-140-
percent) of GHM’s capitalization. Exh. 691.69 It appears,
however, the arrangement described above was not carried out
because, on March 2, 1982, Connolly and Essex Corp. executed an
option agreement (the GHM option agreement), which they
purportedly had agreed to on September 18, 1981, which recited
that Connolly owned 100 percent of GHM, Connolly was transferring
to Essex Corp. an option to acquire 80 percent of GHM (80 shares
at $100 per share) for 10 years and, in exchange for the option,
Essex Corp. would pay Connolly $1,000 per year for 10 years.
Exh. 817. The record also includes an $8,000 promissory note,
dated December 15, 1981, from Connolly to Essex Corp. (the
Connolly promissory note) requiring annual payments for 9 years
and a final balloon payment in 1991. Exh. 4015.70
f. MHM and GHM Hotel Management Contracts
In October 1979, MHM was awarded a management contract for a
new hotel being constructed on Madison Avenue in Morris Township,
New Jersey (the Madison Hotel). Exh. 688. In February 1980,
Prudential provided financing for this hotel. Exh. 1010. In
August 1981, MHM also began managing a newly opened Hilton Hotel
69 Eulich had no recall of these matters at trial. Eulich,
Transcr. at 1649-1650.
70 The $8,000 amount apparently represents the balance of
the $10,000 initial capitalization of Gateway Hotel Management
Co. (GHM) (assuming Connolly paid $2,000 to Eulich in accordance
with the Oct. 16, 1981, letter described above).
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