         684         836
       Loss (gain) on disposal of assets                      1          30        (138)
       Deferred income taxes - noncurrent                    (1)         (1)     (4,542)

       Change in assets and liabilities:
         Receivables, net, excluding current portion
           of long-term receivables                        (663)       (228)        338
         Inventories                                        (39)          8           1
         Prepaid expenses and other current
           assets                                           200         264        (491)
         Accounts payable                                   333         205        (883)
         Other current liabilities                          209       1,963        (510)
         Other noncurrent liabilities                       305       1,471        (850)
                                                       --------    --------    --------

Net cash flows used in operating activities             (16,735)    (11,543)    (22,650)
                                                       --------    --------    --------



</TABLE>

           See accompanying notes to consolidated financial statements




                                   (Continued)





                                       F-5

<PAGE>



          

           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Cont'd.)
                   or the Years Ended December 31, 1998, 1997
                            and 1996 (in thousands)
<TABLE>
<CAPTION>


                                                            1998            1997             1996    
                                                         --------         --------         --------
Cash flows from investment activities:                                                   
<S>                                                      <C>                    <C>            <C>  
     Increase in deferred charges                        $    (48)              (7)            (195)
     Additions to property and equipment, net                (228)            (136)         (13,455)
     Additions to other assets                             (1,662)          (1,905)          (1,436)
     Proceeds from disposition of property                  1,826              587              184
     Increase in long-term receivables                       (660)            (208)          (3,508)
     Receipt of long-term receivables                      15,115           17,120           13,845
                                                         --------         --------         --------
                                                                                         
Net cash flows provided by (used in)                                                     
     investment activities                                 14,343           15,451           (4,565)
                                                         --------         --------         --------
                                                                                         
Cash flows from financing activities:                                                    
     Payment of long-term debt                               (234)             (16)             -0-
                                                         --------         --------         --------
                                                                                         
Net cash flows used in financing activities                  (234)             (16)             -0-
                                                         --------         --------         --------
                                                                                         
(Decrease) increase in cash and cash equivalents           (2,626)           3,892          (27,215)
                                                                                         
Cash and cash equivalents at beginning of period           12,424            8,532           35,747
                                                         --------         --------         --------
                                                                                         
Cash and cash equivalents at end of period               $  9,798           12,424            8,532
                                                         ========         ========         ========
                                                                                         
                                                                                         
Supplemental cash flow disclosures:                                                      
     Interest paid, net of amounts capitalized           $ 10,087           10,135            8,918
                                                         ========         ========         ========
                                                                                         
     Income taxes paid                                        -0-              -0-              -0-
                                                         ========         ========         ========
                                                                                         
Non-cash financing and investing activities:                                             
     Capital lease obligation incurred to acquire                                        
         Casino Assets                                   $    693               78              -0-
                                                         ========         ========         ========
                                                                                         
                                                              
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-6

<PAGE>



           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


1.      THE CORPORATION

        The Claridge Hotel and Casino Corporation (the "Corporation"), was
        formed on August 26, 1983 to hold all of the shares of capital stock of
        The Claridge at Park Place, Incorporated ("New Claridge"), which was
        formed on August 29, 1983. On October 31, 1983, New Claridge acquired
        certain assets of The Claridge Hotel and Casino (the "Claridge"),
        including gaming equipment (the "Casino Assets"), from Del E. Webb New
        Jersey, Inc. ("DEWNJ"), a wholly-owned subsidiary of Del Webb
        Corporation ("Webb"); leased certain other of the Claridge's assets,
        including the buildings, parking facility and non-gaming, depreciable,
        tangible property of the Claridge (the "Hotel Assets"), from Atlantic
        City Boardwalk Associates, L.P. (the "Partnership"); subleased the land
        on which the Claridge is located from the Partnership; assumed certain
        liabilities related to the acquired assets; and undertook to carry on
        the business of the Claridge Casino Hotel, a facility operating in
        Atlantic City, New Jersey.

        In October 1988, the Corporation and New Claridge entered into an
        agreement to restructure the financial obligations of the Corporation
        and New Claridge (the "Restructuring Agreement"). The restructuring,
        which was consummated in June 1989, resulted in (i) a reorganization of
        the ownership interests in the Claridge; (ii) modifications of the
        rights and obligations of certain lenders; (iii) satisfaction and
        termination of the obligations and commitments of Webb and DEWNJ under
        the original structure; (iv) modifications of the lease agreements
        between New Claridge and the Partnership; and (v) the forgiveness by
        Webb of substantial indebtedness.

        On January 31, 1994, the Corporation completed an offering of $85
        million of First Mortgage Notes (the "Notes") due 2002, bearing interest
        at 11 3/4%. The Notes are secured by (i) a non-recourse mortgage granted
        by the Partnership representing a first lien on the Hotel Assets; (ii) a
        pledge granted by the Corporation of all outstanding shares of capital
        stock of New Claridge; and (iii) a guarantee by New Claridge. New
        Claridge's guarantee of the Notes is secured by a collateral assignment
        of the second lien Expandable Wraparound Mortgage, and by a lien on the
        Claridge's gaming and other assets, which lien will be subordinated to
        liens that may be placed on those gaming and other assets to secure any
        future revolving credit line arrangement. On January 28, 1997, New
        Claridge entered into an agreement to subject the new self-parking
        garage to the lien of the mortgage; such lien will not be subordinated
        to any lien which may be placed on New Claridge's gaming and other
        assets to secure any future revolving credit line arrangement. Interest
        on the Notes is payable semiannually on February 1 and August 1 of each
        year. (See Note 9, "Long-Term Debt".)

        The net proceeds of the Notes, totalling $82.2 million net of fees and
        expenses, were used as follows: (i) to repay in full on January 31,
        1994, the Corporation's outstanding debt under the Revolving Credit and
        Term Loan Agreement (the "Loan Agreement"), including the outstanding
        balance of the Corporation's revolving credit line, which was secured by
        a first mortgage; (ii) to expand New Claridge's casino capacity by
        12,000 square feet in 1994, including the addition of approximately 500
        slot machines and the relocation of two restaurants and their related
        kitchens; (iii) to purchase property in 1995, and construct on that
        property a self-parking garage, which opened in mid-1996; and (iv) to
        acquire the Contingent Payment option in 1996 (see Note 10, "Other
        Noncurrent Liabilities").

                                       F-7

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


2.      CURRENT DEVELOPMENTS

        During 1995, the cash provided by operations of the Claridge was
        sufficient to meet the Corporation's obligations to pay interest on the
        Notes, as well as to make moderate capital improvements. Commencing in
        the latter part of 1995, however, competition in the Atlantic City
        casino market for bus customers, a principal source of customers for the
        Claridge at the time, increased; this competition intensified even more
        during 1996 as additional casino square footage was added, principally
        due to the opening of the Trump World's Fair casino. During 1996, the
        average coin incentive issued per bus patron at the Claridge increased
        to approximately $19, from approximately $13 in 1995. Total cash
        incentives issued to Claridge's casino patrons (in the form of coin to
        play slot machines and gaming chips to play table games) increased to
        approximately $30.5 million in 1996, from approximately $25.2 million in
        1995. While the Corporation's promotional costs increased significantly,
        total casino revenues in 1996 actually decreased from 1995 levels. It
        had been the expectation of the Corporation that, upon opening of its
        new self-parking garage, the Corporation would be able to reduce its
        reliance on the bus patron market; however, the Corporation was forced
        to close the garage facility on July 10, 1996, only ten days after its
        opening, following a fatal accident. Because the facility was not able
        to reopen until the end of September 1996, the Corporation lost any
        possible benefit of the facility during the normally busy summer season.
        In addition, severe winter weather in the first quarter of 1996
        adversely affected revenues. As a result, the Corporation experienced a
        net loss for 1996 of $15.4 million, compared to a net loss of $1.9
        million in 1995.

        The Corporation has experienced recurring losses and serious
        deterioration in its cash flow since 1996. Since the Corporation does
        not have substantial cash reserves or access to a line of credit, the
        Corporation needed to experience significant improvement in operating
        results in 1997 over 1996 levels in order to meet its on-going
        obligations, including the interest due on the Notes. Operating results
        in 1997 did improve over 1996 levels, due primarily to the positive
        impact of the availability of the self-parking garage, lower bus package
        pricing, and other cost containment initiatives. However, operating
        results in 1998 fell below 1997 levels due to increased competition for
        casino customers. In 1998, the Corporation experienced a net loss of
        $9.4 million, compared to a net loss of $6.0 million in 1997. In the
        fall of 1998, New Claridge redirected its bus program to reduce the
        number of customers who arrive by bus, and, thereby, related costs.
        Total coin issued to bus passengers in 1998 was $13.5 million, compared
        to $15.0 million of coin issued to bus passengers in 1997. Marketing
        efforts are being directed toward the mid-level slot customer through
        the use of promotions and advertising. Additionally, management
        continues to conserve cash through various cost containment measures.
        Management is also considering various refinancing alternatives,
        including a sale of the Corporation, or a restructuring of its financial
        obligations.

        In view of the operating results of New Claridge in 1998, and in order
        to meet its obligations, management of the Corporation took several
        steps to enhance its cash position, through both operational changes,
        including the previously mentioned redirection of the bus program, and
        certain transactions with PDS Financial Corporation ("PDS") and the
        Casino Reinvestment Development Authority ("CRDA"), as further discussed
        below.


                                       F-8

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


2.      CURRENT DEVELOPMENTS (cont'd.)

        In December 1997, New Claridge obtained a commitment from PDS for a sale
        lease-back facility (the "Facility"). Under the terms of the Facility,
        New Claridge could sell certain of its slot machines to PDS under a sale
        lease-back arrangement, for a specified amount per slot machine. In
        February 1998, New Claridge sold 370 slot machines to PDS for
        approximately $1 million under this Facility. The machines were then
        leased back to New Claridge under an operating lease arrangement for two
        years. After two years, New Claridge has an option to either purchase
        the machines, renew the lease arrangement for twelve months, or return
        the equipment to PDS. In December 1998, New Claridge completed the sale
        of an addtional 379 slot machines to PDS for approximately $776,000,
        under terms similar to those described above. No additional financing is
        available under this Facility.

        In October 1998, the CRDA approved the direct investment of New Claridge
        funds, already on deposit with the CRDA, and the completion of certain
        donations of New Claridge funds also already on deposit. These
        transactions resulted in the receipt by New Claridge of approximately
        $930,000 from the CRDA in December 1998.

        In addition, in February 1999, the Corporation and New Claridge agreed
        to a settlement of approximately $2.3 million in the arbitration
        proceedings concerning the accident which took place in New Claridge's
        self-parking garage in July 1996. The settlement proceeds were received
        by New Claridge in late February 1999.

        As a result of these transactions, on March 2, 1999, New Claridge was
        able to pay the interest due on the Notes on February 1, 1999, under the
        30-day grace period allowed in accordance with the terms of the
        indenture governing the Notes (the "Indenture").

        The financial statements do not include any adjustments relating to the
        recoverability and classification of recorded asset amounts or the
        amounts and classification of liabilities that might be necessary should
        the Corporation be unable to continue in existence.

3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        a)     Basis of Presentation

               The consolidated financial statements are prepared in accordance
               with generally accepted accounting principles. The consolidated
               financial statements include the accounts of the Corporation and
               its wholly-owned subsidiaries, New Claridge and Claridge Gaming
               Incorporated ("CGI"). CGI was formed in March 1994 for the
               purpose of developing gaming opportunities in other
               jurisdictions. All material intercompany accounts and
               transactions have been eliminated in consolidation.

               The separate financial statements of New Claridge, which is a
               guarantor of the Notes, are not included because the aggregate
               assets, liabilities, operations and equity of New Claridge are
               substantially equivalent to the assets, liabilities, operations
               and equity of the

                                       F-9

<PAGE>



                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)



3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

               Corporation on a consolidated basis, and because the separate
               financial statements and other disclosures concerning New
               Claridge are not deemed material to holders of Notes. There are
               no separate financial statements for CGI, which is the only other
               subsidiary of the Corporation and is not a guarantor of the
               Notes.

        b)     Use of Estimates

               The preparation of financial statements in conformity with
               generally accepted accounting principles requires management to
               make estimates and assumptions that affect the reported amounts
               of assets and liabilities and disclosure of contingent assets and
               liabilities at the date of the financial statements and the
               reported amounts of revenues and expenses during the reporting
               period. Actual results could differ from those estimates.

        c)     Cash and Cash Equivalents

               Cash and cash equivalents include investments in interest bearing
               repurchase agreements in government securities and other
               investments as permitted in accordance with the terms of the
               indenture governing the Notes, with maturities of three months or
               less when purchased. Interest income is recorded as earned.

        d)     Casino Receivables and Revenues

               Credit is issued to certain casino customers and the Corporation
               records all unpaid credit as casino receivables on the date the
               credit was issued. Allowances for estimated uncollectible casino
               receivables are provided to reduce these receivables to amounts
               anticipated to be collected. The Corporation recognizes as casino
               revenue, the net win (which is the difference between amounts
               wagered and amounts paid to winning patrons) from gaming
               activity.

        e)     Inventories

               Inventories are stated at the lower of cost or market, cost being
               determined principally on a first-in, first-out basis.

        f)     Property and Equipment

               Property and equipment are recorded at cost, and are depreciated
               using the straight-line method over the following estimated
               useful lives:

                         Buildings and improvements             39 years
                         Gaming equipment                        5 years
                         Other equipment                         7 years


                                      F-10

<PAGE>



                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

               Interest costs related to the construction of the garage facility
               were capitalized, and are being amortized over the estimated
               useful life of the garage.

        g)     Deferred Charges

               Deferred charges primarily relate to the January 31, 1994
               issuance of the Notes. These charges, which totaled approximately
               $3.7 million, are being amortized over the term of the Notes.
               Accumulated amortization of these charges as of December 31, 1998
               and 1997 was $2,298,000 and $1,831,000, respectively.

        h)     Income Taxes

               Deferred income taxes are provided for temporary differences
               between financial statement reporting and income tax reporting
               for rent leveling provisions, asset basis differences, and
               various other expenses recorded for financial statement purposes.

        i)     Loss Per Share

               Loss per share is calculated by dividing net loss by the weighted
               average shares outstanding (4,983,804 for the year ended December
               31, 1998, 4,995,219 for the year ended December 31, 1997, and
               5,046,064 for the year ended December 31, 1996). Basic and
               diluted net loss per share are the same for the years ended
               December 31, 1998, 1997, and 1996.



                                      F-11

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


4.      RECEIVABLES

        Receivables at December 31, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
        Current Receivables                                                                   1998              1997


                                                                                                 (in thousands)
<S>                                                                                        <C>             <C> 
                  Casino, less allowance for uncollectible accounts
                    of $1,305,000 and $717,000 at
                    December 31, 1998 and 1997, respectively                                $  1,571            1,312
                  Hotel, less allowance for uncollectible accounts
                    of $24,000 and $31,000 at December 31,
                    1998 and 1997, respectively                                                  100              102
                  Interest receivable due from the Partnership                                   804            1,014
                  Current portion Expandable Wraparound
                    Mortgage due from the Partnership                                            -0-           14,000
                  Current portion of FF&E Promissory notes                                     2,046            2,448
                  Current portion of Expansion/Construction
                    promissory note                                                              -0-            2,167
                  Other, less allowance for uncollectible accounts
                    of $10,000 and $10,000 at December 31,
                    1998  and 1997, respectively                                               1,040              424
                                                                                            --------        ---------
                                                                                            $  5,561           21,467
                                                                                            ========          =======

         Long-Term Receivables

                  $127,000,000 Expandable Wraparound Mortgage 14%, maturities
                    through September 30, 2000 (net of $4,525,000 discount and
                    $6,539,000 discount at
                    December 31, 1998 and 1997, respectively)                               $ 45,975           40,461
                  Deferred interest receivable, due
                    September 30, 2000                                                        20,000           20,000
                  FF&E promissory notes, 14%                                                  13,618           15,004
                                                                                           ---------          -------

                                                                                            $ 79,593           75,465
                                                                                            ========          =======

</TABLE>


         The Expandable Wraparound Mortgage Loan Agreement ("Expandable
         Wraparound Mortgage") was executed and delivered by the Partnership to
         New Claridge and is secured by all property of the Partnership. As part
         of the agreement, New Claridge is obligated to make payments required
         under any senior mortgage indebtedness, so long as the Partnership is
         not in default on its obligations under the Expandable Wraparound
         Mortgage. $20 million in interest was deferred between 1983 and 1988
         and will be due upon maturity. Principal payments required under the
         Expandable Wraparound Mortgage commenced in 1988.

                                      F-12

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)

4.       RECEIVABLES (cont'd.)

         Under the terms of the Expandable Wraparound Mortgage, New Claridge is
         obligated to loan the Partnership up to $25 million in the form of FF&E
         promissory notes ("FF&E Loans"), secured under the Expandable
         Wraparound Mortgage, for the purchase of property and equipment ("FF&E
         Replacements"). One half of the FF&E Loan principal is due in 48 months
         and the remaining balance is due 60 months from the date of issuance of
         the respective FF&E Loan. During the year ended December 31, 1999,
         $2,046,000 of principal payments will become due. In connection with
         the offering of $85 million of Notes on January 31, 1994, the
         Corporation agreed to use not less than $8 million from the net
         proceeds of the offering to finance certain internal improvements to
         the Claridge which were funded through additional FF&E Loans. In
         connection therewith, the Expandable Wraparound Mortgage Loan agreement
         as well as the Operating Lease, and the Expansion Operating Lease were
         amended to provide that the principal on these additional FF&E Loans
         will be payable at final maturity of the Expandable Wraparound
         Mortgage.

         In 1986, the Expandable Wraparound Mortgage was increased up to $17
         million to provide the Partnership with funding for the construction of
         an expansion. Effective on the date that the expansion opened to the
         public (August 28, 1986), the Partnership commenced making level
         monthly payments of principal and interest so as to repay on September
         30, 1998, in full, the principal balance of this increase in the
         Expandable Wraparound Mortgage. The Expandable Wraparound Mortgage was
         amended to require, in addition to the above, principal payments (in
         equal monthly installments) due during the years 1988 through 1998 in
         escalating amounts totalling $80 million and on September 30, 2000 a
         balloon payment of $67 million which includes $20 million of deferred
         interest.

         Effective March 1, 1997, the Corporation, New Claridge, and the
         Partnership entered into a restructuring agreement pursuant to which
         New Claridge agreed to use its best efforts to cause a modification of
         the Expandable Wraparound Mortgage (the "Wraparound Modification") that
         is permitted by, or is in compliance with, the terms of the Indenture.
         The Wraparound Modification, if so permitted, will provide for an
         extension of the maturity date of the Expandable Wraparound Mortgage
         from September 30, 2000 to January 1, 2004. If the Wraparound
         Modification is not permitted by or in compliance with the terms of the
         Indenture, New Claridge has agreed to effect the Wraparound
         Modification at such time as the Notes are no longer outstanding.

         Effective September 30, 1998, the Corporation, New Claridge, and the
         Partnership agreed to amend the March 1997 restructuring agreement to
         provide for an extension of the maturity date of the Expandable
         Wraparound Mortgage to January 1, 2005. In addition, the Expandable
         Wraparound Mortage Agreement and Note were amended to defer the
         principal payments which were payable during the fourth quarter of 1998
         (totalling $3.5 million) to the earlier of (i) the maturity date of the
         Expandable Wraparound Mortage Agreement and Note; (ii) such earlier
         date, if any, as the entire principal amount of the Expandable
         Wraparound Mortgage Note becomes due and payable; or (iii) the date on
         which any merger, consolidation or similar transaction to which the
         Corporation or New Claridge is a party, or any sale of all or

                                      F-13

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


4.       RECEIVABLES (cont'd.)

         substantially all of the assets of the Corporation or New Claridge is
         consummated, or any change of control of the Corporation or New
         Claridge occurs.

5.       PROPERTY AND EQUIPMENT

         Property and equipment at December 31, 1998 and 1997 consist of the
         following:
<TABLE>
<CAPTION>
                                                       1998            1997  
                                                     --------        --------
                                                          (in thousands)
<S>                                                  <C>               <C>    
Gaming equipment                                     $12,457           18,366
Land and land improvements                             7,598            7,598
Building                                              20,070           20,070
Leasehold improvements                                   745              745
Capital lease asset                                      808              693
Other equipment                                          107              107
                                                     -------          -------
                                                                      
                                                      41,785           47,579
Less accumulated depreciation and amortization        12,408           15,485
                                                     -------          -------
                                                                      
Net property and equipment                           $29,377           32,094
                                                     =======          =======
</TABLE>
                                                               
6.       OTHER ASSETS

         The Casino Control Act (the "Act") provides for the imposition of an
         investment obligation, calculated at 1.25% of the total revenues from
         gaming operations less the provision for uncollectible accounts. If a
         casino licensee opts not to make the investment as required, it is
         assessed an alternative tax of 2.5% of total gaming revenues less the
         provision for uncollectible accounts. The licensee can satisfy its
         obligation by making a direct investment in a project approved by the
         CRDA, the agency responsible for administering this portion of the Act,
         or it can buy bonds issued by the CRDA. These bonds bear interest at
         two-thirds of market rates, as set forth in the Act.

         New Claridge has opted to deposit its reinvestment obligation funds
         with the State Treasurer. Through December 31, 1998, the Corporation
         has deposited $20,411,000 of which $3,026,000 has been used to purchase
         bonds issued by the CRDA. Since interest on these bonds and funds
         deposited is paid at a discounted rate, New Claridge records a
         valuation allowance of approximately one-third of the reinvestment
         obligation. In addition, in January 1990, it was determined that
         certain bonds issued by the CRDA had become impaired, and that the
         payment of principal and interest was uncertain. As a result, New
         Claridge has recorded a valuation allowance for the full amount of its
         investment in these bonds, totalling $1,654,000.

         From time to time, New Claridge has made donations to the CRDA of 
         funds which had

                                      F-14

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


6.       OTHER ASSETS (cont'd.)

         previously been deposited with the State Treasurer. In exchange for
         these donations, which have totalled $15,054,000 through December 31,
         1998, New Claridge received credits towards future obligations or cash
         credits, from the CRDA equal to 51% of the donations. As of December
         31, 1998, all of these credits had been used.

7.       LOAN FROM THE PARTNERSHIP

         In accordance with the terms of the Restructuring Agreement, on June
         16, 1989 the Partnership loaned to New Claridge $3.6 million, which
         represented substantially all cash and cash equivalents remaining in
         the Partnership other than funds needed to pay expenses incurred
         through the closing of the Restructuring. This loan is evidenced by an
         unsecured promissory note and is not due and payable until such time as
         the full or partial satisfaction of the Expandable Wraparound Mortgage
         and the First Mortgage has been made in connection with a refinancing
         or sale of all or a partial interest in the Claridge.

         Interest which accrues at 12% per annum is payable in full upon
         maturity. As of December 31, 1998, such interest, which is included in
         other current liabilities, amounted to $4,122,000.

8.       OTHER CURRENT LIABILITIES

         Other current liabilities at December 31, 1998 and 1997 consist of the
         following:
<TABLE>
<CAPTION>
                                                      1998       1997      
                                                      ----       -----     
                                                       (in thousands)      
         <S>                                         <C>        <C>                                                                 
         Deferred rent, current                     $15,078     15,078     
         Deferred rent                                  475      1,075     
         Accrued payroll and related benefits         6,571      6,508     
         Accrued interest, Notes                      4,161      4,161     
         Auto/General insurance reserves              1,424      1,488     
         Accrued interest due to Partnership          4,122      3,690     
         Other current liabilities                    2,771      2,393     
                                                   --------    -------     
                                                                           
                                                    $34,602     34,393     
                                                    =======     ======     
</TABLE>
                                                                           
                                                                 

         Deferred rent of $15,078,000 represents the maximum deferral allowed in
         accordance with the Operating Lease Agreement and Expansion Operating
         Lease Agreement, as amended. The deferred rent liability will become
         payable (i) upon a sale or refinancing of the Claridge; (ii) upon full
         or partial satisfaction of the Expandable Wraparound Mortgage; and
         (iii) upon full satisfaction of any first mortgage then in place.

         The Fifth Amendment to the Operating Lease and the Fourth Amendment to
         the Expansion Operating Lease, which were effective on March 1, 1997
         provided for the abatement of

                                      F-15

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


8.       OTHER CURRENT LIABILITIES (cont'd.)

         $867,953 of basic rent and for the deferral of $1.3 million of basic
         rent on March 1, 1997, and for additional monthly abatements of rent
         beginning April 1, 1997. The $1.3 million of basic rent deferred on
         March 1, 1997 is to be paid to the Partnership as additional rent of
         $25,000 per month for the period April 1, 1997 through December 31,
         1997, and of $50,000 per month for the year 1998 and thereafter until
         paid in full (subject to acceleration under certain circumstances).

9.       LONG-TERM DEBT

         Long-term debt at December 31, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
                                                   1998            1997
                                                   ----           -----
                                                       (in thousands)
        <S>                                     <C>                <C>    
         11 3/4% Notes due 2002                 $ 85,000           85,000
         Capital lease obligation                    521               62
                                               ---------           ------
                                                  85,521           85,062
         Less current installments                   351               39
                                               ---------           ------
                                               $  85,170           85,023
                                               =========           ======
</TABLE>

         On January 31, 1994, the Corporation completed an offering of $85
         million of Notes due 2002, bearing interest at 11 3/4%. The Notes are
         secured by (i) a non-recourse mortgage granted by the Partnership
         representing a first lien on the Hotel Assets; (ii) a pledge granted by
         the Corporation of all outstanding shares of capital stock of New
         Claridge; and (iii) a guarantee by New Claridge. New Claridge's
         guarantee of the Notes is secured by a collateral assignment of the
         second lien Expandable Wraparound Mortgage, and by a lien on the
         Claridge's gaming and other assets, which lien will be subordinated to
         liens that may be placed on those gaming and other assets to secure any
         future revolving credit line arrangement. On January 28, 1997, New
         Claridge entered into an agreement to subject the new self-parking
         garage to the lien of the mortgage; such lien will not be subordinated
         to any lien which may be placed on New Claridge's gaming and other
         assets to secure any future revolving credit line arrangement. Interest
         on the Notes is payable semiannually on February 1 and August 1 of each
         year. A portion of the net proceeds of $82.2 million was used to repay
         in full the Corporation's outstanding debt under the Loan Agreement,
         including the outstanding balance of the Corporation's revolving credit
         line, which was secured by a first mortgage. In conjunction with the
         full satisfaction of the Loan Agreement, the Corporation's $7.5 million
         revolving credit line arrangement was terminated.

         Beginning in 1995, and annually thereafter, the Corporation is required
         to make an offer ("Excess Cash Offer"), to all holders of Notes, to
         purchase at 100% of par (plus accrued and unpaid interest, if any, to
         the purchase date), the maximum amount of Notes that may be purchased
         with 50% of the Corporation's "Excess Cash" (as defined in the
         Indenture), from the preceding year. If less than $5 million is
         available to make such purchases (i.e., if Excess Cash is less than $10
         million), no such offer needs to be made. The commencement date of any

                                      F-16

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


9.       LONG-TERM DEBT (cont'd.)

         required Excess Cash Offer must be not later than 30 days after the
         publication of the Corporation's audited financial statements for the
         immediately preceding fiscal year. For the year ended December 31,
         1998, the Corporation's Excess Cash was less than $10 million, and
         therefore the Corporation is not required to make an Excess Cash Offer
         in 1999.

         The Indenture restricts the declaration or payment of dividends or
         distributions or redemptions of capital stock by the Corporation and
         its subsidiaries, other than (i) dividends or distributions payable in
         equity interests of the Corporation or such subsidiaries; (ii)
         dividends or distributions payable to the Corporation or any
         wholly-owned subsidiary; or (iii) dividends by a subsidiary on its
         common stock if such dividends are paid pro-rata to all holders of such
         common stock.

10.      OTHER NONCURRENT LIABILITIES

         Other noncurrent liabilities at December 31, 1998 and 1997 consist of
         the following:
<TABLE>
<CAPTION>
                                             1998                     1997  
                                             ----                     ----
                                                     (in thousands)
          <S>                              <C>                      <C>    
         Contingent Payment                $ 19,000                  19,000
         License agreement                    1,369                   1,444
         Other                                  971                     406
                                           --------                  ------

                                           $ 21,340                  20,850
                                           ========                  ======
</TABLE>

         Pursuant to the Restructuring Agreement, Webb retained an interest,
         which was assigned to the Valley of the Sun United Way on April 2,
         1990, equal to $20 million plus interest at a rate of 15% per annum,
         compounded quarterly, commencing December 1, 1988, in any proceeds
         ultimately recovered from operations and/or the sale or refinancing of
         the Claridge facility in excess of the first mortgage loan and other
         liabilities ("Contingent Payment"). Consequently, New Claridge has
         deferred the recognition of $20 million of forgiveness income with
         respect to the Contingent Payment obligation. Interest on the
         Contingent Payment has not been recorded in the accompanying
         consolidated financial statements since the likelihood of paying such
         amount is not considered probable at this time. As of December 31,
         1998, accrued interest would have amounted to approximately $68.3
         million.

         In connection with the restructuring, Webb agreed to grant those
         investors in the Corporation and the Partnership ("Releasing
         Investors"), from whom Webb had received written releases from all
         liabilities, rights ("Contingent Payment Rights") to receive certain
         amounts to the extent available for application to the Contingent
         Payment. Approximately 84% in interest of the investors provided
         releases and became Releasing Investors. Payments to Releasing
         Investors are to be made in accordance with a schedule of priorities,
         as defined in the Restructuring Agreement.

                                      F-17

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)



10.      OTHER NONCURRENT LIABILITIES (cont'd.)

         On February 23, 1996, the Corporation acquired an option to purchase,
         at a discount from the carrying value, the Contingent Payment. The
         purchase price of the option of $1 million was recorded as an offset to
         the Contingent Payment liability which is included in other noncurrent
         liabilities on the Corporation's consolidated balance sheet. The option
         could have been exercised any time prior to December 31, 1997. Given
         its operating results (see Note 2, "Current Developments"), the
         Corporation was not able to exercise this Contingent Payment option,
         and it expired in accordance with its terms on December 31, 1997.

         On February 28, 1997, New Claridge entered into an agreement with
         Thermal Energy Limited Partnership I ("Atlantic Thermal"), pursuant to
         which Atlantic Thermal was granted an exclusive license for a period of
         twenty years to use, operate, and maintain certain steam and chilled
         water production facilities at the Claridge. In consideration for this
         license agreement, Atlantic Thermal paid New Claridge $1.5 million.
         This amount will be recognized as income over the term of the
         agreement, commencing April 1997.

11.      PROMOTIONAL ALLOWANCES

         The retail value of complimentary rooms, food and beverages and other
         complimentaries furnished to patrons is included in gross revenue and
         then deducted as promotional allowances. The estimated cost of
         providing such promotional allowances for the years ended December 31,
         1998, 1997 and 1996 has been allocated to casino expenses as follows
         (in thousands):
<TABLE>
<CAPTION>
                                      1998              1997             1996
                                      ----              ----             ----
        <S>                         <C>                 <C>             <C>     
         Hotel                      $ 3,800             3,828            3,339
         Food and beverage           13,716            11,815           12,001
         Entertainment                1,073             1,134            1,725
                                    -------            ------           ------
              Total                 $18,589            16,777           17,065
                                    =======            ======           ======
</TABLE>

12.      INCOME TAXES

         Income taxes are accounted for under the asset and liability method.
         Deferred tax assets and liabilities are recognized for the estimated
         future tax consequences attributable to temporary differences between
         the financial statement carrying amounts of existing assets and
         liabilities and their respective tax basis. The benefit for income
         taxes is comprised of the following (in thousands):
<TABLE>
<CAPTION>
                                      1998              1997             1996
                                      ----              ----             ----
         <S>                          <C>                <C>             <C>    
         Current:
           Federal                    $ -0-               -0-              -0-
           State                        -0-               -0-              -0-
         Deferred                       -0-               -0-           (5,398)
                                      -----              ----           ------
                                      $ -0-               -0-           (5,398)
                                      =====              ====           ======
</TABLE>

                                      F-18

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)




12.   INCOME TAXES (cont'd.)

      The benefit for income taxes differs from the amount computed at the
      statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
                                                 1998         1997        1996
                                                 ----         ----        ----
      <S>                                         <C>          <C>        <C>    
      Computed "expected" tax benefit            $(3,201)     (2,033)    (7,068)
      Increase (reduction) in income taxes
        resulting from:
        Change in the valuation allowance          4,391       2,311      2,460
        State income tax, net of federal
          income tax benefit                        (565)       (359)    (1,247)
        Meals and entertainment                     (454)        454        550
        Contingent Payment option                    -0-        (400)       -0-
        Other                                       (171)         27        (93)
                                                 -------      ------     ------
                                                 $   -0-         -0-     (5,398)
                                                 =======      ======     ======
</TABLE>

      The tax effects of temporary differences that give rise to significant
      portions of the deferred tax assets and deferred tax liabilities at
      December 31, 1998 and 1997 are presented below (in thousands):
<TABLE>
<CAPTION>
                                                               1998        1997
                                                               ----        ----
      <S>                                                   <C>           <C>                                                      
      Deferred tax assets:
        Net operating loss                                  $ 21,566     14,915
        Rent leveling                                          3,204      7,476
        Accrued expenses                                       1,354      1,460
        Deferred revenue                                         633        578
        Tax credit                                               940        940
        Difference between book and tax basis
           other liabilities                                   2,285      1,065
        Other                                                    637        857
                                                            --------    -------
               Total gross deferred tax assets                30,619     27,291
               Less valuation allowance                       (9,584)    (5,193)
                                                            --------    -------
               Net deferred tax assets                        21,035     22,098
                                                            --------    -------
      Deferred tax liabilities:
        Gaming equipment, due to differences in depreciation    (852)    (1,019)
        Difference between book and tax basis of
          Expandable Wraparound Mortgage receivable          (20,683)   (22,745)
        Difference between book and tax basis of receivables    (679)      (912)
        Difference between book and tax basis of
          Operating Lease expense                             (1,400)       -0-
        Other                                                    -0-         (2)
                                                            --------    -------
               Total gross deferred tax liabilities          (23,614)   (24,678)
                                                            --------    -------
               Net deferred tax liability                   $ (2,579)    (2,580)
                                                            ========    =======
</TABLE>

                                      F-19

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)



12.      INCOME TAXES (cont'd.)

         The valuation allowance for deferred tax assets as of December 31, 1997
         was $5,193,000. The net change in the total valuation allowance for the
         year ended December 31, 1998 was an increase of $4,391,000.

         The Corporation recorded an income tax benefit of $-0-, $-0-, and
         $5,398,000, for the years ended December 31, 1998, 1997 and 1996,
         respectively, which represents the tax benefit expected from the
         carryforward of Federal net operating losses net of increased deferred
         tax credits.

         At December 31, 1998, the Corporation had net operating loss
         carryforwards for federal income tax purposes of approximately $54.5
         million. These net operating loss carryforwards are available to offset
         future federal taxable income, if any, in the amounts of $23.6 million
         through 2016, $12.7 million through 2017, and $18.2 million through
         2018. The Corporation also has tax credit carryforwards for income tax
         purposes of approximately $940,000, which are available to reduce
         future federal income taxes, if any, through 2002.

         As a result of the restructuring in 1989, the amount of debt forgiven
         resulted in the loss or reduction of various tax attributes including
         tax operating loss carry forwards of $30,400,000, unused tax credits of
         $1,041,000 and reduction in tax basis of assets by $89,178,000. As a
         result of the reduction in tax basis of assets, cash payments for
         income taxes will significantly exceed income tax expense for financial
         statement purposes in future years. The above amounts have been
         adjusted to reflect settlements of the Internal Revenue Service ("IRS")
         audits of the years 1983 through 1987. During 1995 the Corporation
         received notice from the IRS asserting deficiencies in Federal
         corporate income taxes for the Corporation's 1990 and 1991 taxable
         years. Many of the proposed adjustments to the Corporation's tax
         returns have been settled with no adverse impact to the Corporation's
         consolidated financial statements. There is a remaining IRS asserted
         deficiency for the 1990 and 1991 taxable years. In October 1996, the
         IRS sent the Corporation a statutory notice of deficiency for the
         Corporation's 1990 and 1991 taxable years. In January 1997, the
         Corporation filed a petition with the United States Tax Court (the
         "Court") requesting a redetermination of the asserted deficiency. In
         January 1999, the Corporation reached a settlement agreement with the
         IRS District Counsel, which was submitted to the Court on January 25,
         1999. On March 4, 1999, the Court confirmed this settlement. This
         settlement agreement did not have a material impact on the
         Corporation's consolidated financial statements.

13.      OPERATING LEASE

         The Hotel Assets are owned by the Partnership and leased by the
         Partnership to New Claridge under the terms of an Operating Lease
         originally entered into on October 31, 1983, and an Expansion Operating
         Lease, which covered the expansion improvements made to the Claridge in
         1986. The initial terms of both leases expired on September 30, 1998;
         each lease provides for three ten-year renewal options at the election
         of New Claridge. In connection with the

                                      F-20

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


13.      OPERATING LEASE (cont'd.)

         March 1, 1997 restructuring agreement between the Corporation, New
         Claridge, and the Partnership (discussed below), New Claridge agreed to
         exercise the first of the ten-year renewal options, extending the term
         of the Operating Lease and Expansion Operating Lease through September
         30, 2008.

         Basic rent during the renewal term of each lease is calculated pursuant
         to a defined formula, with such rent for the lease year commencing
         October 1, 1998 through September 30, 1999 not to be more than $29.5
         million nor less than $24 million for the Operating Lease, and not to
         be more than $3 million nor less than $2.5 million for the Expansion
         Operating Lease. In addition, in each subsequent lease year, rent will
         be calculated pursuant to a defined formula, but may not exceed 10%
         more than the basic rent for the immediately preceding lease year.
         Basic rent, as calculated pursuant to the defined formula for the lease
         year commencing October 1, 1998 will be $24 million for the Operating
         Lease and $2.5 million for the Expansion Operating Lease.

         New Claridge is also required to pay, as additional rent, certain
         amounts including certain taxes, insurance, and other charges related
         to the occupancy of the land and Hotel Assets, certain expenses and
         debt service related to furniture, fixture and equipment replacements
         and building improvements, and the general and administrative costs of
         the Partnership.

         Effective with the consummation of the restructuring in June 1989, the
         Operating Lease Agreement and Expansion Operating Lease Agreement were
         amended to provide for the deferral of $15.1 million of rental payments
         due during the period July 1, 1988 through the beginning of 1992, and
         to provide for the abatement of $38.8 million of basic rent payable
         through 1998, thereby reducing the Partnership's cash flow to an amount
         estimated to be necessary to meet the Partnership's cash requirements.
         Lease expense (which had been recognized on leveled basis in accordance
         with Statement of Financial Accounting Standards No. 13) was reduced
         prospectively as a result of the abatements provided for in connection
         with the June 1989 restructuring. During the third quarter of 1991, the
         maximum deferral of rent was reached. On August 1, 1991, the Operating
         Lease and Expansion Operating Lease were amended further to revise the
         abatement provisions so that, commencing January 1, 1991, for each
         calendar year through 1998, the lease abatements could not exceed $10
         million in any one calendar year, and $38.8 million in the aggregate.
         All of the $38.8 million of available rent abatements were fully
         utilized by the end of March 1997.

         The Fifth Amendment to the Operating Lease and the Fourth Amendment to
         the Expansion Operating Lease provided for the abatement of $867,953 of
         basic rent, and for the deferral of $1.3 million of basic rent on March
         1, 1997, and provided for additional abatements of basic rent,
         commencing on April 1, 1997, as necessary to reduce the Partnership's
         cash flow to an amount necessary only to meet the Partnership's cash
         requirements through December 31, 1998. The $1.3 million of basic rent
         deferred on March 1, 1997 is to be paid to the Partnership in monthly
         installments of $25,000 for the period April 1, 1997 through December
         31, 1997, and monthly installments of $50,000 for the year 1998 and
         thereafter until paid in full. All abatements of rent in excess of the
         $38.8 million which was allowed in accordance with the

                                      F-21


<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


13.      OPERATING LEASE (cont'd.)


         1989 restructuring will be recognized as a reduction to lease expense
         as abated. In 1998 and 1997, $11.1 million and $9.0 million,
         respectively, of rent in excess of the $38.8 million was abated.

         For the years ended December 31, 1998, 1997, and 1996, total expense
         resulting from the Operating Lease and Expansion Operating Lease
         amounted to $26,374,000, $30,554,000, and $38,561,000, respectively, of
         which ($10,679,000), ($11,504,000), and ($2,737,000), respectively, of
         rental expense is attributable to the requirement under Statement of
         Financial Accounting Standards No. 13 to provide a level rent expense
         for those leases with escalating payments.

         Effective September 30, 1998, the Operating Lease and Expansion
         Operating Lease were further amended, pursuant to a Sixth Amendment to
         the Operating Lease and Fifth Amendment to the Expansion Operating
         Lease (the "Sixth Amendment"), to allow for the deferral of $1.1
         million of rent in either February 1999 or March 1999, dependent upon
         certain conditions being met. These conditions, which must have
         occurred prior to March 2, 1999, include (i) New Claridge having
         received the proceeds in connection with its settlement of the parking
         garage litigation (see Note 15(b), "Legal Proceedings"); and (ii) the
         Corporation or New Claridge having paid the interest due on the Notes
         on February 1, 1999. New Claridge received the proceeds from the
         settlement of the parking garage litigation in February 1999, and paid
         the interest that was due on the Notes on March 2, 1999, within the 30
         day grace period allowed in accordance with the terms of the Indenture.
         The $1.1 million of basic rent deferred in 1999 is to be paid to the
         Partnership in monthly installments of $25,000 commencing January 1,
         2000 until paid in full (subject to acceleration under certain
         circumstances). This amendment also provides for additional abatements
         of rent, through December 31, 2004, as necessary to reduce the
         Partnership's cash flow to an amount necessary only to meet the
         Partnership's cash requirements; these abatements, however, are to be
         reduced by specified amounts for each period commencing January 1, 2000
         and ending on December 31, 2004 ($83,333 per month in 2000, $130,000
         per month in 2001, $180,000 per month in 2002 and 2003, and $130,000
         per month in 2004).

         In addition to the deferral and abatements of rent provided for in the
         Sixth Amendment, the amendment provides for the payment of $3.5 million
         of additional basic rent on the earlier of (i) the maturity date of the
         Expandable Wraparound Mortgage Note; (ii) such earlier date, if any, as
         the entire principal amount of the Expandable Wraparound Mortgage
         becomes due and payable; or (iii) the date on which any merger,
         consolidation or similar transaction to which the Corporation or New
         Claridge is a party or any sale of all or substantially all of the
         assets of the Corporation or New Claridge is consummated or any change
         in control of the Corporation or New Claridge occurs.


         Under the terms of the Operating Lease, as amended March 1, 1997, New
         Claridge had an option to purchase (the "Purchase Option"), on
         September 30, 1998, the Hotel Assets and the underlying land. To
         exercise the Purchase Option, New Claridge was required to give notice

                                      F-22

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)



13.      OPERATING LEASE (cont'd.)
         
         to the Partnership, at least nine months prior to the option date, of
         its election to do so. Based on the current financial situation, New
         Claridge did not give such notice to the Partnership in respect of the
         September 30, 1998 option date. However, New Claridge may also exercise
         an option, on September 30, 2003, to purchase the Hotel Assets and the
         underlying land on January 1, 2004, for their fair market value at the
         time the option is exercised.

         If the Partnership should fail to make any payment due under the
         Expandable Wraparound Mortgage, New Claridge may exercise a right of
         offset against rent or other payments due under the Operating Lease and
         Expansion Operating Lease, to the extent of any such deficiency.

         New Claridge also leases supplemental office, warehouse, and surface
         parking spaces in nearby lots. For the years ended December 31, 1998,
         1997, and 1996, operating lease expense for these facilities amounted
         to $1,253,000, $1,283,000, and $1,484,000, respectively. In addition,
         New Claridge leases certain slot machines used on the casino floor
         under various capital and operating leases. Future lease payments under
         noncancellable operating leases (with initial or remaining lease terms
         in excess of one year) and minimum capital lease payments as of
         December 31, 1998 (in thousands) are as follows:
<TABLE>
<CAPTION>
                                                             Present Value of
                                                               Minimum Lease              Operating
                                                                  Payments                  Leases  
                                                             ----------------             ---------
             <S>                                             <C>                          <C>    
             1999                                               $    391                    1,604
             2000                                                    175                      965
             2001                                                    -0-                      602
             2002                                                    -0-                      600
             2003                                                    -0-                      600
                                                                --------                    -----

             Total minimum lease payments                            566                    4,371
                                                                                            =====
             Less amount representing interest
                 (at rates ranging from 11% to 12%)                   45
                                                                --------

             Present value of minimum lease payments                 521
             Less current portion of capital lease obligations       351
                                                                --------

             Long-term portion of capital lease obligations     $    170
                                                                ========
</TABLE>

14.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
         "Disclosures about Fair Value of Financial Instruments" requires the
         Corporation to disclose estimated fair value for its financial
         instruments. The estimates of fair value are subjective in nature and
         involve uncertainties and matters of significant judgement, and
         therefore cannot be determined with precision; changes in these
         assumptions could significantly affect the estimates. The carrying

                                      F-23

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


14.      FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)

        amounts and estimated fair values of the Corporation's financial
        instruments as of December 31, 1998 and 1997 are as follows (in
        thousands):
<TABLE>
<CAPTION>
                                                                             1998                         1997         
                                                                   ------------------------     -----------------------
                                                                       Carrying     Fair          Carrying    Fair
                                                                         Amount     Value           Amount    Value 
                                                                       --------     -----         --------    -----
        <S>                                                            <C>           <C>          <C>        <C>    
         Financial Assets:
           Cash and cash equivalents                                    $ 9,798     9,798           12,424   12,424
           Long-term receivables due from the
             Partnership (including current portion)                     81,639      n/a            94,080     n/a
           Reinvestment obligation funds                                  2,823     2,823            3,619    3,619
         Financial Liabilities:
           Loan from the Partnership                                      3,600      n/a             3,600     n/a
           Long term debt                                                85,170    59,776           85,023   83,323
           Deferred rent due to the Partnership                           5,827      n/a            16,506     n/a
           Contingent payment                                            19,000      n/a            19,000     n/a
</TABLE>

         The following assumptions were used to estimate the fair value of each
         class of financial instruments:

         Cash and cash equivalents

         The carrying amounts reflected on the Corporation's Consolidated
         Balance Sheet approximate the fair value because of the short maturity
         (90 days or less) of these instruments.

         Reinvestment obligation funds

         The reinvestment obligation funds, which are included in Other assets
         on the Corporation's Consolidated Balance Sheet, consist of required
         investments imposed by the Casino Control Act. The reinvestment
         obligation funds are stated net of a valuation allowance reflecting the
         below market interest rates associated with the investments. As a
         result, the carrying values of these investments approximate their fair
         values.

         Long-term debt

         The fair value of the Corporation's long-term debt is estimated based
         on the quoted market price of the Notes as of December 31, 1998 and
         1997, respectively.

         Long-term receivables due from Partnership, Loan from the Partnership,
         Deferred rent due to the Partnership

         Due to the nature of the relationship between the Corporation and the
         Partnership, estimation
       
                                      F-24

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


14.    FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)

         of the fair value of the financial instruments due to and due from the
         Partnership is not practical as there is no trading market for these
         financial instruments. (See Note 4, "Receivables", Note 7, "Loan from
         the Partnership" and Note 13, "Operating Lease", for a description of
         the terms of these instruments.)

         Contingent Payment

         There is no market for the Contingent Payment; therefore, estimation of
         the fair value of the Contingent Payment is not practical. (See Note
         10, "Other Noncurrent Liabilities" for a description of the Contingent
         Payment and the option to purchase the Contingent Payment.)

15.   CONTINGENCIES

      a) Licensing

         On September 22, 1995, New Claridge was issued a four-year casino
         license by the Commission for the period commencing September 30, 1995.

      b) Legal Proceedings

         On July 10, 1996, ten days after its opening, a fatal accident occurred
         at New Claridge's self-parking garage, in which the vehicle of two
         patrons breached a cable restraint system, permitting their vehicle to
         drive through the side wall of the self-parking garage. The vehicle
         fell four stories to the sidewalk and street below, killing both
         occupants. As a result, New Claridge's self-parking garage was closed
         until the end of September 1996, while various investigations sought to
         determine the cause of the accident. At the same time, New Claridge
         determined to remove the exterior wall cable restraint system and
         replace it with a rigid I-beam barrier system.

         New Claridge retained the law firm of Zelle and Larson LLP of
         Minneapolis, Minnesota to assist in the recovery of certain expenses
         incurred in reopening the self-parking garage and potential lost
         profit claims. On July 22, 1997, New Claridge filed a Complaint and
         Demand for Arbitration in the amount of $10 million against the general
         contractor and the architect for the garage, alleging negligence,
         breach of warranty and breach of contract in the design and
         construction of the garage. In February 1999, the Corporation and New
         Claridge entered into a settlement agreement of approximately $2.3
         million in the arbitration proceedings.

         A wrongful death action was commenced by the estates of the two patrons
         who died in the July 1996 accident in the self-parking garage. New
         Claridge is fully insured and indemnified for any financial liability
         that may result due to either an award to or a negotiated settlement
         with the plaintiffs in this action.

                                      F-25
<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)



15.      CONTINGENCIES (cont'd.)

         The Corporation and New Claridge are also defendants in various legal
         proceedings arising in the normal course of business. In the opinion of
         management, it is not reasonably likely that any such matters
         individually or collectively would result in an outcome having a
         material adverse effect on the consolidated financial statements.

16.      RELATED PARTY TRANSACTIONS

         a. The Restructuring Agreement provided for Webb to retain an interest,
            which was assigned to the United Way of Arizona on April 2, 1990,
            equal to $20 million plus interest at a rate of 15% per annum,
            compounded quarterly, commencing December 1, 1988, in any proceeds
            ultimately recovered from operations and/or in the sale or
            refinancing of the Claridge facility in excess of the first mortgage
            loan. Webb was also entitled to retain a seat on the Board of
            Directors of the Corporation and New Claridge (a right it
            subsequently relinquished). Effective with the closing of the
            Restructuring on June 16, 1989, all or substantially all of the
            financial, contractual, ownership, guarantee and other relationships
            of the Corporation and New Claridge with Webb were terminated.

         b. The Partnership has a direct material interest in the Expandable
            Wraparound Mortgage Loan Agreement, the Operating Lease and the
            Expansion Operating Lease together with the amendments thereto as
            described in the preceding notes. Approximately 93% of the
            Corporation's common stock is owned by persons who also own over 90%
            of the limited partnership interests in the Partnership.

         c. In February 1992, the Corporation's Board of Directors adopted a
            Long-Term Incentive Plan (the "Plan") in which certain key employees
            of the Corporation and/or New Claridge participate. The Plan
            provided for the grant of the 273,938 shares of the Corporation's
            Class A stock, which were held as treasury shares of the
            Corporation, and for the issuance of 100 Equity Units. The aggregate
            value of the 100 Equity Units is equal to 5.41 percent of certain
            amounts as further defined in the Plan. Specified portions of the
            awarded treasury shares and Equity Units held by participants vest
            upon the attainment of specific goals as described in the Plan. The
            treasury shares and Equity Units fully vest upon a further
            restructuring or a change in control as defined in the Plan. Payment
            with respect to the Equity Units will only be made (a) upon the
            occurrence of a transaction in which substantially all of the assets
            and business operations of the Claridge entities are transferred to
            one or more entities in a merger, sale of assets or other
            acquisition-type transaction, (b) upon termination of employment of
            any participant in the Plan within one year after any change in
            control of the Corporation occurs, as defined in the Plan, or (c) if
            the Corporation pays dividends to its stockholders, if the
            Partnership makes distributions to its partners, or if the
            Corporation or the Partnership makes certain distributions under the
            Restructuring Agreement. On April 15, 1992, the Commission approved
            the Plan and the treasury shares were delivered to the participants.
            Upon the issuance of the Notes and the repayment in full of the
            Corporation's outstanding debt under the Loan Agreement, 25%

                                      F-26

<PAGE>


                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)


16.   RELATED PARTY TRANSACTIONS (cont'd.)

         of the shares and Equity Units awarded under the Plan vested. A
         participant is entitled to vote all awarded treasury shares whether
         or not vested in such shares.

         On June 5, 1995, the Corporation's Board of Directors amended the
         Plan by creating 100 Additional Equity Units to be issued to certain
         key employees and 100 Director Equity Units to be issued to the
         individual members of the Board of Directors (the "Directors"). The
         aggregate value of the Additional Equity Units is 5.59 percent and
         the aggregate value of the Director Equity Units is 4 percent of
         certain amounts as further defined in the Plan. Vesting of the
         Additional Equity Units occurs if a Transaction results in the
         Claimholders of the Claridge receiving cash or marketable securities
         having a certain value all as further defined and described in the
         Plan. Vesting of the Director Equity Units occurs according to a
         vesting schedule stated in the Plan and also is tied to the
         occurrence of a Transaction having a certain value. The Plan was
         further amended, on November 10, 1998, to modify the terms by which
         the Additional Equity Units and Director Equity Units will vest. The
         modification adjusts the value that must be received by the
         Claimholders of the Claridge resulting from the occurance of a
         Transaction, all as further defined and described in the Plan.

17.   PARENT COMPANY INFORMATION

      The Corporation owns all of the outstanding common stock of New
      Claridge, which it purchased for $5,000,000. The balance sheet accounts
      of the Corporation as of December 31, 1998 and 1997 include the
      following:
<TABLE>
<CAPTION>
                                                          1998            1997
                                                          ----            ----
                                                               (in thousands)
       <S>                                              <C>             <C>    
      Cash                                              $   -0-             -0-
      Investment in New Claridge                         87,206          87,206
      Other assets                                       12,138          12,631
                                                        -------          ------
               Total assets                             $99,344          99,837
                                                        =======          ======
      Long-term debt                                    $85,000          85,000
      Other liabilities                                  13,476          12,932
      Stockholders' equity                                  868           1,905
                                                        -------          ------
         Total liabilities and  stockholders' equity    $99,344          99,837
                                                        =======          ======
</TABLE>

      For the years ended December 31, 1998, 1997, and 1996 the Corporation
      recorded income of $9,987,500, $10,070,000 and $9,987,500, respectively, 
      representing dividends received from New Claridge to fund the payment of 
      interest on the Notes; this income is eliminated in the consolidation with
      the financial statements of New Claridge. In addition, in 1998 and 1997 
      the Corporation recorded interest income of $1,200 and $4,200, 
      respectively, on short-term

                                      F-27

<PAGE>

                    THE CLARIDGE HOTEL AND CASINO CORPORATION
              Notes to Consolidated Financial Statements (Cont'd.)



17.      PARENT COMPANY INFORMATION (cont'd.)

         investments. The Corporation's expenses for the years ended December
         31, 1998, 1997 and 1996 amounted to $11,026,000, $9,909,000, and
         $8,943,000, respectively, including income tax benefit of $31,000,
         $2,751,000, and $1,868,000, respectively. These amounts represent the
         results of operations of the Corporation for the respective periods
         before equity in the results of New Claridge. For the year ended
         December 31, 1998, New Claridge had net income of $1,610,000, as
         compared to net income of $3,925,000 for the year ended December 31,
         1997 and a net loss of $6,446,000 for the year ended December 31, 1996.

         Changes in the Corporation's financial position for the years ended
         December 31, 1998, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
                                                                     1998                 1997               1996  
                                                                   --------             --------           --------
         <S>                                                        <C>                 <C>               <C>    
         Cash flows from operating activities:
              Net income (loss)                                    $ (1,037)               166               1,045
              Adjustments to reconcile net income
                (loss) to net  cash provided by (used in)
                operating activities:
                  Amortization                                          524                524                 496
                  Change in assets and liabilities:
                     Other assets                                       (31)            (2,751)             (2,683)
                     Other liabilities                                  544              2,061               1,142
                                                                   --------             ------              ------
         Net cash flows used in operating activities                    -0-                -0-                 -0-
                                                                   --------             ------              ------
         Decrease in cash and cash equivalents                          -0-                -0-                 -0-
 
         Cash and cash equivalents at beginning of period               -0-                -0-                 -0-
                                                                   --------             ------              ------
         Cash and cash equivalents at end of period                $    -0-                -0-                 -0-
                                                                   ========             ======              ======
         Supplemental cash flow disclosures:
           Interest paid, net of amounts capitalized                 $9,988             10,075               8,918
                                                                   ========             ======              ======
           Income taxes paid                                       $    -0-                -0-                 -0-
                                                                   ========             ======              ======
</TABLE>

                                      F-28

<PAGE>

                                  SCHEDULE II


           THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
                                 Valuation and
                              Qualifying Accounts
                  Years Ended December 31, 1998, 1997 and 1996
                                 (in thousands)
<TABLE>
<CAPTION>
                                  Balance           Charged to             Charged to                                  Balance
                                 Beginning          Costs and                Other                                    at End of
Description                      of Period          Expenses                Accounts            Deductions              Period  
-----------                      ---------          ----------              ---------           ----------            ---------
<S>                               <C>               <C>                      <C>                <C>                   <C>    
Year ended
December 31, 1998

Allowance for
Uncollectible Accounts             $ 758              1,128                   -0-                 547 (a)               1,339

Year ended
December 31, 1997

Allowance for
Uncollectible Accounts             $ 899                218                   -0-                 359 (a)                 758

Year ended
December 31, 1996

Allowance for
Uncollectible Accounts             $ 987                238                   -0-                 326 (a)                 899
</TABLE>

(a)   Accounts written-off.

                                      F-29


<PAGE>





                                INDEX TO EXHIBITS


Exhibit
-------

EX10(bt)  Amended Employment Agreement between Robert M. Renneisen and 
          The Claridge at Park Place, Incorporated effective November 10, 1998.

EX10(bu)  Amended Employment Agreement between Albert T. Britton and 
          The Claridge at Park Place, Incorporated effective November 10, 1998.

EX10(bv)  Amended Employment Agreement between Jean I. Abbott and The Claridge 
          at Park Place, Incorporated effective November 10, 1998.

EX10(bw)  Amended Employment Agreement between Frank A. Bellis, Jr. and 
          The Claridge at Park Place, Incorporated effective November 10, 1998.

EX10(bx)  Amended Employment Agreement between Glenn Lillie and The Claridge at
          Park Place, Incorporated effective November 10, 1998.

EX10(by)  Sixth Amendment to Operating Lease Agreement and Fifth Amendment to 
          Expansion Operating Lease Agreement between The Claridge at Park
          Place, Incorporated and Atlantic City Boardwalk Associates, L.P. 
          effective September 30, 1998.

EX10(bz)  Amendment to Restructuring Agreement between The Claridge Hotel and 
          Casino Corporation, The Claridge at Park Place, Incorporated and
          Atlantic City Boardwalk Associates, L.P. effective September 30, 1998.

EX10(ca)  Amendment to Wraparound Mortgage Agreement and Note between The 
          Claridge at Park Place, Incorporated and Atlantic City Boardwalk
          Associates, L.P. effective September 30, 1998.

EX10(cb)  Amendment to Exhibit A to the Long-Term Management Incentive Plan of 
          The Claridge Hotel and Casino Corporation effective November 10, 1998.

EX12(b)   Statement of Computation of Ratio of Earnings to Fixed Charges.