SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______
Commission File No.: 2-0219
TRUMP PLAZA FUNDING, INC.
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(Exact Name of Registrant as specified in its charter)
New Jersey 13-3339198
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 441-6526
TRUMP PLAZA HOLDING ASSOCIATES
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(Exact Name of Registrant as specified in its charter)
New Jersey 22-3213714
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 441-6526
TRUMP PLAZA ASSOCIATES
----------------------------------------
(Exact Name of Registrant as specified in its charter)
New Jersey 22-3241643
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 441-6526
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have 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 the Registrants' 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 ]
The aggregate market value of the voting stock of Trump Plaza Funding, Inc.
held by non-affiliates as of March 29, 1995 was approximately: $ 0
Indicate by check mark whether the Registrants have filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
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As of March 29, 1995, there were 100 shares of Trump Plaza Funding, Inc.'s
Common Stock outstanding.
Documents Incorporated by Reference -- Not applicable.
FORM 10-K
TABLE OF CONTENTS
Item Page
PART I.................................................. 1
ITEM 1. BUSINESS....................................... 1
ITEM 2. PROPERTIES..................................... 31
ITEM 3. LEGAL PROCEEDINGS.............................. 37
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS........................................ 40
PART II................................................. 41
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.................... 41
ITEM 6. SELECTED FINANCIAL DATA........................ 42
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.. 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.... 51
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE..................................... 51
PART III................................................ 52
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.............. 52
ITEM 11. EXECUTIVE COMPENSATION........................ 56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 62
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 63
PART IV................................................. 67
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K........................... 67
PART I
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ITEM 1. BUSINESS.
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(A) GENERAL DEVELOPMENT OF BUSINESS
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Trump Plaza Associates (the "Partnership") owns and operates the
Trump Plaza Hotel and Casino ("Trump Plaza"), a luxury casino hotel located on
The Boardwalk in Atlantic City, New Jersey. The Partnership was organized in
June 1982 as a general partnership under the laws of the State of New Jersey.
Trump Plaza Funding, Inc. (the "Company") was incorporated on March 14, 1986
as a New Jersey corporation and was originally formed solely to raise funds
through the issuance and sale of its debt securities for the benefit of the
Partnership. Trump Plaza Holding Associates ("Holding") was formed in
February 1993 as a New Jersey general partnership for the purpose of raising
funds through the issuance and sale of its Units (as defined).
The partners in the Partnership are Holding, which has a 99%
interest in the Partnership, and the Company, which has a 1% interest in the
Partnership. Donald J. Trump ("Trump"), by virtue of his ownership of the
Company, Holding and Trump Plaza Holding Inc. ("Holding Inc."), which owns a
1% partnership interest in Holding, is the beneficial owner of 100% of the
equity interest in the Partnership. The two partners in Holding are Trump and
Holding Inc. Holding Inc. acts as the managing general partner of Holding.
Holding has no assets other than its equity interest in the Partnership. The
Company is the managing general partner of the Partnership.
On June 24, 1993, the Partnership, the Company and certain
affiliated entities completed a refinancing (the "Refinancing") of their debt
and equity interests. The purpose of the Refinancing was (i) to repay, in
full, the mortgage indebtedness and certain other indebtedness issued as part
of the restructuring (the "Restructuring") of the indebtedness of the
Partnership and the Company pursuant to a prepackaged plan of reorganization
(the "Plan") under chapter 11 of the Bankruptcy Code of 1978, as amended,
effective as of May 29, 1992, (ii) to repurchase the preferred stock interest
in Trump Plaza not owned by Trump and (iii) to repay certain personal
indebtedness of Trump. The Refinancing included (i) the offering (the
"Mortgage Note Offering") by the Company of $330 million in aggregate
principal amount of its 10-7/8% Mortgage Notes due 2001 (the "Mortgage Notes")
and (ii) the offering (the "Units Offering" and, together with the Mortgage
Note Offering, the "Offerings") by Holding of 12,000 Units (the "Units")
consisting of an aggregate of $60 million in principal amount of 12-1/2% Pay-
in-Kind Notes due 2003 (the "PIK Notes") and 12,000 warrants (the "Warrants")
to acquire an aggregate of $12 million in principal amount of PIK Notes. Each
of the Warrants entitles the holder to
acquire $1,000 principal amount of PIK Notes for no additional consideration.
The partnership agreement of the Partnership was amended and restated to alter
certain procedures and to effectuate the consummation of the Offerings. See
"-- Narrative Description of Business -- The Refinancing and Restructuring."
The Mortgage Notes are senior indebtedness of the Company. The
Company and the Partnership are subject to restrictions on the incurrence of
additional indebtedness. The Mortgage Notes are unconditionally guaranteed by
the Partnership. The Guarantee ranks pari passu in right of payment with all
existing and future senior indebtedness of the Partnership. The PIK Notes are
secured by Holding's equity interest in the Partnership. Holders of the PIK
Notes and the Warrants are not creditors of the Partnership and, consequently,
have no recourse to the assets of the Partnership if an event of default
should occur thereunder. Accordingly, the PIK Notes are structurally
subordinated to the indebtedness of the Partnership, including the Mortgage
Notes.
As of December 31, 1994, the Company's debt consisted of
approximately $326,234,000 (net of discount) outstanding of its Mortgage
Notes. As of December 31, 1994, Holding's debt consisted of approximately
$71,756,000 of PIK Notes and $12 million of deferred warrant obligations. As
of December 31, 1994, the Partnership's debt consisted of a non-recourse
promissory note to the Company in the amount of $326,234,000 (net of discount)
and approximately $6 million of other indebtedness. The Partnership has
unconditionally guaranteed the Mortgage Notes.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
---------------------------------------------
The Partnership operates in only one industry segment. See the
Financial Statements of the Company and the Partnership included elsewhere
herein.
(C) NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
GENERAL
The Partnership owns and operates Trump Plaza, a luxury casino hotel
located in Atlantic City, New Jersey. Trump Plaza, with its 73,000 square
foot casino, first class guest rooms and other luxury amenities, has both a
"Four Star" Mobil Travel Guide rating and a "Four Diamond" American Automobile
Association ("AAA") rating. Management believes that these ratings reflect the
high quality amenities and services that Trump Plaza provides to its casino
patrons and hotel guests. Trump Plaza is conveniently located on The
Boardwalk, at the end of the main highway into Atlantic City and is one of the
first
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casino hotels visible from that approach. Management believes that the
central location of Trump Plaza, with its accessibility to "drive in" and
"walk in" patrons, is highly advantageous to Trump Plaza. In addition, the
Casino Reinvestment Development Authority ("CRDA") is currently overseeing the
development of a "tourist corridor" which will link The Boardwalk with
downtown Atlantic City and, when completed, will feature an entertainment and
retail complex of up to 800,000 square feet. Trump Plaza will be located at
the end of the tourist corridor by The Boardwalk.
Trump Plaza seeks to attract casino patrons who tend to wager more
frequently and in larger denominations than the typical Atlantic City gaming
patron (a "high-end" patron). This strategy is accomplished, in part, through
the attractiveness of the facility, which is enhanced by routinely attending
to the aesthetics of the casino and other public areas in Trump Plaza. In
addition, Trump Plaza provides a consistency in the conduct of play of its
table games that serious gaming patrons seek. Finally, Trump Plaza offers a
broad selection of dining choices (including four gourmet restaurants),
headline entertainment, deluxe accommodations and other amenities and
services.
FACILITIES AND AMENITIES
The casino in Trump Plaza currently offers 89 table games and 2,076
slot machines. In addition to the casino, Trump Plaza consists of a 31-story
tower with 555 guest rooms, including 62 suites. Trump Plaza's hotel capacity
will increase to a total of 904 guest rooms as a result of the renovation of
349 rooms at the Boardwalk Expansion Site. The facility also offers 10
restaurants, a 750-seat cabaret theater, four cocktail lounges, 28,000 square
feet of convention, ballroom and meeting room space, a swimming pool, tennis
courts and a health spa.
The entry level of Trump Plaza includes a cocktail lounge, two gift
shops, a deli, a coffee shop, an ice cream parlor and a buffet. The casino
level houses the casino, a fast food restaurant, an exclusive slot lounge for
high-end patrons and a new ocean front baccarat gaming area. There is also an
enclosed skywalk which connects Trump Plaza at the casino level with the
Atlantic City Convention Center.
Trump Plaza's guest rooms are located in a tower which affords most
guest rooms a view of the ocean. While rooms are of varying size, a typical
guest room consists of approximately 400 square feet. Trump Plaza also
features 23 one-bedroom suites, 21 two-bedroom suites and 18 "Super Suites."
The Super Suites are located on the top two floors of the tower and offer
luxurious accommodations and 24-hour butler and maid service. The Super
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Suites and certain other suites are located on the "Club Level" which requires
guests to use a special elevator key for access, and contains a lounge area
(the "Club Level Lounge") that offers food and bar facilities.
Trump Plaza is connected by an enclosed pedestrian walkway to a 10-
story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino, and is located directly off of the main
highway into Atlantic City.
BUSINESS STRATEGY
GENERAL. After a period of turnover in management in 1994, the
Partnership has hired a new president and chief operating officer for Trump
Plaza, as well as several other senior managers. The new management team at
Trump Plaza is dedicated to continuing Trump Plaza's longstanding commitment
to maintaining high quality amenities, while at the same time pursuing an
aggressive new strategy focusing on strategic expansion and customer service.
A primary element of the Trump Plaza business strategy is to seek to
attract patrons who tend to wager more frequently and in larger denominations
than the typical Atlantic City gaming customer. Such high-end players
typically wager $5 or more per play in slots and $25 or more per play in table
games. In order to attract more high-end gaming patrons to Trump Plaza in a
cost-effective manner, the Partnership has refocused its marketing efforts.
Commencing in 1991, the Partnership substantially curtailed costly "junket"
marketing operations which involved attracting groups of patrons to the
facility on an entirely complimentary basis (e.g., by providing free air fare,
gifts and room accommodations). In the fall of 1992, the Partnership decided
to de-emphasize marketing efforts directed at "high roller" patrons from the
Far East, who tend to wager $50,000 or more per play in table games. In each
case the Partnership determined that the potential benefit derived from these
patrons did not outweigh the high costs associated with attracting such
players and the resultant volatility in the results of operations of Trump
Plaza. This shift in marketing strategy has allowed the Partnership to focus
its efforts on attracting the high-end players.
In addition, Trump Plaza's new management team has launched a
variety of new initiatives designed to increase the level of casino gaming
activity. These initiatives include targeted marketing and advertising
campaigns directed to select
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groups of customers in the corridor that extends from Washington, D.C. to
Boston and includes New York City and Philadelphia, the introduction of new
slot machines and table games and the addition of bill acceptors on slot
machines.
GAMING ENVIRONMENT. Trump Plaza also pursues a continuous
preventative maintenance program that emphasizes the casino, hotel rooms and
public areas in Trump Plaza. These programs are designed to maintain the
attractiveness of Trump Plaza to its gaming patrons. Trump Plaza continuously
monitors the configuration of the casino floor and the games it offers to
patrons with a view towards making changes and improvements. Trump Plaza's
casino floor has clear, large signs for the convenience of patrons. As new
games have been approved by the Casino Control Commission ("CCC"), the
Partnership has integrated such games into its casino operations to the extent
it deems appropriate.
In recent years, there has been an industry trend towards fewer
table games and more slot machines. For the Atlantic City casino industry,
revenue from slot machines increased from 54.6% of the industry gaming revenue
in 1988 to 66.9% of the industry gaming revenue in 1994. Trump Plaza
experienced a similar increase, with slot revenue increasing from 51.2% of
gaming revenue in 1988 to 64.7% of the industry gaming revenue in 1994. In
response to this trend, Trump Plaza has devoted more of its casino floor space
to slot machines. In April 1993, Trump Plaza removed 12 table games from the
casino floor and replaced them with 75 slot machines. Moreover, as part of
its program to attract high-end slot players, the Partnership created "Fifth
Avenue Slots," a partitioned portion of the casino floor that includes
approximately 70 slot machines (most of which provide for $5 or more per
play), an exclusive lounge for high-end patrons and other amenities.
"COMPING" STRATEGY. In order to compete effectively with other
Atlantic City casino hotels, the Partnership offers complimentary drinks,
meals, room accommodations and/or travel arrangements to its patrons
("complimentaries" or "comps"). Trump Plaza's policy on complimentaries is to
provide comps primarily to patrons with a demonstrated propensity to wager at
Trump Plaza.
ENTERTAINMENT. Trump Plaza offers headline entertainment, as well
as other entertainment and revue shows as part of its strategy to attract
high-end and other patrons. Trump Plaza offers headline entertainment weekly
during the summer and monthly during the off-season, and also features other
entertainment and revue shows.
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PLAYER DEVELOPMENT/CASINO HOSTS. The Partnership currently employs
gaming representatives in New Jersey, New York and other states, as well as
several international representatives, to promote Trump Plaza to prospective
gaming patrons. Player development personnel host special events, offer
incentives and contact patrons directly in an effort to attract high-end table
game patrons from the United States, Canada and South America. Trump Plaza's
casino hosts assist patrons on the casino floor, make room and dinner
reservations and provide general assistance. They also solicit Trump Card (the
frequent player slot card) sign-ups in order to increase the Partnership's
marketing base.
PROMOTIONAL ACTIVITIES. The Trump Card, a player identification
card, constitutes a key element in Trump Plaza's direct marketing program.
Slot machine players are encouraged to register for and utilize their
personalized Trump Card to earn various complimentaries based upon their level
of play. The Trump Card is inserted during play into a card reader attached
to the slot machine for use in computerized rating systems. The Company's
computer systems record data about the cardholder, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced.
Trump Plaza designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by
the Trump Card and on table game wagering by the casino game supervisors.
Promotional activities include the mailing of vouchers for complimentary slot
play. Trump Plaza also utilizes a special events calendar (e.g., birthday
parties, sweepstakes and special competitions) to promote its gaming
operations.
The Partnership conducts slot machine and table game tournaments in
which cash prizes are offered to a select group of players invited to
participate in the tournament based upon their tendency to play. Such players
tend to play at their own expense during "off-hours" of the tournament. At
times, tournament players are also offered special dining and entertainment
privileges that encourage them to remain at Trump Plaza.
BUS PROGRAM. Trump Plaza has a bus program, which transports
approximately 2,400 gaming patrons per day during the week and 3,500 per day
on the weekends. The Partnership's bus program offers incentives and
discounts to certain scheduled and chartered bus customers. Trump Plaza's
Transportation Facility contains 13 bus bays and is connected by an enclosed
pedestrian walkway to Trump Plaza. The Transportation Facility provides
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patrons with immediate access to the casino, and contains a comfortable lounge
area for patrons waiting for return buses.
CREDIT POLICY. Historically, Trump Plaza has extended credit to
certain qualified patrons. For the years ended December 31, 1994, 1993 and
1992, credit play as a percentage of total dollars wagered was approximately
17%, 18% and 28%, respectively. As part of the Partnership's new business
strategy and in response to the general economic downturn in the Northeast,
Trump Plaza has imposed stricter standards on applications for new or
additional credit and has reduced credit to international patrons. Such
stricter standards in the extension of credit have contributed to the
reduction of credit play as a percentage of total dollars wagered and has led
to improved quality of the credit extended.
ATLANTIC CITY MARKET
Gaming in Atlantic City started in May 1978 when the first casino
hotel opened for business. Since 1978, gaming in Atlantic City has grown from
one casino to 12 casinos as of December 31, 1994, with approximately $3.4
billion of casino industry revenue generated in 1994, a 4% increase over 1993
revenues of $3.3 billion, despite the effects of unfavorable winter weather in
the first quarter of 1994. From 1989 to 1994, total casino revenues in
Atlantic City have increased 22%. See "-- Competition."
Atlantic City is near many densely populated metropolitan areas.
The primary area served by Atlantic City casino hotels is the corridor that
extends from Washington, D.C. to Boston and includes New York City and
Philadelphia. Within this primary area, Atlantic City may be reached by
automobile or bus. Principal arteries lead into Atlantic City from the
metropolitan New York area and from the Baltimore/Washington, D.C. area, both
of which are approximately three hours away by automobile. Atlantic City can
also be reached by air and rail transportation, although most patrons arrive
by automobile or bus.
Historically, Atlantic City has suffered from inadequate rail and
air transportation. As a result, a majority of Atlantic City gaming patrons
travel from the mid-Atlantic and northeast regions of the United States by
automobile or bus. The State of New Jersey is in the process of implementing
a $124 million capital plan to upgrade the Atlantic City International Airport
and Atlantic City Expressway. Despite the expansion of the Atlantic City
International Airport, however, access to Atlantic City by air is still
limited by a lack of regularly scheduled flights and by inadequate terminal
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facilities. The lack of adequate transportation infrastructure has limited
the expansion of the Atlantic City gaming industry's geographic patron base
and the attractiveness of Atlantic City to major conventions.
In February 1993, the State of New Jersey broke ground for a new
$250,000,000 Convention Center on a 30.5-acre site adjacent to the Atlantic
City Expressway. Targeted to open in January 1997, the new Convention Center
will house approximately 500,000 square feet of exhibit space along with 45
meeting rooms totalling nearly 110,000 square feet. The building will include
a 1,600-car underground garage and an indoor street linking the Convention
Center to the existing Rail Terminal. The new Convention Center has been
designed to serve as the centerpiece of Atlantic City's renaissance as a
favorable meeting destination.
EXPANSION SITES
Management has determined to expand the Partnership's facilities.
The purpose of such an expansion is to increase the casino floor space and to
add additional gaming units. Any such expansion will require various
regulatory approvals, including the approval of the CCC. Furthermore, the
Casino Control Act requires that additional guest rooms be put in service
within a specified time period after any such casino expansion. As discussed
below, the Partnership has begun the planned expansion of its hotel facilities
at the Boardwalk Expansion Site (as defined). If the Partnership completed
any casino expansion and subsequently did not complete the requisite number of
additional guest rooms within the specified time period, the Partnership might
have to close all or a portion of the expanded casino in order to comply with
regulatory requirements, which could have a material adverse effect on the
results of operations and financial condition of the Partnership.
BOARDWALK EXPANSION SITE. In 1993, the Partnership received the
approval of CCC, subject to certain conditions, for the expansion of the Trump
Plaza hotel facilities on a 2.0-acre parcel of land located adjacent to Trump
Plaza on The Boardwalk upon which there is located an approximately 349-room
hotel, which was, at the time, closed to the public and in need of substantial
renovation and repair (the "Boardwalk Expansion Site"). In June 1993, Trump
and the lender holding mortgage liens on the Boardwalk Expansion Site
negotiated the terms of a restructuring of loans of approximately $52.0
million of principal and accrued interest secured by the liens on the
Boardwalk Expansion Site. On June 24, 1993, the date the Offerings were
consummated, Trump transferred title to the Boardwalk Expansion Site to the
lender in exchange for a
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reduction in Trump's indebtedness to such lender, with a further reduction of
Trump's indebtedness if the Partnership assumed the Boardwalk Expansion Site
Lease (as defined). On such date, the lender leased the Boardwalk Expansion
Site to Trump (the "Boardwalk Expansion Site Lease") for a term of five years,
which expires on June 30, 1998, during which time Trump is obligated to pay
the lender $260,000 per month in lease payments.
On June 24, 1993, the Partnership also acquired a five-year option
to purchase the Boardwalk Expansion Site (the "Boardwalk Expansion Site
Purchase Option"). In October 1993, the Partnership assumed the leases
associated with the Boardwalk Expansion Site. In addition, the Partnership
has a right of first offer (the "Right of First Offer") upon any proposed sale
of all or any portion of the Boardwalk Expansion Site during the term of the
Boardwalk Expansion Site Purchase Option. Until such time as the Boardwalk
Expansion Site Purchase Option is exercised or expires, the Partnership is
obligated to pay the net expenses associated with the Boardwalk Expansion
Site. During the year ended December 31, 1994, the Partnership incurred $4.9
million of such expenses. Under the Boardwalk Expansion Site Purchase Option,
the Partnership has the right to acquire the Boardwalk Expansion Site for a
purchase price of $27.0 million through 1995, increasing by $1.0 million
annually thereafter until expiration on June 30, 1998. Under the terms of the
Boardwalk Expansion Site Purchase Option, if the Partnership defaults in
making payments due under the Boardwalk Expansion Site Purchase Option, the
Partnership would be liable to the grantor of the Boardwalk Expansion Site
Purchase Option for the sum of (a) the present value of all remaining payments
to be made by the Partnership pursuant to the Boardwalk Expansion Site
Purchase Option during the term thereof and (b) the cost of demolition of all
improvements then located at the Boardwalk Expansion Site.
As of December 31, 1994, the Partnership had capitalized
approximately $11.7 million in construction costs related to the Boardwalk
Expansion Site including a $1 million consulting fee paid to Trump. Management
does not currently anticipate that it will be in a position to exercise the
Boardwalk Expansion Site Purchase Option prior to 1996 due, in part, to
limitations on its ability to incur additional indebtedness. If the
Partnership is unable to finance the purchase price of the Boardwalk Expansion
Site pursuant to the Boardwalk Expansion Site Purchase Option, any amounts
expended with respect to the Boardwalk Expansion Site, including payments
under the Boardwalk Expansion Site Purchase Option and the Boardwalk Expansion
Site Lease, if assumed, and any improvements thereon would inure to the
benefit of the owner of the Boardwalk Expansion Site and not to the
Partnership. In such event, the Partnership might have to close all or a
portion of the expanded casino in order to comply with regulatory
requirements, which could have a material adverse effect on the results of
operations and financial condition of the Partnership.
The Partnership's ability to acquire the Boardwalk Expansion Site
pursuant to the Boardwalk Expansion Site Purchase Option is dependent upon its
ability to obtain financing to acquire the property and is subject to the
approval of the CCC. See "-- Gaming and Other Laws and Regulations." The
ability to incur such indebtedness is also restricted by the Mortgage Note
Indenture and the PIK Note Indenture and would require the consent of certain
of Trump's personal creditors. The Partnership's ability to complete
development of the Boardwalk Expansion Site is dependent upon its ability to
use existing cash on hand and
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generate cash flow from operations sufficient to fund development costs. No
assurance can be given that such cash on hand will be available to the
Partnership for such purposes or that it will be able to generate sufficient
cash flow from operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Pursuant to the Right of First Offer, the Partnership has ten
days after receiving written notice from the grantor of the proposed sale to
commit to exercise the Right of First Offer. If the Partnership commits to
exercise the Right of First Offer, it has ten days from the date of the
commitment to deposit $3,000,000 with the grantor, to be credited towards the
purchase price or to be retained by the grantor if the closing, through no
fault of the grantor, does not occur within ninety days (or, subject to
certain conditions, 120 days) of the date of the commitment. There can be no
assurance that the Partnership would have the liquidity necessary to exercise
its Right of First Offer on a timely basis should it be required. In
addition, exercise of the Boardwalk Expansion Site Purchase Option or the
Right of First Offer requires the consent of certain of Trump's personal
creditors, and there can be no assurance that such consent will be obtained at
the time the Partnership desires to exercise the Boardwalk Expansion Site
Purchase Option or such right of first offer. The CCC has required that the
Partnership exercise the Boardwalk Expansion Site Purchase Option or the Right
of First Offer therein no later than July 1, 1995. The Partnership intends to
request a waiver of this requirement; however, no assurance can be given that
such waiver will be granted or that any condition imposed by the CCC would be
acceptable to the Partnership. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Management is in the process of renovating the hotel at the
Boardwalk Expansion Site. When completed, the hotel will have approximately
349 rooms, including a retail space fronting The Boardwalk, and 15,000 square
feet of proposed gaming space on the second floor. As a result of this
expansion, upon approval by the CCC, the Partnership will be permitted to
increase Trump Plaza's casino floor space to 90,000 square feet. The
Partnership added approximately 9,000 square feet in April 1994, 1,000 square
feet in July 1994 and 3,000 square feet in December 1994. At December 31,
1994, the total casino floor space was 73,000 square feet. The Partnership has
begun construction at the Boardwalk Expansion Site (pursuant to rights granted
to the Partnership by the lender and the lessee under the Boardwalk Expansion
Site Lease) prior to acquiring title thereto pursuant to the Boardwalk
Expansion Site Purchase Option. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Acquisition of the Boardwalk Expansion Site by the Partnership would
under certain circumstances (provided there are no events of default under the
Boardwalk Expansion Site Lease or the Boardwalk Expansion Site Purchase Option
and provided that
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certain other events had not theretofore or do not thereafter occur) discharge
Trump's obligation to such lender in full. Management believes that the
Boardwalk Expansion Site will be useful to the operation of Trump Plaza as the
site of the future expansion of the Partnership's hotel operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
In September 1993, Trump entered into a sublease agreement (the
"Time Warner Sublease") with Time Warner Entertainment Company, L.P. ("Time
Warner") for a period of ten years with the sublessee's option to renew the
sublease for a ten-year period. Under this agreement, Time Warner agreed to
sublease the entire first floor of the retail space (approximately 17,000
square feet) located at the Boardwalk Expansion Site for a new Warner Brothers
Studio Store. In October 1993, the Partnership assumed Trump's duties and
obligations under the Time Warner Sublease. In July 1994, Time Warner opened
its second largest Warner Brothers Studio Store at the Boardwalk Expansion
Site pursuant to the Time Warner Sublease. Management believes that the store
will be a major attraction on The Boardwalk and will increase the flow of
patrons through the casino. The remaining portion of the Boardwalk Expansion
Site will be used for a new entranceway to Trump Plaza, directly off the
Atlantic City Expressway, as well as a public park and parking facilities for
Trump Plaza patrons.
The Partnership is obligated to either pay a tax to the CRDA of 2.5%
of its gross casino revenues or to obtain investment tax credits in an amount
equal to 1.25% of its gross casino revenues. The Partnership obtained approval
from the CRDA for up to $14.1 million of investment tax credits with respect
to the acquisition and construction of improvements to the Boardwalk Expansion
Site described herein and the related demolition of certain structures on the
Boardwalk Expansion Site. Due to the fact that the Partnership has begun
construction at the Boardwalk Expansion Site, pursuant to rights granted to
the Partnership by its lessor, the Partnership has received approximately
$1,519,000 in such CRDA credit as of December 31, 1994. There can be no
assurance, however, that such credits would be sufficient to defray a
significant portion of the total project costs.
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TRUMP REGENCY. In June 1989, Trump Crystal Tower Associates Limited
Partnership, a New Jersey limited partnership wholly-owned by Trump, acquired
from Elsinore Shore Associates all of the assets constituting the former
Atlantis Casino Hotel ("Atlantis"), which is located on The Boardwalk adjacent
to the Atlantic City Convention Center on the opposite side from Trump Plaza
and is otherwise referred to herein as the Trump Regency. Prior to such
acquisition, all of the Atlantis' gaming operations were discontinued. The
facility was renamed the Trump Regency Hotel and leased to the Partnership,
which operated it solely as a non-casino hotel. As part of the Restructuring,
the lease was terminated and the Partnership issued to Chemical Bank
("Chemical"), the assignee of rents payable under such lease, a promissory
note in the original principal amount of $17.5 million (the "Regency Note").
At such time, title to the Trump Regency was transferred by Trump to ACFH Inc.
("ACFH"), a wholly owned subsidiary of Chemical. Since that time, the Trump
Regency has been operated by ACFH as a non-casino hotel. The Partnership
repaid the Regency Note with a portion of the proceeds of the Refinancing.
In December 1993, Trump entered into an option agreement (the
"Original Chemical Option Agreement") with Chemical and ACFH. The Original
Chemical Option Agreement granted to Trump an option to purchase (i) the Trump
Regency (including the land, improvements and personal property used in the
operation of the hotel) and (ii) certain promissory notes made by Trump and/or
certain of his affiliates and payable to Chemical (the "Chemical Notes") which
are secured by certain real estate assets located in New York, unrelated to
the Partnership, including one note dated July 20, 1987, as amended by First
Allonge to the note dated as of November 16, 1988 and as further amended by
Second Allonge to the note dated as of August 8, 1988 in the original
principal amount of $80,000,000 made by Trump to a predecessor of Chemical
(the "Trump Note"). As of December 31, 1994, the aggregate amount owed by
Trump and his affiliates under the Chemical Notes (none of which constitutes
an obligation of the Partnership) was approximately $65.8 million, of which
the aggregate amount owing under the Trump Note was $35.9 million.
The aggregate purchase price payable for the assets subject to the
Original Chemical Option Agreement was $80 million. Under the terms of the
Original Chemical Option Agreement, $1 million was required to be paid for the
option by January 5, 1994. In addition, the Original Chemical Option
Agreement provided for an expiration of the option on May 8, 1994, subject to
an extension until June 30, 1994 upon payment of an additional $250,000 on or
before May 8, 1994. The Original Chemical Option Agreement did not allocate
the purchase price
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among the assets subject to the option or permit the option to be exercised
for some, but not all, of such assets.
In connection with the execution of the Original Chemical Option
Agreement, the Partnership was to make the initial $1,000,000 payment, and, in
consideration of such payment to be made by the Partnership, Trump agreed with
the Partnership that, if Trump is able to acquire the Trump Regency pursuant
to the exercise of the option, he would make the Trump Regency available for
the sole benefit of the Partnership on a basis consistent with the
Partnership's contractual obligations and requirements. Trump further agreed
that the Partnership would not be required to pay any additional consideration
to Trump in connection with any assignment to the Partnership of the option to
purchase the Trump Regency. On January 5, 1994, the Partnership obtained the
approval of the CCC to make the $1 million payment, and the payment was made
on that date.
On June 16, 1994, Trump, Chemical and ACFH amended and restated the
Original Chemical Option Agreement (the "First Amended Chemical Option
Agreement"). The First Amended Chemical Option Agreement provided for an
extension of the expiration of the option through September 30, 1994, upon
payment of $250,000. Such payment was made on June 27, 1994. The First
Amended Chemical Option Agreement also provided for a $60 million option price
for the Trump Regency and the Trump Note, and a separate $20 million option
price for the other Chemical Notes. On August 30, 1994, Trump, Chemical and
ACFH entered into an amendment to the First Amended Chemical Option Agreement
(the "Second Amended Chemical Option Agreement"). The Second Amended Chemical
Option Agreement provided for an extension of the expiration of the option
through March 31, 1995 upon the payment of $50,000 per month for the period
October through December 1994, and $150,000 per month for the period January
through March 1995. The Partnership received the approval of the CCC and has
made such payments. On March 6, 1995, Trump, Chemical and ACFH entered into
an amendment to the Second Amended Chemical Option Agreement (the "Third
Amended Chemical Option Agreement"). The Third Amended Chemical Option
Agreement provides for an extension of the expiration of the option through
August 31, 1995 upon the payment of $100,000 per month for the period April
through August 1995. The Partnership received the approval of the CCC on
March 22, 1995 to make such payment. As a condition to the Third Amended
Chemical Option Agreement, Trump must (i) obtain the approval of the CCC by
July 1, 1995 for the transactions contemplated by the exercise of the options
set forth in the Third Amended Chemical Option Agreement and for the financing
to be used in connection with the acquisition of Trump Regency and other
assets in connection with the exercise of the options set forth in the Third
Amended Chemical Option Agreement; and (ii) file with the Securities and
Exchange Commission (the "SEC") by April 1, 1995 a registration statement
relating to
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the financing necessary to complete the transactions contemplated by the
exercise of the options set forth in the Third Amended Chemical Option
Agreement.
As of December 31, 1994, $1,550,000, representing option payments,
is included in other assets in the accompanying Consolidated Financial
Statements. If the option is exercised pursuant to the Third Amended Chemical
Option Agreement, option payments through March 31, 1995 are available to
offset the $60 million option price.
COMPETITION
Trump Plaza competes primarily with other casinos located in
Atlantic City, New Jersey, and also competes, or will compete, with facilities
in the northeastern and mid-Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or may in the future
be, authorized. To a lesser extent, Trump Plaza faces competition from gaming
facilities nationwide, including land based, cruise line, riverboat and
dockside casinos located in Mississippi, Nevada, Louisiana, Iowa, Puerto Rico,
the Bahamas and other locations inside and outside the United States and from
other forms of legalized gaming in New Jersey and in its surrounding states
such as lotteries, horse racing (including off-track betting), jai alai, bingo
and dog racing and from illegal wagering of various types.
Competition in the Atlantic City casino hotel market is intense. At
present, there are 12 casino hotels located in Atlantic City, including Trump
Plaza, all of which compete for patrons. In addition, there are several sites
on The Boardwalk and in the Atlantic City Marina area on which casino hotels
could be built in the future, although the Partnership is not aware of any
current development of such sites by third parties.
Casinos in Atlantic City must be located in approved hotel
facilities which offer dining, entertainment and other guest facilities. In
addition, the approved hotel facilities must have a prescribed number of
qualified sleeping units depending on the size of the casino space.
Competition among casino hotels is based primarily upon promotional
allowances, advertising, the attractiveness of the casino area, service,
quality and price of rooms, food and beverages, restaurant, convention and
parking facilities and entertainment. In order to compete effectively with
all other Atlantic City casino hotels, the Partnership offers complimentary
beverages, meals, room accommodations and/or travel arrangements to its
preferred customers, as well as cash bonuses and other incentives pursuant to
approved coupon programs.
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In addition, Trump Plaza faces competition from casino facilities
operated by federally recognized Native American tribes. Pursuant to the
Indian Gaming Regulatory Act ("IGRA"), which was passed by Congress in 1988,
any state which permits casino style gaming (even if only for limited charity
purposes) is required to negotiate gaming compacts with federally recognized
Native American tribes. Under IGRA, Native American tribes enjoy comparative
freedom from regulation and taxation of gaming operations, which provides them
with an advantage over their competitors, including the Partnership.
In 1991, the Mashantucket Pequot Nation opened a casino facility in
Ledyard, Connecticut, located in the far eastern portion of such state, an
approximately three-hour drive from New York City. In February 1992, the
Mashantucket Pequot Nation initiated 24 hour gaming, and in January 1993, slot
machines were added at such facility, and the facility currently contains over
3,100 slot machines. The Mashantucket Pequot Nation has announced various
expansion plans, including its intention to build another casino in Ledyard
together with hotels, restaurants and a theme park. There can be no assurance
that any continued expansion of gaming operations by the Mashantucket Pequot
Nation would not have a materially adverse impact on the Partnership's
operations.
A group in New Jersey calling itself the "Ramapough Indians" has
applied to the U.S. Department of the Interior to be recognized formally as a
Native American tribe, which recognition would permit it to require the State
of New Jersey to negotiate a gaming compact under IGRA. In 1993, the Bureau
of Indian Affairs denied the Ramapough Indians Federal recognition.
Similarly, a group in Cumberland County, New Jersey calling itself the
"Nanticoke Lenni Lenape" tribe has filed a notice of intent with the Federal
Bureau of Indian Affairs seeking Federal recognition as a Native American
tribe. Also, it has been reported that a Sussex County, New Jersey
businessman has offered to donate land he owns there to the Oklahoma-based
Lenape/Delaware Indian Nation which originated in New Jersey and already has
Federal tribal status but does not have a reservation in the state. In
addition, in July 1993, the Oneida Nation opened a casino featuring 24-hour
table gaming and electronic gambling systems, but without slot machines, near
Syracuse, New York and have announced a desire to open gaming facilities
elsewhere in New York. Representatives of the St. Regis Mohawk Nation signed
a gaming compact with New York State officials for the opening of a casino,
without slot machines, in the northern portion of the state close to the
Canadian border. The St. Regis Mohawk casino could be operational as early as
August, 1995. The Mohegan Nation, a tribe in Connecticut, received Federal
recognition in March of 1994 and, in May of that year, executed a gaming
compact
-15-
with the State of Connecticut that was approved by the Secretary of the
Interior in December 1994. The Mohegan Nation is scheduled to open a casino
in southeastern Connecticut in the next few years. Other Native American
Nations are seeking Federal recognition, land and negotiation of gaming
compacts in New York, Pennsylvania, Connecticut and other nearby states.
Legislation permitting other forms of casino gaming has been
proposed, from time to time, in various states, including those bordering New
Jersey. Six states have presently legalized riverboat gambling while others
are considering its approval, including Pennsylvania. Several states are
considering or have approved large scale land-based casinos. Harrah's Jazz
Company is scheduled to open and operate a casino in New Orleans, Louisiana in
May of 1995. Additionally, Las Vegas experienced significant expansion in
1993 and 1994 with additional capacity planned and currently under
construction. The Partnership's operations could be adversely affected by
such competition, particularly if casino gaming were permitted in
jurisdictions near or elsewhere in New Jersey or other states in the
Northeast. In December 1993, the Rhode Island Lottery Commission approved the
addition of slot machine games on video terminals at Lincoln Greyhound Park
and Newport Jai Alai, where poker and blackjack have been offered for over two
years. Currently, casino gaming, other than Native American gaming, is not
allowed in other areas of New Jersey or in Connecticut, New York or
Pennsylvania. To the extent that legalized gaming becomes more prevalent in
New Jersey or other jurisdictions, competition would intensify. In
particular, a proposal has been introduced to legalize gaming in Philadelphia
and other locations in Pennsylvania.
In addition, legislation has from time to time been introduced in
the New Jersey State Legislature relating to types of statewide legalized
gaming, such as video games with small wagers. To date, no such legislation
has been enacted. The Partnership is unable to predict whether any such
legislation, if enacted, would have a material adverse impact on the results
of operations or financial condition of the Partnership.
THE REFINANCING AND RESTRUCTURING
THE REFINANCING. In connection with the Refinancing, the proceeds
of the Units Offering were distributed to Trump. Trump used $35 million of
such proceeds to purchase stock of the Company, which used such funds,
together with a portion of the proceeds of the Mortgage Note Offering, to
redeem the Company's outstanding stock units (the "Stock Units"), each
consisting of (i) one share of the Company's 9.34% Participating Cumulative
Redeemable Preferred Stock (the "Preferred Stock"), liquidation preference $25
per share, par value $1 per share, and (ii) one
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share of the Company's common stock (the "Common Stock"), par value $.00001
per share. The remaining $25 million of the proceeds of the Units Offering
were distributed to Trump as part of a special distribution (the "Special
Distribution"). Trump used the Special Distribution primarily to reduce his
personal indebtedness and to satisfy certain property tax obligations with
respect to real estate owned by him. Out of the proceeds of the Mortgage Note
Offering, $225 million was used to redeem all of the Bonds (as defined).
In connection with the Offerings, the Company formed Holding, a New
Jersey general partnership, for the purpose of offering the Units. Trump
contributed to Holding his equity ownership interest in the Partnership and
became the sole beneficial owner of Holding.
Also in connection with the Offerings, the Company became the
managing general partner of the Partnership as of June 18, 1993 upon its
merger with TP/GP Corp., a New Jersey corporation ("TP/GP"), which had been
the managing general partner of the Partnership until such date. Holding and
the Company, both of which became wholly-owned by Trump upon such merger,
became the sole partners of the Partnership.
THE RESTRUCTURING. In 1991, the Partnership began to experience a
liquidity problem. Management believes that the Partnership's liquidity
problem was attributable, in part, to an overall deterioration in the Atlantic
City gaming market, as indicated by reduced rates of casino revenue growth for
the industry for the two prior years, aggravated by an economic recession in
the Northeast and the Persian Gulf War. Comparatively excessive casino gaming
capacity in Atlantic City, due in part to the opening of the Trump Taj Mahal
Casino Resort (the "Taj Mahal") in April 1990, may also have contributed to
the Partnership's liquidity problem.
In order to alleviate its liquidity problem, on May 29, 1992 (the
"Effective Date"), the Partnership and the Company restructured their
indebtedness pursuant to the Plan. The purpose of the Restructuring was to
improve the amortization schedule and extend the maturity of the Partnership's
indebtedness by (i) eliminating the sinking fund requirement on the Company's
12-7/8% First Mortgage Bonds, due 1998 (the "Original Bonds"), (ii) extending
the maturity and lowering the interest rate on the Original Bonds, (iii)
reducing the aggregate principal amount of such indebtedness from $250 million
to $225 million, and (iv) eliminating certain other indebtedness by
reconstituting such debt in part as Bonds (as defined) and in part as Stock
Units. The Restructuring was necessitated by the Partnership's inability to
either generate cash flow or obtain
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additional financing sufficient to make the scheduled sinking fund payment on
the Original Bonds.
On the Effective Date, the Company, which theretofore had no
interest in the Partnership, received a 50% beneficial interest in TP/GP, and
the Company and TP/GP were admitted as partners of the Partnership. The
Company issued $225 million principal amount of the Company's 12% Mortgage
Bonds due 2002 (the "Bonds") and approximately three million Stock Units to
certain creditors. Pursuant to the terms of the partnership agreement of the
Partnership, the Company was issued the Preferred Stock. TP/GP became the
managing general partner of the Partnership, and through its Board of
Directors, managed the affairs of the Partnership until its merger into the
Company on June 24, 1993.
Upon consummation of the Plan, each holder of $1,000 principal
amount of Original Bonds and such other indebtedness received (i) $900
principal amount of Bonds, (ii) 12 Stock Units and (iii) certain cash
payments.
As a result of the Refinancing, the Company redeemed the Stock
Units, consisting of the Company's Common Stock and Preferred Stock and Trump
became the sole beneficial owner of the Company's Common Stock. The Company
also retired the outstanding principal amount and interest on the Bonds. In
addition, TP/GP was merged into the Company and the Company became the
managing general partner of the Partnership.
CONFLICTS OF INTEREST
Trump is a 100% beneficial owner of Trump's Castle Casino Resort
("Trump's Castle") subject to certain litigation warrants and a 50% beneficial
owner of the Taj Mahal (collectively, the "Other Trump Casinos"), and is the
sole beneficial owner of TC/GP, Inc., an entity that as of December 31, 1994
has provided certain services to Trump's Castle; prior thereto, Trump's Castle
Management Corp., an entity solely owned by Trump, provided management
services to Trump's Castle. Under certain circumstances, Trump could increase
his beneficial interest in Taj Mahal to 100%. In addition, Trump has a
personal services agreement with the partnership that owns the Taj Mahal
pursuant to which he receives substantial compensation based, in part, on the
financial results of the Taj Mahal. The Other Trump Casinos compete directly
with each other and with other Atlantic City casino hotels, including Trump
Plaza. Trump could under certain circumstances have an incentive to operate
the Other Trump Casinos to the competitive detriment of the Partnership.
Nicholas L. Ribis, the Chief Executive Officer of the Partnership, is also the
chief executive officer of the
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partnerships that own the Other Trump Casinos, and Mr. Robert M. Pickus and
Mr. John P. Burke, officers of the Partnership, are also executive officers of
each of the partnerships that own the Other Trump Casinos. In addition,
Messrs. Trump, Ribis and Burke serve on the governing bodies of the
partnerships that own the Other Trump Casinos. As a result of Trump's
interests in three competing Atlantic City casinos, the common chief executive
officer and other common officers, a conflict of interest may be deemed to
exist by reason of such persons' access to information and business
opportunities possibly useful to any or all of such casinos. Although no
specific procedures have been devised for resolving conflicts of interest
confronting, or which may confront, Trump, such persons and the Other Trump
Casinos, Messrs. Trump, Ribis, Pickus and Burke have informed the Company that
they will not engage in any activity which they reasonably expect will harm
Trump Plaza or is otherwise inconsistent with their fiduciary obligations to
the Partnership. See "Certain Relationships and Related Transactions."
EMPLOYEES AND LABOR RELATIONS
The Partnership has approximately 3,800 employees of whom
approximately 1,100 are covered by collective bargaining agreements.
Management believes that its relationships with its employees are
satisfactory. Certain of the Partnership's employees must be licensed or
registered under the Casino Control Act. See "-- Gaming and Other Laws and
Regulations --Employees." The Company has no employees.
In April 1993, the National Labor Relations board found that the
Partnership had violated the National Labor Relations Act (the "NLRA") in the
context of a union organizing campaign by table game dealers of the
Partnership in association with the Sports Arena and Casino Employees Union
Local 137, a/w Laborers' International Union of North America, AFL-CIO ("Local
137"). In connection with such finding, the Partnership was ordered to
refrain from interfering with, restraining, or coercing employees in the
exercise of the rights guaranteed them by Section 7 of the NLRA, to notify its
employees of such rights and to hold an election by secret ballot among its
employees regarding whether they desire to be represented for collective
bargaining by Local 137. The election was held on May 20 and 21, 1994 and the
vote, which has been certified by the NLRB, was in favor of management and
against representation by Local 137.
SEASONALITY
The gaming industry in Atlantic City traditionally has been
seasonal, with its strongest performance occurring from May through September,
and with December and January showing
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substantial decreases in activity. Revenues have been significantly higher on
Fridays, Saturdays, Sundays and holidays than on other days.
GAMING AND OTHER LAWS AND REGULATIONS
The following is only a summary of the applicable provisions of the
Casino Control Act and certain other laws and regulations. It does not
purport to be a full description thereof and is qualified in its entirety by
reference to the Casino Control Act and such other laws and regulations.
In general, the Casino Control Act contains detailed provisions
concerning, among other things: the granting of casino licenses; the
suitability of the approved hotel facility, and the amount of authorized
casino space and gaming units permitted therein; the qualification of natural
persons and entities related to the casino licensee; the licensing of certain
employees and vendors of casino licensees; rules of the games; the selling and
redeeming of gaming chips; the granting and duration of credit and the
enforceability of gaming debts; management control procedures, accounting and
cash control methods and reports to gaming agencies; security standards; the
manufacture and distribution of gaming equipment; equal employment opportunity
for employees of casino operators, contractors of casino facilities and
others; and advertising, entertainment and alcoholic beverages.
CASINO CONTROL COMMISSION. The ownership and operation of
casino/hotel facilities in Atlantic City are the subject of strict state
regulation under the Casino Control Act. The CCC is empowered to regulate a
wide spectrum of gaming and non-gaming related activities and to approve the
form of ownership and financial structure of not only a casino licensee, but
also its entity qualifiers and intermediary and holding companies.
OPERATING LICENSES. The Partnership was issued its initial casino
license on May 14, 1984. On April 19, 1993, the CCC renewed the Partnership's
casino license through June 30, 1995, and on March 15, 1993 approved Trump as
a natural person qualifier through May 1995. In March 1995, the Partnership's
license renewal proceedings were consolidated with the Other Trump Casinos.
The Partnership, as consolidated with the Other Trump Casinos for license
renewal purposes, intends to apply during March 1995 for a renewal of its
casino license for the period through June 30, 1999 and renewal of the
approval of Trump as a natural person qualifier for the license term. It is
anticipated that the CCC will conduct a plenary hearing for renewal of the
Partnership's casino license in June 1995. No assurance can be given that the
CCC will renew the casino license
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or, if it does so, as to the conditions it may impose, if any, with respect
thereto.
CASINO LICENSEE. No casino hotel facility may operate unless the
appropriate license and approvals are obtained from the CCC, which has broad
discretion with regard to the issuance, renewal, revocation and suspension of
such licenses and approvals, which are non-transferable. The qualification
criteria with respect to the holder of a casino license include its financial
stability, integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. The casino license currently held by the Partnership is
renewable for periods of up to four years. The CCC may reopen licensing
hearings at any time, and must reopen a licensing hearing at the request of
the New Jersey Division of Gaming Enforcement (the "Division").
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due, to achieve a gross
operating profit; to pay all local, state and federal taxes when due, to make
necessary capital and maintenance expenditures to insure that it has a
superior first-class facility, and to pay, exchange, refinance or extend debts
which will mature or become due and payable during the license term.
In the event a licensee fails to demonstrate financial stability,
the CCC may take such action as it deems necessary to fulfill the purposes of
the Casino Control Act and protect the public interest, including: issuing
conditional licenses, approvals or determinations; establishing an appropriate
cure period, imposing reporting requirements; placing restrictions on the
transfer of cash or the assumption of liability; requiring reasonable reserves
or trust accounts; denying licensure; or appointing a conservator. See "--
Gaming and Other Laws and Regulations -- Conservatorship."
The Partnership believes that it has adequate financial resources to
meet the financial stability requirements of the CCC for the foreseeable
future.
Pursuant to the Casino Control Act, CCC regulations and precedent,
no entity may hold a casino license unless each officer, director, principal
employee, person who directly or indirectly holds any beneficial interest or
ownership in the licensee, each person who in the opinion of the CCC has the
ability to control or elect a majority of the board of directors
-21-
of the licensee (other than a banking or other licensed lending institution
which makes a loan or holds a mortgage or other lien acquired in the ordinary
course of business) and any lender, underwriter, agent or employee of the
licensee or other person whom the CCC may consider appropriate, obtains and
maintains qualification approval from the CCC. Qualification approval means
that such person must, but for residence, individually meet the qualification
requirements as a casino key employee. See " --Gaming and Other Laws and
Regulations -- Employees." Pursuant to a condition of its casino license,
payments by the Partnership to or for the benefit of any related entity or
partner are subject to prior CCC approval; and, if the Partnership's cash
position falls below $5.0 million for three consecutive business days, the
Partnership must present to the CCC and the Division evidence as to why it
should not obtain a working capital facility in an appropriate amount.
CONTROL PERSONS. An entity qualifier or intermediary or holding
company, such as Holding, Holding Inc. and the Company, is required to
register with the CCC and meet the same basic standards for approval as a
casino licensee; provided, however, that the CCC, with the concurrence of the
Director of the Division, may waive compliance by a publicly-traded corporate
holding company with the requirement that an officer, director, lender,
underwriter, agent or employee thereof, or person directly or indirectly
holding a beneficial interest or ownership of the securities thereof
individually qualify for approval under casino key employee standards so long
as the CCC and the Director of the Division are, and remain, satisfied that
such officer, director, lender, underwriter, agent or employee is not
significantly involved in the activities of the casino licensee, or that such
security holder does not have the ability to control the publicly-traded
corporate holding company or elect one or more of its directors. Persons
holding five percent or more of the equity securities of such holding company
are presumed to have the ability to control the company or elect one or more
of its directors and will, unless this presumption is rebutted, be required to
individually qualify. Equity securities are defined as any voting stock or
any security similar to or convertible into or carrying a right to acquire any
security having a direct or indirect participation in the profits of the
issuer.
FINANCIAL SOURCES. The CCC may require all financial backers,
investors, mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bears any relation to the
casino project, publicly-traded securities of an entity which holds a casino
license or is an entity qualifier, subsidiary or holding company of a casino
licensee (a "Regulated Company"), to qualify as financial sources. In the
past, the CCC has waived the qualification
-22-
requirement for holders of less than 15% of a series of publicly traded
mortgage bonds so long as the bonds remained widely distributed and freely
traded in the public market and the holder had no ability to control the
casino licensee. The CCC may require holders of less than 15% of a series of
debt to qualify as financial sources even if not active in the management of
the issuer or the casino licensee.
INSTITUTIONAL INVESTORS. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of federal, state or
local public employees; investment company registered under the Investment
Company Act of 1940, as amended; collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; closed
end investment trust; chartered or licensed life insurance company or property
and casualty insurance company; banking and other chartered or licensed
lending institution; investment advisor registered under the Investment
Advisers Act of 1940, as amended; and such other persons as the CCC may
determine for reasons consistent with the policies of the Casino Control Act.
An Institutional Investor may be granted a waiver by the CCC from
financial source or other qualification requirements applicable to a holder of
publicly-traded securities, in the absence of a prima facie showing by the
Division that there is any cause to believe that the holder may be found
unqualified, on the basis of CCC findings that: (i) its holdings were
purchased for investment purposes only and, upon request by the CCC, it files
a certified statement to the effect that it has no intention of influencing or
affecting the affairs of the issuer, the casino licensee or its holding or
intermediary companies; provided, however, that the Institutional Investor
will be permitted to vote on matters put to the vote of the outstanding
security holders; and (ii) if (x) the securities are debt securities of a
casino licensee's holding or intermediary companies or another subsidiary
company of the casino licensee's holding or intermediary companies which is
related in any way to the financing of the casino licensee and represent
either (A) 20% or less of the total outstanding debt of the company, or (B)
50% or less of any issue of outstanding debt of the company, (y) the
securities are equity securities and represent less than 10% of the equity
securities of a casino licensee's holding or intermediary companies, or (z)
the securities so held exceed such percentages, upon a showing of good cause.
There can be no assurance, however, that the CCC will make such findings or
grant such waiver and, in any event, an Institutional Investor may be required
to produce for the CCC or the Division upon request, any document or
information which bears any relation to such debt or equity securities.
-23-
Generally, the CCC requires each institutional holder seeking waiver
of qualification to execute a certification to the effect that (i) the holder
has received the definition of Institutional Investor under the Casino Control
Act and believes that it meets the definition of Institutional Investor; (ii)
the holder purchased the securities for investment purposes only and holds
them in the ordinary course of business; (iii) the holder has no involvement
in the business activities of, and no intention of influencing or affecting
the affairs of the issuer, the casino licensee or any affiliate; and (iv) if
the holder subsequently determines to influence or affect the affairs of the
issuer, the casino licensee or any affiliate, it shall provide not less than
30 days' prior notice of such intent and shall file with the CCC an
application for qualification before taking any such action. If an
Institutional Investor changes its investment intent, or if the CCC finds
reasonable cause to believe that it may be found unqualified, the
Institutional Investor may take no action with respect to the security
holdings, other than to divest itself of such holdings, until it has applied
for interim casino authorization (see "Interim Casino Authorization" below)
and has executed a trust agreement pursuant to such an application.
OWNERSHIP AND TRANSFER OF SECURITIES. The Casino Control Act
imposes certain restrictions upon the issuance, ownership and transfer of
securities of a Regulated Company and defines the term "security" to include
instruments which evidence a direct or indirect beneficial ownership or
creditor interest in a Regulated Company including, but not limited to,
mortgages, debentures, security agreements, notes and warrants. Each of the
Company, Holding, Holding Inc. and the Partnership are deemed to be a
Regulated Company, and instruments evidencing a beneficial ownership or
creditor interest therein, including partnership interest, are deemed to be
the securities of a Regulated Company.
If the CCC finds that a holder of such securities is not qualified
under the Casino Control Act, it has the right to take any remedial action it
may deem appropriate including the right to force divestiture by such
disqualified holder of such securities. In the event that certain
disqualified holders fail to divest themselves of such securities, the CCC has
the power to revoke or suspend the casino license affiliated with the
Regulated Company which issued the securities. If a holder is found
unqualified, it is unlawful for the holder (i) to exercise, directly or
through any trustee or nominee, any right conferred by such securities, or
(ii) to receive any dividends or interest upon such securities or any
remuneration, in any form, from its affiliated casino licensee for services
rendered or otherwise.
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With respect to non-publicly-traded securities, the Casino Control
Act and CCC regulations require that the corporate charter or partnership
agreement of a Regulated Company establish a right in the CCC of prior
approval with regard to transfers of securities, shares and other interests
and an absolute right in the Regulated Company to repurchase at the market
price or the purchase price, whichever is the lesser, any such security, share
or other interest in the event that the CCC disapproves a transfer. With
respect to publicly-traded securities, such corporate charter or partnership
agreement is required to establish that any such securities of the entity are
held subject to the condition that, if a holder thereof is found to be
disqualified by the CCC, such holder shall dispose of such securities.
INTERIM CASINO AUTHORIZATION. Interim casino authorization is a
process which permits a person who enters into a contract to obtain property
relating to a casino operation or who obtains publicly-traded securities
relating to a casino licensee to close on the contract or own the securities
until plenary licensure or qualification. During the period of interim
authorization, the property relating to the casino operation or the securities
are held in trust.
Whenever any person enters into a contract to transfer any property
which relates to an ongoing casino operation, including a security of the
casino licensee or a holding or intermediary company or entity qualifier,
under circumstances which would require that the transferee obtain licensure
or be qualified under the Casino Control Act, and that person is not already
licensed or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, the closing or settlement date in the contract
may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed
trust agreement in a form approved by the CCC. If, after the report of the
Division and a hearing by the CCC, the CCC grants interim authorization, the
property will be subject to a trust. If the CCC denies interim authorization,
the contract may not close or settle until the CCC makes a determination on
the qualifications of the applicant. If the CCC denies qualification, the
contract will be terminated for all purposes and there will be no liability on
the part of the transferor.
If, as the result of a transfer of publicly traded securities of a
licensee, a holding or intermediary company or entity qualifier of a licensee
or a financing entity of a licensee, any person is required to qualify under
the Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC
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determines that qualification is required or declines to waive qualification.
The application must include a fully executed trust agreement in a form
approved by the CCC or, in the alternative, within 120 days after the CCC
determines that qualification is required, the person whose qualification is
required must divest such securities as the CCC may require in order to remove
the need to qualify.
The CCC may grant interim casino authorization where it finds by
clear and convincing evidence that: (i) statements of compliance have been
issued pursuant to the Casino Control Act; (ii) the casino hotel is an
approved hotel in accordance with the Casino Control Act; (iii) the trustee
satisfies qualification criteria applicable to key casino employees, except
for residency and casino experience; and (iv) interim operation will best
serve the interests of the public.
When the CCC finds the applicant qualified, the trust will
terminate. If the CCC denies qualification to a person who has received
interim casino authorization, the trustee is required to endeavor, and is
authorized, to sell, assign, convey or otherwise dispose of the property
subject to the trust to such persons who are licensed or qualified or shall
themselves obtain interim casino authorization.
Where a holder of publicly-traded securities is required, in
applying for qualification as a financial source or qualifier, to transfer
such securities to a trust in application for interim casino authorization and
the CCC thereafter orders that the trust become operative: (i) during the
time the trust is operative, the holder may not participate in the earnings of
the casino hotel or receive any return on its investment or debt security
holdings; and (ii) after disposition, if any, of the securities by the
trustee, proceeds distributed to the unqualified holder may not exceed the
lower of their actual cost to the unqualified holder or their value calculated
as if the investment had been made on the date the trust became operative.
APPROVED HOTEL FACILITIES. The CCC may permit a licensee, such as
the Partnership, to increase its casino space if the licensee agrees to add a
prescribed number of qualifying sleeping units within two years after the
commencement of gaming operations in the additional casino space. However, if
the casino licensee does not fulfill such agreement due to conditions within
its control, the licensee will be required to close the additional casino
space, or any portion thereof that the CCC determines should be closed.
Agreements to lease an approved hotel building or the land under the
building must be for a durational term exceeding
-26-
30 years, concern 100% of the entire approved hotel building or the land upon
which it is located and include a buy-out provision conferring upon the lessee
the absolute right to purchase the lessor's entire interest for a fixed sum in
the event that the lessor is found by the CCC to be unsuitable. The CCC may
waive any of the foregoing requirements for good cause. The Partnership
intends to apply for a ruling that good cause exists to waive the 30-year
requirement. There can be no assurances that the CCC will grant such a
waiver.
LICENSE FEES. The CCC is authorized to establish annual fees for
the renewal of casino licenses. The renewal fee is based upon the cost of
maintaining control and regulatory activities prescribed by the Casino Control
Act, and may not be less than $200,000 for a two-year casino license.
Additionally, casino licensees are subject to potential assessments to fund
any annual operating deficits incurred by the CCC or the Division. There is
also an annual license fee of $500 for each slot machine maintained for use or
in use in any casino.
GROSS REVENUE TAX. Each casino licensee is also required to pay an
annual tax of 8% on its gross casino revenues. For the years ended December
31, 1994, 1993 and 1992, the Partnership's gross revenue tax was approximately
$21.0 million, $21.3 million and $21.0 million, respectively, and its license,
investigation, and other fees and assessments totalled approximately $4.2
million, $4.0 million and $4.7 million, respectively.
INVESTMENT ALTERNATIVE TAX OBLIGATIONS. An investment alternative
tax imposed on the gross casino revenues of each licensee in the amount of
2.5% is due and payable on the last day of April following the end of the
calendar year. A licensee is obligated to pay the investment alternative tax
for a period of 25 years. Estimated payments of the investment alternative
tax obligation must be made quarterly in an amount equal to 1.25% of estimated
gross revenues for the preceding three-month period. Investment tax credits
may be obtained by making qualified investments or by the purchase of bonds
issued by the CRDA. CRDA bonds may have terms as long as fifty years and bear
interest at below market rates, resulting in a value lower than the face value
of such CRDA bonds.
For the first ten years of its obligation, the licensee is entitled
to an investment tax credit against the investment alternative tax in an
amount equal to twice the purchase price of bonds issued to the licensee by
the CRDA. Thereafter, the licensee is (i) entitled to an investment tax
credit in an amount equal to twice the purchase price of such bonds or twice
the amount of its investments authorized in lieu of such bond
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investments or made in projects designated as eligible by the CRDA and (ii)
has the option of entering into a contract with the CRDA to have its tax
credit comprised of direct investments in approved eligible projects which may
not comprise more than 50% of its eligible tax credit in any one year.
From the moneys made available to the CRDA, the CRDA is required to
set aside $100,000,000 for investment in hotel development projects in
Atlantic City undertaken by a licensee which result in the construction or
rehabilitation of at least 200 hotel rooms by December 31, 1996. These monies
shall be used to fund up to 35% of the cost to casino licensees of expanding
their hotel facilities to provide additional hotel rooms which are required to
be available upon the opening of the Atlantic City Convention Center and
a portion of which will be required to be dedicated to convention events. The
CRDA has determined at this time that eligible casino licensees will receive
27% of the cost of additional hotel rooms out of these monies set aside and
may, in the future, determine to increase the percentage to an amount no
greater than 35%.
MINIMUM CASINO PARKING CHARGES. As of July 1, 1993, each casino
licensee was required to pay the New Jersey State Treasurer a $1.50 charge for
every use of a parking space for the purpose of parking, garaging or storing
motor vehicles in a parking facility owned or leased by a casino licensee or
by any person on behalf of a casino licensee. This amount is paid into a
special fund established and held by the New Jersey State Treasurer for the
exclusive use of the CRDA. The Partnership currently charges its parking
patrons $2.00 in order to make its required payment to the New Jersey State
Treasurer and cover related expenses. Amounts in the special fund will be
expended by the CRDA for economic development projects of a revenue producing
nature that foster the redevelopment of Atlantic City.
CONSERVATORSHIP. If, at any time, it is determined that the
Partnership, the Company, Holding Inc. or Holding has violated the Casino
Control Act or that any of such entities cannot meet the qualification
requirements of the Casino Control Act, such entity could be subject to fines
or the suspension or revocation of its license or qualification. If the
Partnership's license is suspended for a period in excess of 120 days or
revoked or if the CCC fails or refuses to renew such casino license, the CCC
could appoint a conservator to operate and dispose of the Partnership's casino
hotel facilities. A conservator would be vested with title to all property of
the Partnership relating to the casino and the approved hotel subject to valid
liens and/or encumbrances. The conservator would be required to act under the
direct supervision of the CCC and would be charged with the duty of
conserving, preserving and, if permitted, continuing the operation of the
casino hotel. During the period of the conservatorship, a former or suspended
casino
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licensee is entitled to a fair rate of return out of net earnings, if any, on
the property retained by the conservator. The CCC may also discontinue any
conservatorship action and direct the conservator to take such steps as are
necessary to effect an orderly transfer of the property of a former or
suspended casino licensee.
EMPLOYEES. Certain employees of the Partnership must be licensed by
or registered with the CCC, depending on the nature of the position held.
Casino employees are subject to more stringent requirements than non-casino
employees and must meet applicable standards pertaining to financial
stability, integrity and responsibility, good character, honesty and
integrity, business ability and casino experience and New Jersey residency.
These requirements have resulted in significant competition among Atlantic
City casino operators for the services of qualified employees.
GAMING CREDIT. The Partnership's casino games are conducted on a
credit as well as cash basis. Gaming debts arising in Atlantic City in
accordance with applicable regulations are enforceable in the courts of the
State of New Jersey. The extension of gaming credit is subject to regulations
that detail procedures which casinos must follow when granting gaming credit
and recording counter checks which have been exchanged, redeemed or
consolidated.
CONTROL PROCEDURES. Gaming at Trump Plaza is conducted by trained
and supervised personnel. The Partnership employs extensive security and
internal controls. Security checks are made to determine, among other
matters, that job applicants for key positions have had no criminal history or
associations. Security controls utilized by the surveillance department
include closed circuit video camera to monitor the casino floor and money
counting areas. The count of moneys from gaming also is observed daily by
representatives of the CCC.
OTHER LAWS AND REGULATIONS. The United States Department of the
Treasury has adopted regulations pursuant to which a casino is required to
file a report of each deposit, withdrawal, exchange of currency, gambling
tokens or chips, or other payments or transfers by, through, or to such casino
which involve a transaction in currency of more than $10,000 per patron, per
gaming day. Such reports are required to be made on forms prescribed by the
Secretary of the Treasury and are filed with the Commissioner of the Internal
Revenue Service (the "Service"). In addition, the Partnership is required to
maintain detailed records (including the names, addresses, social security
numbers and other information with respect to its gaming
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customers) dealing with, among other items, the deposit and withdrawal of
funds and the maintenance of a line of credit.
In the past, the Service had taken the position that gaming winnings
from table games by nonresident aliens were subject to a 30% withholding tax.
The Service, however, subsequently adopted a practice of not collecting such
tax. Recently enacted legislation exempts from withholding tax table game
winnings by nonresident aliens, unless the Secretary of the Treasury
determines by regulation that such collections have become administratively
feasible.
As the result of an audit conducted by the U.S. Department of
Treasury, Office of Financial Enforcement, the Partnership was alleged to have
failed to timely file the "Currency Transaction Report by Casino" in
connection with 65 individual currency transactions in excess of $10,000
during the period from October 31, 1986 to December 10, 1988. The Partnership
paid a fine of $292,500 in connection with these violations. The Partnership
has revised its internal control procedures to ensure continued compliance
with these regulations.
On April 5, 1994, the Occupational Safety and Health Administration
("OSHA") proposed a regulation that would require, inter alia, that employers
who permit smoking in workplaces establish designated smoking areas, permit
smoking only in such areas, and assure that designated smoking areas be
enclosed, exhausted directly to the outside, and maintained under negative
pressure sufficient to contain tobacco smoke within the designated area. The
Partnership has estimated construction costs to build enclosed, exhausted,
negative-pressure smoking rooms in Trump Plaza to be $1.5 million for its
casino and $2.5 million for its restaurants. The Partnership has also
estimated construction costs to provide negative-pressure exhaust systems for
Trump Plaza hotel rooms to be $1,500 per room; however, management believes
that it is highly unlikely that the regulation, if promulgated, would require
hotel rooms to be equipped with exhaust systems if smoking is prohibited in
the rooms during housekeeping and maintenance activities. If the regulation
is promulgated and is applicable to Trump Plaza hotel rooms, the number of
rooms that would be affected is not known at this time.
The Partnership is subject to other federal, state and local
regulations and, on a periodic basis, must obtain various licenses and
permits, including those required to sell alcoholic beverages in the State of
New Jersey as well as in other jurisdictions. Management believes all
required licenses and permits necessary to conduct business of the Partnership
have been obtained for operations in the State of New Jersey.
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(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES
------------------------------------------------
Not applicable.
ITEM 2. PROPERTIES.
------ ----------
The Partnership owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is subject to the liens of the Note
Mortgage and Guarantee Mortgage (collectively, the "Mortgages") and certain
other liens. The "Note Mortgage" and related assignments of assets encumber
the real property owned and leased by the Partnership and substantially all of
the Partnership's other assets, all of which constitute Trump Plaza and its
related properties, which secures the non-recourse promissory note (the
"Partnership Note") of the Partnership issued to the Company in exchange for
the Company's lending to the Partnership the proceeds of the Mortgage Note
Offering. In exchange for the use of such proceeds, the Company has assigned
the Note Mortgage and the Partnership Note to the Trustee. The "Guarantee
Mortgage" is the mortgage on and related assignments of the assets of the
Partnership described above, senior to the lien of the Note Mortgage, which
secures the Partnership's non-recourse guarantee (the "Guarantee") of the
Mortgage Notes. The Mortgage Note Indenture, the Note Mortgage and the
Guarantee Mortgage are herein collectively referred to as the "Mortgage Note
Agreements."
CASINO PARCEL
Trump Plaza is located on The Boardwalk in Atlantic City, New Jersey,
next to the Atlantic City Convention Center. It occupies the entire city
block (approximately 2.38 acres) bounded by The Boardwalk, Mississippi Avenue,
Pacific Avenue and Columbia Place (the "Casino Parcel").
The Casino Parcel consists of four tracts of land, one of which is
owned by the Partnership and three of which are leased to the Partnership
pursuant to three non-renewable Ground Leases, each of which expires on
December 31, 2078 (each, a "Ground Lease"). Trump Seashore Associates,
Seashore Four Associates and Plaza Hotel Management Company (each, a "Ground
Lessor") are the owners/lessors under such respective Ground Leases
(respectively, the "TSA Lease," "SFA Lease" and "PHMC Lease"; the land which
is subject to the Ground Leases (which includes Additional Parcel 1, as
hereinafter defined) is referred to collectively as the "Leasehold Tracts" and
individually as a "Leasehold Tract"). Trump Seashore Associates and Seashore
Four Associates are
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beneficially owned by Trump and are, therefore, affiliates of the Company and
the Partnership.
On August 1, 1991, as security for indebtedness owed to a third party,
Trump Seashore Associates transferred its interest in the TSA Lease to United
States Trust Company of New York ("UST"), as trustee for the benefit of such
third party creditor. The trust agreement among UST, Trump Seashore
Associates and such creditor provides that the trust shall terminate on the
earlier of (i) August 1, 2012 or (ii) the date on which such third party
creditor certifies to UST that all principal, interest and other sums due and
owing from Trump Seashore Associates to such third party creditor have been
paid.
Trump Seashore Associates is currently negotiating with its third party
lender for the extension or refinancing of the indebtedness described above,
which debt matured on October 29, 1993. The lender has agreed to forebear
from pursuing remedies under such loan through April 1995, while such
refinancing negotiations are taking place. The Mortgage Note Agreements
provide that, upon such refinancing, the refinancing lender shall consent to
the execution of an agreement between TSA and the Partnership providing, among
other matters, for certain protections for holders of Mortgage Notes in the
event of a default arising under the TSA Lease.
While the transfer to UST of Trump Seashore Associates' interest in the
TSA Lease was primarily a financing transaction to provide the third-party
creditor with a potentially enhanced security interest, because of the
transfer of such interest to UST, it is not certain that the TSA Lease would
be deemed to be held by an affiliate of the Partnership and, therefore, even
if the agreement described above is executed by TSA, the holders of the
Mortgage Notes and the PIK Notes may not have the benefit of any such
agreement regarding the TSA Lease.
The SFA Lease and the PHMC Lease each contain options pursuant to which
the Partnership may purchase the Leasehold Tract covered by such Ground Lease
at certain times during the term of such Ground Lease under certain
circumstances. Upon any refinancing of the mortgage indebtedness which
currently encumbers the fee interest in the TSA Lease Leasehold Tract,
including any refinancing resulting from the on-going negotiations described
above, the TSA Lease will be amended to confirm the existence thereunder of
the purchase options, or provide for an additional option grant, in each case
substantially similar to those currently set forth in the other Ground Leases.
The purchase price pursuant to each option is specified in the applicable
Ground Lease.
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The Ground Leases are "net leases" pursuant to which the Partnership,
in addition to the payment of fixed rent, is responsible for all costs and
expenses with respect to the use, operation and ownership of the Leasehold
Tracts and the improvements now, or which may in the future be, located
thereon, including, but not limited to, all maintenance and repair costs,
insurance premiums, real estate taxes, assessments and utility charges.
The improvements located on the Leasehold Tracts are owned by the
Partnership during the terms of the respective Ground Leases and upon the
expiration of the term of each Ground Lease (for whatever reason), ownership
of such improvements will vest in the Ground Lessor. Subject to the
provisions of the Mortgage Note Agreements, the Partnership has the right to
improve the Leasehold Tracts, alter, demolish and/or rebuild the improvements
constructed thereon, and remove any personal property and movable trade
fixtures therefrom.
The Ground Leases provide that each Ground Lessor may encumber its fee
estate with mortgage liens, but any such fee mortgage will not increase the
rent under the applicable Ground Lease and must be subordinate to such Ground
Lease. Accordingly, any default by a Ground Lessor under any such fee mortgage
(including that mortgage encumbering the TSA Lease parcel, for which
refinancing negotiations are on-going) will not result in a termination of the
applicable Ground Lease but would permit the fee mortgagee to bring a
foreclosure action and succeed to the interests of the Ground Lessor in the
fee estate, subject to the Partnership's leasehold estate under such Ground
Lease. Each Ground Lease also specifically provides that the Ground Lessor
may sell its interest in the applicable Leasehold Tract, but any such sale
would be made subject to the Partnership's interest in the applicable Ground
Lease.
The Mortgages are subject and subordinate to each of the Ground Leases.
Accordingly, if a Ground Lease were to be terminated while such Mortgages were
outstanding, the lien of the Mortgages would be extinguished as to the
applicable Leasehold Tract. The Ground Leases, however, contain certain
provisions to protect the Mortgage Note Trustee and the holders of the
Mortgage Notes from such an occurrence, including the following: (i) no
cancellation, surrender, acceptance of surrender or modification of a Ground
Lease is binding on the Mortgage Note Trustee or affects the lien of the
Mortgages without the Mortgage Note Trustee's prior written consent, (ii) the
Mortgage Note Trustee is entitled to a copy of any notices (including notices
of default) sent by a Ground Lessor to the Partnership, has the right to
perform any term or condition of the Ground Lease to be performed by the
Partnership and can cure any defaults, (iii) if
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any default is not remedied within the applicable grace period specified in
the Ground Lease, then before the Ground Lessor exercises its rights under the
Ground Lease or any statute, the Mortgage Note Trustee has an additional
period of time within which to cure, or commence the curing of, the default
and (iv) upon any termination of a Ground Lease, the Ground Lessor must enter
into a new lease, on substantially the same terms as the applicable Ground
Lease, with the Mortgage Note Trustee if requested within a specified period
of time. In the event of a default by the Partnership under a Ground Lease,
however, notwithstanding any additional cure period granted to the Mortgage
Note Trustee, there can be no assurance that the Mortgage Note Trustee will
take action to cure the default, will have sufficient time to cure the default
or will otherwise be able to take advantage of such provisions. If the Ground
Lease were then terminated and a new lease entered into, the Mortgage Note
Trustee would nevertheless remain obligated to cure all pre-existing defaults
as a condition to obtaining such new lease.
If a bankruptcy case is filed by or commenced against a Ground Lessor
under applicable bankruptcy law, the trustee in bankruptcy in a liquidation or
reorganization case under the applicable bankruptcy law, or a debtor-in-
possession in a reorganization case under the applicable bankruptcy law, has
the right, at its option, to assume or reject the Ground Lease of the debtor-
lessor (subject, in each case, to court approval). If the Ground Lease is
assumed, the rights and obligations of the Partnership thereunder, and the
rights of the Mortgage Note Trustee as leasehold mortgagee under the Mortgage
Note Agreements, would continue in full force and effect. If the Ground Lease
is rejected, the Partnership would have the right, at its election, either (i)
to treat the Ground Lease as terminated, in which event the lien of the
Mortgages on the leasehold estate created thereby would be extinguished, or
(ii) to continue in possession of the land and improvements under the Ground
Lease for the balance of the term thereof and at the rental set forth therein
(with a right to offset against such rent any damages caused by the Ground
Lessor's failure to thereafter perform its obligations under such Ground
Lease). The Mortgage Note Agreements provide that if a Ground Lease is
rejected, the Partnership assigns to the Trustee its rights to elect whether
to treat the Ground Lease as terminated or to remain in possession of the
leased premises.
In the case of the Ground Leases, the rejection of a Ground Lease by a
trustee in bankruptcy or debtor-lessor (as debtor-in-possession) may result in
termination of any options to purchase the fee estate of the debtor-lessor and
the Mortgage Note Trustee's option (as leasehold mortgagee as described
above), if the Ground Lease is terminated to enter into a new
-34-
lease directly with the lessor. In addition, under an interpretation of New
Jersey law, it is possible that a court would regard such options as separate
contracts and, therefore, severable from the Ground Lease. In such event, the
trustee in bankruptcy or debtor-lessor (as debtor-in-possession) could assume
the Ground Lease, while rejecting some or all of such options under the Ground
Lease.
PARKING PARCELS
The Partnership owns a parcel of land (the "Garage Parcel") located
across the street from the Casino Parcel and along Pacific Avenue in a portion
of the block bounded by Pacific Avenue, Mississippi Avenue, Atlantic Avenue
and Missouri Avenue. The Partnership has constructed on the Garage Parcel a
10-story parking garage capable of accommodating approximately 2,650 cars and
which includes offices and a bus transportation center with bays accommodating
up to 13 buses at one time. An enclosed pedestrian walkway from the parking
garage accesses Trump Plaza at the casino level. Parking at the parking
garage is available to Trump Plaza's guests, as well as to the general public.
Two of the tracts comprising a portion of the Garage Parcel are subject to a
first mortgage on the Partnership's fee interest in such tract. As of
December 31, 1994, such mortgage had an approximate outstanding principal
balance of $3.8 million.
The Partnership leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet ("Additional Parcel 1")
and owns another parcel on Mississippi Avenue adjacent to Additional Parcel 1
consisting of approximately 5,750 square feet (the "Bordonaro Parcel"). The
Bordonaro Parcel is encumbered by a first mortgage having an outstanding
principal balance, as of December 31, 1994, of approximately $130,000.
Additional Parcel 1 and the Bordonaro Parcel are presently paved and used for
surface parking.
The Partnership also owns five unimproved parcels of land, aggregating
approximately 43,300 square feet, and sub-leases one parcel consisting of
approximately 3,125 square feet. All of such parcels are contiguous and are
located along Atlantic Avenue, in the same block as the Garage Parcel. They
are used for signage and surface parking for employees of Trump Plaza and are
not encumbered by any mortgage liens other than those of the Mortgages.
-35-
WAREHOUSE PARCEL
The Partnership owns a warehouse and office facility located in Egg
Harbor Township, New Jersey containing approximately 64,000 square feet of
space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is encumbered by a
first mortgage having an outstanding principal balance, as of December 31,
1994, of approximately $1.6 million.
BOARDWALK EXPANSION SITE
See "Business -- Narrative Description of Business
-- Expansion Sites -- Boardwalk Expansion Site."
SUPERIOR MORTGAGES
The liens securing the indebtedness on the Garage Parcel, the Bordonaro
Parcel and the Egg Harbor Parcel (all of such liens are collectively called
the "Existing Senior Mortgages") are all senior to the liens of the Mortgages.
The principal amount currently secured by such Existing Senior Mortgages as of
December 31, 1994 is in the aggregate, approximately $5.5 million.
If the Partnership were to default in the payment of the indebtedness
secured by any of the Existing Senior Mortgages or default in the performance
of any of the other obligations thereunder, and the holder of an Existing
Senior Mortgage were to commence a foreclosure action, the debt owed to the
holder of such Existing Senior Mortgage, together with the debt owed to the
holder of any other Existing Senior Mortgage which is also then being
foreclosed, would have to be satisfied before the holders of the Mortgage
Notes would realize any proceeds from the sale of the portion of the property
encumbered thereby. If the Company and the Partnership default in the payment
of the Mortgage Notes or any other obligation under the Mortgages, and the
Mortgage Note Trustee elects to foreclose under the Mortgages, the Mortgage
Note Trustee will receive the proceeds of the sale of the collateral under the
Mortgage Note Indenture (the "Collateral") subject to the rights of the
holders of any Existing Senior Mortgages. The purchaser of the Collateral at
any such foreclosure sale would take title to the Collateral subject to, to
the extent not foreclosed upon, the Existing Senior Mortgages.
In addition to the Existing Senior Mortgages, the Partnership may,
under certain circumstances, borrow up to $25 million to pay for certain
expansion site costs which may be secured by a lien on the expansion site
superior to the lien of the Mortgages thereon.
-36-
The Partnership has financed or leased and from time to time will
finance or lease its acquisition of furniture, fixtures and equipment. The
lien in favor of any such lender or lessor may be superior to the liens of the
Mortgages.
ITEM 3. LEGAL PROCEEDINGS.
------ -----------------
The Partnership, its partners, certain members of its former Executive
Committee, and certain of its employees, have been involved in various legal
proceedings. In general, the Partnership has agreed to indemnify such persons
and entities against any and all losses, claims, damages, expenses (including
reasonable costs, disbursements and counsel fees) and liabilities (including
amounts paid or incurred in satisfaction of settlements, judgments, fines and
penalties) incurred by them in said legal proceedings. Such persons and
entities are vigorously defending the allegations against them and intend to
vigorously contest any future proceedings.
PENTHOUSE LITIGATION
On April 3, 1989, BPHC Acquisition, Inc. and BPHC Parking Corp.
(collectively, "BPHC") filed a third-party complaint (the "Complaint") against
the Partnership and Trump. The Complaint arose in connection with the action
entitled Boardwalk Properties, Inc. and Penthouse International Ltd. v. BPHC
Acquisition, Inc. and BPHC Parking Corp., which was instituted on March 20,
1989 in the New Jersey Superior Court, Chancery Division, Atlantic County.
The suit arose in connection with the conditional sale by Boardwalk
Properties, Inc. ("BPI") (or, with respect to certain of the property, BPI's
agreement to sell) to Trump of BPI's fee and leasehold interests in (i) the
Boardwalk Expansion Site, (ii) an approximately 4.2-acre parcel of land
located on Atlantic Avenue, diagonally across from Trump Plaza's parking
garage (the "Columbus Plaza Site") which was then owned by an entity in which
50% of the interests were each owned by BPHC and BPI and (iii) an additional
1,462-square foot parcel of land located within the area of the Boardwalk
Expansion Site (the "Bongiovanni Site"). Prior to BPI entering into its
agreement with Trump, BPI had entered into agreements with BPHC which
provided, among other things, for the sale to BPHC of the Boardwalk Expansion
Site, as well as BPI's interest in the Columbus Plaza Site, assuming that
certain contingencies were satisfied by a certain date. Additionally, by
agreement between BPHC and BPI, in the event BPHC failed to close on the
Boardwalk Expansion Site, BPHC would convey to BPI the Bongiovanni Site. Upon
BPHC's failure to close on the Boardwalk Expansion Site, BPI entered into its
agreement
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with Trump pursuant to which it sold the Boardwalk Expansion Site to Trump and
instituted a lawsuit against BPHC for specific performance to compel BPHC to
transfer to BPI, BPHC's interest in the Columbus Plaza and Bongiovanni Sites,
as provided for in the various agreements between BPHC and BPI and in the
agreement between BPI and Trump.
The Complaint alleges that the Partnership and/or Trump engaged in the
following activities: civil conspiracy, violations of the New Jersey
Antitrust Act, violations of the New Jersey RICO statute, malicious
interference with contractual relations, malicious interference with
prospective economic advantage, inducement to breach a fiduciary duty and
malicious abuse of process. The relief sought in the Complaint included,
among other things, compensatory damages, punitive damages, treble damages,
injunctive relief, the revocation of all of the Partnership's and Trump's
casino licenses, the revocation of the Partnership's current Certificate of
Partnership, the revocation of any other licenses or permits issued to the
Partnership and Trump by the State of New Jersey, and a declaration voiding
the conveyance by BPI to Trump of BPI's interest in the Boardwalk Expansion
Site as well as BPI's and/or Trump's rights to obtain title to the Columbus
Plaza Site.
The Partnership and Trump filed an answer denying all liability and
alleging that all of BPHC's claims are without merit. On November 9, 1990,
BPHC filed an application to amend its counterclaims against BPI and the
Complaint, which amendment sought to withdraw all of BPHC's affirmative claims
for equitable relief and thereby limit such claims to monetary damages. On
December 20, 1990, the Superior Court entered an Order permitting BPHC to
withdraw its affirmative demands for equitable relief.
Trial of the Penthouse litigation was bifurcated into issues of
liability and damages, with liability issues to be tried first. On March 25,
1993, after trial on issues of liability, the Superior Court rendered a
decision rejecting all of BPHC's claims in the Complaint. On October 13,
1993, the court entered a judgment dismissing with prejudice all claims
against Trump and the Partnership. On November 19, 1993, the Court entered an
Order confirming that the October 13, 1993 judgment in favor of Trump and the
Partnership was a final judgment. That Order was further confirmed by Order
of the Appellate Division entered March 3, 1994. A final judgment disposing
of all claims between BPI and BPHC was entered on May 10, 1994.
BPHC and BPI have settled all claims between them. BPHC is pursuing
its appeal as to Trump and the Partnership but only as to its claims of
interference with contract and prospective
-38-
economic advantage and of inducing BPI to breach its fiduciary duty to BPHC.
All other claims raised in BPHC's complaint as to Trump and the Partnership
and dismissed by the October 13, 1993 judgment have been finally determined in
favor of Trump and the Partnership. BPHC has filed its appeal brief, and
according to the briefing schedule currently in effect, the answering brief of
Trump and the Partnership is due to be filed April 20, 1995 and BPHC's reply
brief is due May 9, 1995.
On January 9, 1991, BPHC instituted suit against Trump, the
Partnership, BPI, Penthouse International Ltd. and Robert C. Guccione in the
United States District Court for the District of New Jersey. This action is
virtually identical to the state court action described above. The
Partnership and Trump filed an answer denying all liability and alleging that
all of BPHC's claims are without merit. In April 1993, the Partnership filed
a motion to dismiss certain claims based on the favorable decision in the
state court action. In May 1993, the court issued an order to show cause,
scheduling a hearing for June 1993 to determine whether certain claims of the
plaintiff's amended complaint should be dismissed with prejudice. On July 15,
1993, the court acted favorably on the Partnership's motion and dismissed the
action in its entirety. The order of dismissal was appealed to the United
States Court of Appeals for the Third Circuit. On April 20, 1994, that Court
affirmed the order of dismissal and, because the time within which to take any
further appeals has elapsed, the order of dismissal is final and unappealable.
OTHER LITIGATION
Various legal proceedings are now pending against the Partnership. The
Partnership considers all such proceedings to be ordinary litigation incident
to the character of its business and not material to its business or financial
condition. The majority of such claims are covered by liability insurance
(subject to applicable deductibles), and the Partnership believes that the
resolution of these claims, to the extent not covered by insurance, will not,
individually or in the aggregate, have a material adverse effect on the
financial condition or results of operations of the Partnership.
The Partnership is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. The Partnership believes that the final outcome of these
proceedings will not, either individually or in the aggregate, have a material
adverse effect on the Partnership or on the ability of the Partnership to
otherwise retain or renew any casino or other licenses required under the
Casino Control Act for the operation of Trump Plaza.
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ITEM 4. SUBMISSION OF MATTERS
------ TO A VOTE OF SECURITY HOLDERS.
-----------------------------
No matters were submitted by the Registrants to their security holders
for a vote during the fourth quarter of 1994.
-40-
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON
------ EQUITY AND RELATED STOCKHOLDER MATTERS.
--------------------------------------
(a) There is no established public trading market for the Company's
outstanding Common Stock.
(b) As of December 31, 1994, Trump was the sole holder of record of
the Company's Common Stock.
(c) The Company has not paid any cash dividends on its Common Stock.
The Mortgage Note Indenture restricts the ability of the Company and the
Partnership, and the PIK Note Indenture restricts the ability of the
Partnership, to declare or pay dividends and make other distributions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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ITEM 6. SELECTED FINANCIAL DATA.
------ -----------------------
SELECTED FINANCIAL INFORMATION
The following table sets forth historical financial information of the
Partnership for each of the five years ended December 31, 1994. This
information should be read in conjunction with the financial statements of the
Partnership and related notes included elsewhere in this Report and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Year Ended December 31,
------------------------------------------------------
1994 1993 1992 1991 1990
---------- --------- --------- --------- ---------
STATEMENTS OF OPERATIONS DATA: (dollars in thousands)
Revenues:
Gaming............................... $261,451 $264,081 $265,448 $233,265 $276,932
Other................................ 66,869 69,203 73,270 66,411 87,286
Trump Regency........................ -- -- 9,465 11,547 --
-------- -------- -------- -------- --------
Gross revenues..................... 328,320 333,284 348,183 311,223 364,218
Promotional allowances............... 33,257 32,793 34,865 31,539 44,281
-------- -------- -------- -------- --------
Net revenues......................... 295,063 300,491 313,318 279,684 319,937
Costs and expenses:
Gaming............................... 139,540 136,895 146,328 133,547 178,356
Other................................ 23,380 24,778 23,670 23,404 26,331
General and administrative........... 73,075 71,624 75,459 69,631 76,057
Depreciation and amortization........ 15,653 17,554 15,842 16,193 16,725
Restructuring costs.................. -- -- 5,177 943 --
Trump Regency........................ -- -- 11,839 19,879 3,359
-------- -------- -------- -------- --------
251,648 250,851 278,315 263,597 300,828
-------- -------- -------- -------- --------
Income from operations............... 43,415 49,640 35,003 16,087 19,109
-------- -------- -------- -------- --------
Net interest expense................... 48,219 39,889 31,356 33,363 33,128
Extraordinary (loss) gain.............. - 4,120 (38,205) -- --
Net income (loss) (1).................. $ (8,870) 9,338 (35,787) (29,230) (10,591)
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 11,144 $ 14,393 $ 18,802 $ 10,474 $ 10,005
Property and equipment - net........... 298,354 293,141 300,266 306,834 316,595
Total assets........................... 375,643 374,498 370,349 378,398 395,775
Total long-term debt - net of current
maturities (2)......................... 403,214 395,948 249,723 33,326 247,048
Preferred Partnership Interest......... -- -- 58,092 -- --
Total capital (deficit)................ (63,580) (54,710) 11,362 54,043 83,273
----------------------------
(1) Net loss for the year ended December 31, 1990 includes income of $2.4
million resulting from the settlement of a lawsuit relating to a boxing
match. Net loss for the year ended December 31, 1991 includes a $10.9
million charge associated with rejection of the Regency Lease and $4.0
million of costs associated with certain litigation. Net loss for 1992
includes $1.5 million of costs associated with certain litigation. Net
income (loss) for 1994 and 1993 includes $4.9 and $3.9 million,
respectively, of costs associated with the Boardwalk Expansion Site.
(2) Long-term debt of $225 million at December 31, 1991 had been classified as
a current liability.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
---------------------------------------------
GENERAL
The Company was incorporated on March 14, 1986 as a New Jersey
Corporation, and was originally formed solely to raise funds through the
issuance and sale of its debt securities for the benefit of the Partnership.
The Partnership experienced liquidity problems that culminated in the
Restructuring in May 1992, where, as part of a prepackaged plan of
reorganization under chapter 11 of the U.S. Bankruptcy Code consummated on May
29, 1992, the Company became a partner of the Partnership and issued
approximately three million Stock Units, each comprised of one share of
Preferred Stock and one share of Common Stock. On June 25, 1993 the Company
issued and the Partnership guaranteed $330,000,000 of Mortgage Notes (for net
proceeds of $325,687,000) and Holding, issued 12,000 Units consisting of an
aggregate of $60,000,000 of PIK Notes, together with Warrants to acquire an
additional $12,000,000 of PIK Notes at no additional cost. Holding has no
other assets or business other than its 99% equity interest in the
Partnership. The Company owns the remaining 1% interest in the Partnership.
The combined proceeds of the Offerings, together with cash on hand, were used
substantially as follows: (i) $225.0 million of such proceeds were used to
repay the Partnership's Promissory Note to the Company in the principal amount
of $225.0 million, which proceeds were then used by the Company to redeem the
Bonds; (ii) $12.0 million was used to repay the Regency Note (see "Item 13.
Certain Relationships and Related Transactions -- Trump Regency"); (iii) $40.0
million was distributed to the Company (which used such funds, together with
$35.0 million from the Units Offering distributed to Trump and paid to the
Company, to redeem its Stock Units); (iv) approximately $17.3 million was used
to pay the expenses incurred in connection with the Offerings; and (v)
approximately $52.5 million was used to make the Special Distribution to
Trump, which was used by Trump primarily to pay certain personal indebtedness.
No portion of the net proceeds was retained by Holding, the Company or the
Partnership for working capital purposes.
Results of operations of the Partnership through December 31, 1992 were
affected by the Restructuring, which resulted in an extraordinary loss of
$38.2 million for the year ended December 31, 1992. The Partnership's
business is highly competitive, and any future expansions by the Mashantucket
Pequot Nation or new gaming ventures by other Native American tribes or other
persons in the northeastern or mid-Atlantic region of the United States could
have a material adverse effect on the Trump Plaza's future financial condition
and results of operations. In addition, casino gaming is already permitted in
a number of other
-43-
jurisdictions. Increased competition in the casino gaming industry generally
could have a materially adverse impact on the Partnership as it seeks to
expand into new jurisdictions.
In August 1990, the Partnership entered into a triple net lease with an
affiliate pursuant to which the Partnership began operating the Trump Regency
as a non-casino hotel. From August 1990 to September 1992, losses attributable
to the Trump Regency aggregating approximately $14.1 million adversely
affected the results of operations of the Partnership. Pursuant to the
Restructuring, the Partnership ceased operating the Trump Regency as of
September 30, 1992. Subsequent to September 30, 1992, revenues and expenses of
Trump Regency are not included in the Partnership's results of operations.
The financial information presented below reflects the results of
operations of the Partnership. Since the Company and Holding have no business
operations other than their interest in the Partnership, their results of
operations are not discussed below.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Gaming revenues were $261.5 million for the year ended December 31,
1994, a decrease of $2.6 million or 1.0% from gaming revenues of $264.1
million for 1993, although revenues increased for the industry generally in
Atlantic City for the year ended 1994 compared to the year ended 1993. This
decrease in gaming revenues consisted of a reduction in both table games and
slot revenues. These results were impacted by a number of major ice and snow
storms throughout the northeastern United States, during the three months
ended March 31, 1994, which severely restricted travel in the region. Bad
weather also impacted the Atlantic City markets' results for the three months
ended March 31, 1993; however, the weather during the comparable period in
1994 was much more severe. The decrease in gaming revenues was also due in
part to disruptions caused by an expansion of the casino floor which created
inefficiencies in the operation of the casino floor by temporarily disrupting
the normal flow of patrons upon entrance to the casino, as well as detracting
from the overall appearance of the casino floor. Also, in 1994 Trump Plaza
experienced turnover of certain key management positions which had a negative
impact on operations. This negative impact was mitigated toward the end of
1994 as new management was hired and began implementing new policies and
marketing programs.
Slot revenues were $168.7 million for the year ended December 31, 1994,
a decrease of $1.8 million or 1.1%, from slot revenues of $170.5 million in
1993. This decrease was due in part to the sensitivity of slot revenues to
certain of the factors specified in the foregoing paragraph. The Partnership
-44-
elected to discontinue certain progressive slot programs, thereby reversing
certain accruals into revenue which had the effect of improving slot revenue
by $0.6 million for the year ended December 31, 1994.
Table games revenues were $92.8 million for the year ended December 31,
1994, a decrease of $0.8 million or 0.9% from table games revenues of $93.6
million in 1993. This decrease was primarily due to a reduction in table
games drop (i.e., the dollar value of chips purchased) by $26.7 million or
4.3% for the year ended December 31, 1994 from 1993, offset by an increase in
the table game hold percentage to 15.5% (the percentage of table drop retained
by the Partnership) for the year ended December 31, 1994 from 14.9% in 1993.
During the year ended December 31, 1994, gaming credit extended to
customers was approximately 17% of overall table play. At December 31, 1994,
gaming receivables amounted to approximately $13.7 million, with allowances
for doubtful gaming receivables of approximately $8.5 million.
Other revenues were $66.9 million for the year ended December 31, 1994,
a decrease of $2.3 million or 3.3%, from other revenues of $69.2 million in
1993. Other revenues include revenues from rooms, food and beverage and
miscellaneous items. This decrease in other revenues primarily reflects
decreases in food and beverage revenue resulting from changes in bus
couponing.
Promotional allowances were $33.3 million for the year ended December
31, 1994, an increase of $0.5 million or 1.5%, from $32.8 million in 1993.
This increase is attributable to increased marketing and promotional
activities.
Gaming costs and expenses were $139.5 million for the year ended
December 31, 1994, an increase of $2.6 million, or 1.9%, from gaming costs and
expenses of $136.9 million in 1993. This increase was primarily due to
increased marketing costs attributable to an expanded marketing program that
was instituted toward the end of 1994. The marketing programs consisted of
increased bus programs and direct marketing activities. The increase in
marketing costs was offset by decreased gaming taxes associated with the
decreased levels of gaming activity.
General and administrative expenses of $73.1 for the year ended
December 31, 1994 increased $1.5 million or 2.1% from $71.6 million in 1993.
This increase resulted primarily from $1.1 million in cash associated with
donations to the CRDA for the year ended December 31, 1994.
-45-
Income from operations was $43.4 million for the year ended December
31, 1994, a decrease of $6.2 million or 12.5% from income from operations of
$49.6 million for 1993.
Net interest expense was $48.2 million for the year ended December 31,
1994, an increase of $8.3 million, or 20.8% from net interest expense of $39.9
million in 1993. This increase is primarily attributable to increased
interest expenses associated with the Mortgage Notes and PIK Notes which were
outstanding for all of 1994.
Other non-operating expense was $4.9 million (including $3.1 million of
leasing costs) for the year ended December 31, 1994, an increase of $1.0
million or 25.6% from other non-operating expense of $3.9 million (including
$0.8 million of leasing costs) in 1993. This increase is directly attributable
to twelve months of costs associated with the Boardwalk Expansion Site. See
"Note 6 to the Financial Statements --Commitments and Contingencies -- The
Boardwalk Expansion Site."
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Gaming revenues were $264.1 million for the year ended December 31,
1993, a decrease of $1.4 million or 0.5% from gaming revenues of $265.4
million in 1992. This decrease in gaming revenues consisted of a reduction in
table games revenues, which was partially offset by an increase in slot
revenues. These results were impacted by major snow storms during February
and March, which severely restricted travel in the region. The decrease in
revenues was also attributable, in part, to the revenues derived from "high
roller" patrons from the Far East during 1992, which did not recur in 1993,
due in part to the decision to de-emphasize marketing efforts directed at
"high roller" patrons from the Far East and also to the effects of the adverse
economic conditions in that region.
Slot revenues were $170.5 million for the year ended December 31, 1993,
an increase of $1.0 million or 0.6%, from slot revenues of $169.5 million in
1992. The Partnership elected to discontinue certain progressive slot jackpot
programs thereby reversing certain accruals into revenues which had the effect
of improving slot revenue by $4.1 million for the year ended December 31,
1992. Excluding the aforementioned adjustment, slot revenues would have
resulted in a $5.0 million or 3.0% improvement over 1992. The Partnership
believes that its improvement in slot revenues reflects its intensified slot
marketing efforts directed towards patrons who tend to wager more
-46-
per slot play and general growth in the industry. See "Business -- Narrative
Description of Business -- Business Strategy."
Table games revenues were $93.6 million for the year ended December 31,
1993, a decrease of $2.3 million or 2.4% from table games revenues of $95.9
million in 1992. This decrease was primarily due to a reduction in table
games drop (i.e., the dollar value of chips purchased) by 9.2% for the year
ended December 31, 1993 from 1992, offset by an increase in the table games
hold percentage to 14.9% (the percentage of table drop retained by the
Partnership) for the year ended December 31, 1993 from 13.9% in 1992. The
reduction in table game drop was due to the large dollar amounts wagered
during 1992 by certain foreign customers.
During the year ended December 31, 1993, gaming credit extended to
customers was approximately 18.0% of overall table play. At December 31,
1993, gaming receivables amounted to approximately $16.0 million, with
allowances for doubtful gaming receivables of approximately $10.4 million.
Other revenues were $69.2 million for the year ended December 31,
1993, a decrease of $4.1 million or 5.6%, from other revenues (excluding
revenues from Trump Regency) of $73.3 million in 1992. Other revenues include
revenues from rooms, food and beverage and miscellaneous items. The decrease
in other revenues primarily reflects a $2.1 million adjustment to the
outstanding gaming chip liability in 1992, (this amount had been offset in
gaming cost and expenses with a specific reserve provision for casino
uncollectible accounts receivable) as well as decreases in food and beverage
revenues attendant to reduced levels of gaming activity, and reduced
promotional allowances.
Promotional allowances were $32.8 million for the year ended December
31, 1993, a decrease of $2.1 million or 5.9%, from promotional allowances of
$34.9 million in 1992. This decrease is primarily attributable to a reduction
in table gaming activity as well as the Partnership's focusing its marketing
efforts during the period towards patrons who tend to wager more frequently
and in larger denominations.
Gaming costs and expenses were $136.9 million for the year ended
December 31, 1993, a decrease of $9.4 million, or 6.4%, from gaming costs and
expenses of $146.3 million in 1992. This decrease was primarily due to a $4.8
million decrease in gaming bad debt expense as well as decreased promotional
and operating expenses and taxes associated with decreased levels of gaming
activity and revenues from 1992.
-47-
Other costs and expenses were $24.8 million for the year ended December
31, 1993 an increase of $1.1 million or 4.7%, from other costs and expenses of
$23.7 million in 1992.
General and administrative expenses were $71.6 million for the year
ended December 31, 1993, a decrease of $3.8 million, or 5.1%, from general and
administrative expenses of $75.5 million in 1992. This decrease resulted
primarily from a $2.4 million real estate tax charge resulting from a
reassessment by local authorities of prior years' property values incurred
during 1992 and overall cost reductions related to cost containment efforts.
Income from operations was $49.6 million for the year ended December
31, 1993, an increase of $7.0 million or 16.4% from income from operations
(excluding the operations of Trump Regency and before restructuring costs) of
$42.6 million for 1992. In addition to the items described above, 1993 costs
and expenses were lower as a result of the absence of the Restructuring costs
and the expenses associated with the Trump Regency which were incurred in
1992.
Net interest expense was $39.9 million for the year ended December 31,
1993, an increase of $8.5 million, or 27.2% from net interest expense of $31.4
million in 1992. This is attributable to the interest expense associated with
the Offerings.
Other non-operating expenses were $3.9 million for the year ended
December 31, 1993, an increase of $2.4 million or 164.9% from non-operating
expense of $1.5 million in 1992. This increase is directly attributable to
costs associated with the Boardwalk Expansion Site. See "Note 6 to the
Financial Statements -- Commitments and Contingencies -- The Boardwalk
Expansion Site."
The Offerings resulted in an extraordinary gain of $4.1 million for the
year ended December 31, 1993, which reflects the excess of carrying value of
the Regency Hotel obligation over the amount of the settlement payment, net of
related prepaid expenses. The Restructuring resulted in an extraordinary loss
of $38.2 million for the year ended December 31, 1992 consisting of the
effects of stating the Bonds and Preferred Stock issued at fair value and the
write off of certain deferred financing charges and costs.
LIQUIDITY AND CAPITAL RESOURCES
THE PARTNERSHIP. Cash flow from operating activities is the
Partnership's principal source of liquidity. For the year ended December 31,
1994, net cash from operating activities was $20.0 million. The decrease of
$2.0 million in net cash provided
-48-
by operating activities as compared to the comparable period in 1993 reflects
reduced income from operations and interest on the Mortgage Notes, which were
outstanding for all of 1994.
Capital expenditures of $20.5 million for the year ended December 31,
1994 increased approximately $10.4 million from 1993 and was primarily
attributable to the casino expansion, purchase of additional slot machines,
construction of the new baccarat pit for Trump Plaza and refurbishing costs
associated with the Boardwalk Expansion Site. These expenditures were
financed from funds generated from operations. Management believes that funds
from operations will be sufficient to complete the development of the
Boardwalk Expansion Site. Additional borrowings will be necessary to exercise
the Boardwalk Expansion Site Purchase Option. Capital expenditures for 1993
and 1992 were $10.1 million and $8.6 million, respectively. Previously, the
Partnership made significant capital expenditures which concentrated on the
renovation of the casino floor and certain restaurants, hotel rooms and the
hotel lobby. See "Business --Narrative Description of Business -- Facilities
and Amenities."
Current maturities of long-term debt were $3.0 million and $1.6
million, as of December 1994 and December 1993, respectively. Management
believes that this debt will be paid by cash from operating activities.
At December 31, 1994, the Partnership had a combined working capital
deficit totalling $6.0 million, compared to a working capital deficit of $1.5
million at December 31, 1993.
In 1993, the Partnership received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at the Boardwalk
Expansion Site. As part of an expansion, management has determined to
renovate rooms at the Boardwalk Expansion Site. As a result of such
expansion, the Partnership will be permitted to increase Trump Plaza's casino
floor space to 90,000 square feet. The Partnership added approximately 9,000
square feet in April 1994, 1,000 square feet in July 1994 and 3,000 square
feet in December 1994. At December 31, 1994, the total casino floor space
was 73,000 square feet. See "Business -- Narrative Description of Business --
Expansion Sites -- Boardwalk Expansion Site."
The Partnership currently leases one parcel and subleases the other
parcel which together comprise the Boardwalk Expansion Site. Pursuant to the
Boardwalk Expansion Site Purchase Option, which expires on June 30, 1998, the
Partnership may purchase both the fee and leasehold interests in the Boardwalk
Expansion Site. Until such time as the Boardwalk Expansion Site Purchase
Option is exercised or expires, the Partnership will be obligated to pay the
net expenses associated with the Boardwalk Expansion Site, including, without
limitation, current real estate taxes (approximately $1.2 million per year
based upon current assessed valuation) and annual lease payments of $3.1
million per year. See "Business -- Narrative Description of Business --
Expansion Sites -- Boardwalk Expansion Site."
-49-
As of December 31, 1994, the Partnership had capitalized approximately
$11.7 million in construction costs related to the Boardwalk Expansion Site
including a $1 million consulting fee paid to Trump. The Partnership's ability
to acquire the Boardwalk Expansion Site pursuant to the Boardwalk Expansion
Site Purchase Option is dependent upon its ability to obtain financing to
acquire the property and is subject to the approval of the CCC. See "Business
--Narrative Description of Business--Expansion Sites--Boardwalk Expansion
Site" and "Business--Narrative Description of Business--Gaming and Other Laws
and Regulations."
Pursuant to the terms of a Services Agreement (as defined) with TPM (as
defined), in consideration for services provided, the Partnership pays TPM
each year an annual fee of $1.0 million in equal monthly installments, and
reimburses TPM on a monthly basis for all reasonable out-of-pocket expenses
incurred by TPM in performing its obligations under the Services Agreement, up
to certain amounts. Under the Services Agreement, approximately $1.3 million
and $1.2 million were charged to expense for the years ended December 31, 1994
and 1993, respectively.
The Mortgage Note Indenture restricts the ability of the Company and
the Partnership, and the PIK Note Indenture restricts the ability of the
Partnership to declare or pay dividends and make distributions to its
partners, including restrictions relating to the achievement of certain
financial ratios. Subject to the satisfaction of these restrictions, the
Partnership may make distributions to its partners with respect to their
Partnership interests. Neither the Company nor Holding has an available bank
line of credit as of the date hereof.
THE COMPANY. The Company's sole source of liquidity is, and will be,
payments made by the Partnership in respect of the Partnership Note securing
the Company's indebtedness, and distributions from the Partnership, if any, in
respect of its Partnership interest.
HOLDING. Holding has no business operations other than that associated
with holding its partnership interest in the Partnership and as issuer of the
PIK Notes and Warrants. Holding's sole source of liquidity is from
distributions in respect of its interest in the Partnership. Prior to the
Units Offering, Holding did not have any long-term or short-term indebtedness;
upon consummation of the Units Offering on June 25, 1993, Holding issued $72.0
million of indebtedness comprised of $60.0 million of PIK Notes and $12.0
million of deferred warrant obligations. Holding's indebtedness will increase
upon exercise of the Warrants and upon the issuance of additional PIK Notes in
lieu of cash interest paid on the PIK Notes. As of December 31, 1994, the
Partnership issued, in lieu of cash, a total of
-50-
$11,756,000 in PIK Notes to satisfy its semi-annual PIK Note interest
obligations.
SEASONALITY
The gaming industry in Atlantic city is seasonal, with the heaviest
activity at Trump Plaza occurring during the period from May through
September. Consequently, the Partnership's operating results during the two
quarters ending in March and December would not likely be as profitable as the
two quarters ending in June and September.
INFLATION
There was no significant impact on the Partnership's operations as a
result of inflation during 1994, 1993 and 1992.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
------ -------------------------------------------
An index to the financial statements and required financial statement
schedules is set forth at Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING
------ AND FINANCIAL DISCLOSURE.
------------------------
None.
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PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
------- --------------------------------
MANAGEMENT
Prior to the merger of TP/GP into the Company, management of the
affairs of the Partnership was vested in TP/GP. As of June 18, 1993, the date
of such merger, the Company became the managing partner of the Partnership.
As of such date, the Company was granted full authority to do all things
deemed necessary or desirable of the operations, business and affairs of the
Partnership.
As currently constituted, the Board of Directors of each of the Company
and Holding consists of Messrs. Trump, Nicholas L. Ribis, Wallace B. Askins
and Don M. Thomas. In addition, Holding Inc. acts as the managing partner of
Holding. Trump is currently the sole beneficial owner of the Partnership, the
Company, Holding and Holding Inc.
Pursuant to the PIK Note Indenture and the Mortgage Note Indenture, the
Company and Holding Inc. are each required to have at least two Independent
Directors (as such term is defined by the American Stock Exchange, Inc.). The
prior approval of the majority of the Company's Independent Directors will be
required before the Partnership can engage in certain affiliate transactions.
Set forth below, are the names, ages, positions and offices held with
the Company, Holding and the Partnership and a brief account of the business
experience during the past five years of each member of the Board of Directors
and the executive officers of the Company, Holding and the Partnership.
Donald J. Trump - Mr. Trump, 48 years old, is Chairman of the Board of
Directors, President and Treasurer of the Company, the managing general
partner of the Partnership. Trump was a 50% shareholder, Chairman of the
Board of Directors, President and Treasurer of TP/GP, the managing general
partner of the Partnership prior to its merger into the Company in June 1993.
Trump was Chairman of the Executive Committee and President of the Partnership
from May 1986 to May 1992 and was a general partner of the Partnership until
June 1993. Trump has been a director and President of Holding Inc. and a
partner in Holding since February 1993. Trump has been Chairman of the Board
of Partner Representatives of Trump's Castle Associates, the partnership that
owns Trump's Castle ("TCA"), since May 1992; and was Chairman of the Executive
Committee of TCA from June 1985 to May 1992. In addition, Trump is the
managing general partner of TCA. Trump was Chairman of the Executive Committee
of Trump
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Taj Mahal Associates, the Partnership that owns the Taj Mahal ("TTMA") from
June 1988 to October 1991; and has been Chairman of the Board of Directors of
the managing general partner of TTMA since October 1991; President and sole
director of Trump Boardwalk Realty Corp. since May 1986; and President of the
Trump Organization, which has been in the business, through its affiliates and
subsidiaries, of acquiring, developing and managing real estate properties for
more than the past five years. Trump was a member of the board of directors
of Alexander's Inc. from 1987 to March 1992.
Nicholas L. Ribis - Mr. Ribis, 50 years old, has been the Chief
Executive Officer of the Partnership since February 1991 and a member of the
Executive Committee of the Partnership from April 1991 to May 29, 1992 and was
a director and Vice President of TP/GP from May 1992 until its merger into the
Company in June 1993. Mr. Ribis has been Vice President of the Company since
February 1995 and Vice President of Holding Inc. since February 1995. Mr.
Ribis serves as the Chairman of the Atlantic City Casino Association. He has
also been Chief Executive Officer of TCA and TTMA since March 1991; member of
the executive committee of TCA from April 1991 to May 1992; member of the
Board of Partner Representatives of TCA since May 1992; member of the
executive committee of TTMA from April 1991 to October 1991; and member of the
board of directors of the managing general partner of TTMA since October 1991.
From January 1980 to January 1991, Mr. Ribis was Senior Partner in, and since
February 1991, is Counsel to, the law firm of Ribis, Graham & Curtin, which
serves as New Jersey legal counsel to all of the above-named companies, and
certain of their affiliated entities, including the Company.
Barry J. Cregan - Mr. Cregan, 41 years old, has been Chief Operating
Officer of the Partnership since September 19, 1994. Since February 21, 1995,
Mr. Cregan has been Vice President of the Company and Holding Inc. Prior to
accepting these positions, from April 1992 to September 1994, Mr. Cregan was
President of The Plaza Hotel in New York. From March 1991 to April 1992, he
was Vice President of Hotel Operations at Trump's Castle in Atlantic City.
From June 1989 until March 1991, Mr. Cregan was an executive with Hyatt.
Wallace B. Askins - Mr. Askins, 64 years old, has been a director of
the Company and Holding Inc. since April 11, 1994, and has been a partner
representative of the Board of Partner Representatives of Trump's Castle
Associates since May 1992. Mr. Askins served as a director of TC/GP from May
1992 to December 1993. From 1987 to November 1992, Mr. Askins served as
Executive Vice President, Chief Financial Officer and as a director of Armco
Inc. Mr. Askins also serves as a director of EnviroSource, Inc.
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Don M. Thomas - Mr. Thomas, 63 years old, has been the Senior Vice
President of Corporate Affairs of the Pepsi-Cola Bottling Co. of New York
since January 1985. Mr. Thomas was the Acting Chairman, and a Commissioner,
of the CRDA from 1985 through 1987, and a Commissioner of the CCC from 1980
through 1984. From 1974 through 1980, Mr. Thomas served as Vice President,
General Counsel of the National Urban League. From 1966 through 1974, Mr.
Thomas served in various capacities with Chrysler Corporation rising to the
level of President-Auto Dealerships. Mr. Thomas was an attorney with American
Airlines from 1957 through 1966. Mr. Thomas was a director of TP/GP until its
merger into the Company in June 1993 and has been a director of the Company
since June 1993. Mr. Thomas is an attorney licensed to practice law in the
State of New York.
Francis X. McCarthy, Jr. - Mr. McCarthy, 42 years old, was Vice
President of Finance and Accounting of TP/GP from October 1992 until June
1993, the date of TP/GP's merger into the Company, has been Executive Vice
President, Finance Administration since June 1994 and was Senior Vice
President of Finance and Administration of the Partnership from August 1990 to
June 1994; Chief Accounting Officer of the Company since May 1992; Vice
President and Chief Financial Officer of the Company since July 1992 and
Assistant Treasurer of the Company since March 1991. Mr. McCarthy previously
served in a variety of financial positions for Greater-Bay Hotel and Casino,
Inc. from June 1980 through August 1990.
John P. Burke - Mr. Burke, 47 years old, has been corporate treasurer
of the Partnership since October 1991; corporate treasurer of TCA since
October 1991; Vice President of The Trump Organization since September 1990;
and member of the board of directors of TTMA since October 1991. Mr. Burke
was an Executive Vice President and Chief Administrative Officer of Imperial
Corporation of America from April 1989 through September 1990. From May 1980
through April 1989, Mr. Burke was Executive Vice President and Chief Financial
Officer of Tamco Enterprises, Inc.
Robert M. Pickus - Mr. Pickus, 40 years old, has been the Executive
Vice President of Corporate and Legal Affairs of the Partnership since
February 16, 1995. From December 1993 to February 1995, Mr. Pickus was the
Senior Vice President and General Counsel of the Partnership and, since April
1994, he has been the Vice President and Assistant Secretary of the Company
and Assistant Secretary of Holding Inc. He was the Senior Vice President and
Secretary of Trump's Castle Funding, Inc. from June 1988 until December 1993
and General Counsel of TCA from June 1985 to June 1988. Mr. Pickus was also
Secretary of Trump's
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Castle Hotel & Casino, Inc., an entity beneficially owned by Trump, from
October 1991 until December 1993.
Fred A. Buro - Mr. Buro, 38 years old, has been the Senior Vice
President of Marketing of the Partnership since May 1994. Mr. Buro previously
served as the President of Casino Resources, Inc., a casino marketing,
management and development organization from 1991 through 1994. Prior to
that, Mr. Buro served from 1984 through 1991 as the President of a
professional services consulting firm.
James A. Rigot - Mr. Rigot, 43 years old, has been Executive Vice
President of Casino Operations of the Partnership since November 1994. Mr.
Rigot served as Vice President of Casino Operations of TropWorld Casino and
Entertainment Resort from July 1989 through November 1994. From January 1989
through July 1989, Mr. Rigot was Assistant Casino Manager of Resorts Casino
Hotel. Mr. Rigot also served as Executive Host of the Partnership from
September 1983 through January 1989 and as a Pit Boss at Harrah's Hotel Casino
(in Atlantic City) from October 1980 through September 1983.
Kevin S. Smith - Mr. Smith, 38 years old, has been the Vice President,
General Counsel of the Partnership since February 1995. From February 1992 to
February 1995 Mr. Smith was associated with Cooper Perskie April Niedelman
Wagenheim & Levenson, an Atlantic City law firm specializing in trial
litigation as a certified criminal trial attorney by the New Jersey Supreme
Court. From 1989 until February 1992, Mr. Smith handled criminal trial
litigation for the State of New Jersey, Department of Public Defender,
assigned to the Cape May and Atlantic County Conflict Unit.
Shinji Tanaka - Mr. Tanaka, 47 years old, has been Executive Vice
President of Hotel Operations of the Partnership since January 1995 and was
Vice President of Hotel Operations and Food & Beverage of the Partnership from
June 1994 to January 1995. Mr. Tanaka was Director of Hotel and Food and
Beverage Operations at TropWorld Casino and Entertainment Resort from August
1986 through February 1994. Mr. Tanaka also held various management positions
with Hilton Hotels, including the Waldorf-Astoria and Capitol Hilton, from
1973 through October 1985.
All of the persons listed above have been qualified or licensed by the
CCC.
The employees of the Partnership serve at the pleasure of the Company,
the managing general partner of the Partnership, subject to any contractual
rights contained in any employment agreement. The officers of the Company
serve at the pleasure of the Board of Directors of the Company. The officers
of Holding Inc. serve at the pleasure of the board of directors of that
company.
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Donald J. Trump and Nicholas L. Ribis served as either executive
officers and/or directors of TTMA and its affiliated entities when such
parties filed their petition for reorganization under chapter 11 of the
Bankruptcy Code on July 17, 1991. The Second Amended Joint Plan of
Reorganization of such parties was confirmed on August 28, 1991, and was
declared effective on October 4, 1991. Donald J. Trump, Nicholas L. Ribis,
Robert M. Pickus and John P. Burke also served as Executive Committee members,
officers, and/or directors of TCA and its affiliated entities, at the time
such parties filed a petition for reorganization under chapter 11 of the
Bankruptcy Code on March 9, 1992. The First Amended Joint Plan of
Reorganization of such parties was confirmed on May 5, 1992, and declared
effective on May 29, 1992. Donald J. Trump, Nicholas L. Ribis and John P.
Burke served as either executive officers and/or directors of the Partnership
and its affiliated entities when such parties filed their petition for
reorganization under chapter 11 of the Bankruptcy Code in March 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
April 30, 1992, and was declared effective on May 29, 1992. Trump was a
partner of Plaza Operating Partners Ltd. when it filed a petition for
reorganization under chapter 11 of the Bankruptcy Code on November 2, 1992.
The plan of reorganization for Plaza Operating Partners Ltd. was confirmed on
December 11, 1992 and declared effective in January 1993. John P. Burke was
Executive Vice President and Chief Administrative Officer of Imperial
Corporation of America ("Imperial"), a thrift holding company whose major
subsidiary, Imperial Savings, was seized by the Resolution Trust Corporation
in February 1990. Subsequently, in February 1990, Imperial filed a petition
for reorganization under chapter 11 of the Bankruptcy Code.
ITEM 11. EXECUTIVE COMPENSATION.
------- ----------------------
COMPENSATION
Holding, the Company and the Partnership do not offer their executive
officers stock option or stock appreciation right plans, long-term incentive
plans or defined benefit pension plans.
The following table sets forth compensation paid or accrued during the
years ended December 31, 1994, 1993 and 1992 to the Chief Executive Officer,
each of the four most highly compensated executive officers of the Partnership
whose cash compensation, including bonuses and deferred compensation, exceeded
$100,000 for the year ended December 31, 1994 and two additional individuals
whose employment with the Company terminated in 1994.
-56-
Executive Officers of the Company do not receive any additional compensation
for serving in such capacity. Compensation accrued during one year and paid
in another is recorded under the year of accrual. Information relating to
long-term compensation is inapplicable and has therefore been omitted from the
table.
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Summary Compensation Table
Other
Annual
Name and Compen- All Other
Principal Position Year Salary Bonus sation(1) Compensation(2)
---------------------------- ---- ----------- ----------- ---------- -----------------
Nicholas L. Ribis (3)....... 1994 $572,917 $250,000 $280,407 $ --
Chief Executive Officer 1993 225,000 250,000 380,500 --
1992 300,000 300,000 256,000 --
Francis X. McCarthy, Jr..... 1994 $201,894 $ 42,500 -- $ 3,139
Executive Vice President 1993 189,069 90,000 -- 3,781
Finance and 1992 170,618 50,000 -- 1,651
Administration
Barry J. Cregan (4)......... 1994 $153,945 -- -- --
Chief Operating
Officer
Robert M. Pickus (5)........ 1994 $163,759 $ 32,500 -- $ 3,291
Executive Vice 1993 5,808 $ -- -- --
President of
Corporate and
Legal Affairs
James A. Rigot (6).......... 1994 $ 13,461 $100,000 -- --
Executive Vice
President of
Casino Operations
Kevin DeSanctis (7)......... 1994 $200,769 $128,720 $ 4,000 $ 3,073
1993 559,753 178,000 118,000 4,497
1992 410,890 160,000 72,372 4,364
William Velardo (8)......... 1994 $84,807 $ -- -- $ 88,893
1993 187,607 75,000 -- 3,598
1992 170,216 50,000 -- 3,405
----------------
(1) Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for income taxes
and director's fees. Following SEC rules, perquisites and other personal
benefits are not included in this table if the aggregate amount of that
compensation is the lesser of either $50,000 or 10% of the total of salary and
bonus for that officer.
(2) Represents vested and unvested contributions made by the Partnership under
the Trump Plaza Hotel and Casino Retirement Savings Plan. Funds accumulated
for an employee, which consist of a certain percentage of the employee's
compensation plus Partnership contributions equalling 50% of the participant's
contributions, are retained until termination of employment, attainment of age
59 1/2 or financial hardship, at which time the employee may withdraw his or
her vested funds.
(3) Mr. Ribis devotes approximately one-third of his professional time to the
affairs of the Partnership. Mr. Ribis is also employed as the chief executive
officer of the Other Trump Casinos; his compensation from the Other Trump
Casinos is not included in the table.
(4) Mr. Cregan commenced employment with the Partnership in September 1994.
(5) Mr. Pickus commenced employment with the Partnership in December 1993.
(6) Mr. Rigot commenced employment with the Partnership in November 1994.
(7) Mr. DeSanctis, former President and Chief Operating Officer of Trump Plaza
resigned in March 1994.
(8) Mr. Velardo, former Vice President of Casino Operations of the
Partnership until March 1994 and Chief Operating Officer from March 1994 to
April 1994.
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EMPLOYMENT AGREEMENTS
The Partnership has an employment agreement with Nicholas L. Ribis
pursuant to which Mr. Ribis acts as Chief Executive Officer of the
Partnership. The agreement, which expires in September 1996, provides for an
annual salary of $550,000. The salary increases by ten percent for each of
the second and third years of the agreement. Upon execution of the employment
agreement, Mr. Ribis received a $250,000 signing bonus. In the event the
Partnership, or any entity which acquires substantially all of the equity
interests or assets of the Partnership, proposes to engage in an offering of
common shares to the public, the Partnership and Mr. Ribis have agreed to
negotiate new compensation arrangements which shall include equity
participation for Mr. Ribis. Mr. Ribis is also chief executive officer of
TTMA and TCA, the partnerships that own the Other Trump Casinos, and receives
compensation from such entities for such services. Mr. Ribis devotes
approximately one-third of his professional time to the affairs of the
Partnership. All other executive officers of the Partnership, except Mr.
Burke, devote substantially all of their time to the business of the
Partnership.
The Partnership and the Company have an employment agreement with Barry
J. Cregan (the "Cregan Agreement") pursuant to which Mr. Cregan acts as Chief
Operating Officer of the Partnership. The Cregan Agreement, which expires on
September 18, 1996, provides for an annual base salary of $600,000 during the
first year and an annual base salary of $700,000 during the second year. In
addition, Mr. Cregan has an option to extend the Cregan Agreement for one
additional year at an annual base salary of $750,000 during such third year of
employment. In addition to base salary, Mr. Cregan shall also receive certain
other benefits as provided for in the Cregan Agreement. Pursuant to the
Cregan Agreement, Mr. Cregan devotes all of his professional time to the
Partnership. In the event that the Partnership or the Company terminates Mr.
Cregan's employment for Cause (as defined in the Cregan Agreement), the
Partnership shall pay Mr. Cregan all compensation earned to the date of such
termination. In the event Mr. Cregan terminates the Cregan Agreement for Good
Cause (as defined therein), the Partnership shall pay Mr. Cregan all
compensation, reimbursements and benefits provided for therein (i) due as of
the date of such termination and (ii) payable under the Cregan Agreement from
such date of termination through the date of expiration.
The Partnership has an employment agreement with James A. Rigot (the
"Rigot Agreement") pursuant to which Mr. Rigot acts as Executive Vice
President of Casino Operations of the Partnership. The Rigot Agreement, which
expires on November 30, 1997, provides for a bonus of $100,000 upon
commencement of employment, an annual base salary of $250,000, with any bonus
and increases in
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salary provided in the Partnership's sole and absolute discretion, however, at
no time shall such salary be less than $250,000. In addition to salary, Mr.
Rigot shall also receive certain other benefits as provided for in the Rigot
Agreement. Pursuant to the Rigot Agreement, Mr. Rigot devotes all of his
professional time to the Partnership. In the event that the Partnership
terminates the Rigot Agreement (i) because Mr. Rigot's CCC license is
terminated or (ii) because Mr. Rigot has committed an act constituting Cause
(as defined therein), the Partnership shall pay to Mr. Rigot all compensation
earned to the date of such termination. In the event that the Partnership
terminates the Rigot Agreement for any other reason, the Partnership shall
offer to pay Mr. Rigot an amount equal to twelve months of Mr. Rigot's then
current salary, which offer, if accepted, will constitute complete
satisfaction of all obligations and liabilities arising out of the Rigot
Agreement.
The Partnership has an employment agreement with Kevin S. Smith, Esq.
(the "Smith Agreement") pursuant to which Mr. Smith acts as the Vice
President/General Counsel of the Partnership. The Smith Agreement, which
expires on February 9, 1998, provides for an annual base salary of $110,000,
with any bonus and increases in salary provided in the Partnership's sole and
absolute discretion. In addition to salary, Mr. Smith shall also receive
certain other benefits as provided for in the Smith Agreement. Pursuant to
the Smith Agreement, Mr. Smith devotes all of his professional time to the
Partnership. In the event that the Partnership or Mr. Smith terminates the
Smith Agreement, the Smith Agreement provides for various types of severance
compensation based on the circumstances surrounding the termination. The
severance compensation provided for in the Smith Agreement shall, in no case,
exceed one year's salary, including benefits.
The Partnership has a severance agreement with Robert M. Pickus, Esq.,
who is the Executive Vice President of Corporate and Legal Affairs of the
Partnership. The agreement provides that upon Mr. Pickus' termination other
than for cause (as defined in the severance agreement) or loss of his casino
key employee license from CCC, the Partnership will pay Mr. Pickus a severance
payment equal to the amount of his salary at its then current rate for a
period of one year, which is anticipated to be in excess of $150,000.
The Partnership had an employment agreement with Kevin DeSanctis,
former President and Chief Operating Officer of Trump Plaza. The agreement
was terminated upon the resignation of Mr. DeSanctis. Mr. DeSanctis received
$200,769 of salary and $128,720 in bonus in 1994.
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The Partnership had an employment agreement with Ernest E. East, Esq.,
former Senior Vice President of Administration and Corporate Affairs of the
Partnership. The agreement was terminated upon Mr. East's resignation in
August 1994. Mr. East received $101,407 of salary, and $156,000 in board fees
in 1994.
The Partnership had an employment agreement with William Velardo that
expired in March 1994. Mr. Velardo served as the Vice President of Casino
Operations of the Partnership until March 1994 and as the Chief Operating
Officer of the Partnership from March 1994 to April 1994. Mr. Velardo received
$173,700 of salary and severance payments in 1994.
All of the above agreements provide for discretionary bonuses and/or
signing bonuses.
COMPENSATION OF DIRECTORS
Each director of the Company, receives an annual fee of $50,000 and
$2,000 per meeting attended, plus reasonable out-of-pocket expenses incurred
in attending any meeting of the Board of Directors of the Company.
Each director of TP/GP, other than Trump, received an annual fee of
$50,000 and $2,000 per meeting attended, plus reasonable out-of-pocket
expenses incurred in attending any meeting of the board of directors of TP/GP.
In addition, each member of the TP/GP Audit Committee received a fee of $1,500
for each meeting attended. TP/GP, the former managing general partner of the
Partnership, was merged with and into the Company in June 1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Holding does not have a compensation committee and its officers serve
without separate compensation.
In general, the compensation of executive officers of the Partnership
is determined by the Board of Directors of the Company, composed of Donald J.
Trump, Nicholas L. Ribis, Wallace B. Askins and Don M. Thomas. The
compensation of Nicholas L. Ribis is set forth in his employment agreement
with the Partnership, pursuant to which the Partnership has delegated the
responsibility over certain matters, such as bonuses, to Trump. See "--
Employment Agreements." No officer or employee of Trump Plaza, other than Mr.
Ribis, who serves on the Board of Directors of the Company, participated in
the deliberations of the Board of Directors of the Company concerning
executive compensation. Executive officers of the Company do not receive any
additional compensation for serving in such capacity.
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The SEC requires registrants to disclose the existence of any other
corporation in which both (i) an executive officer of the registrant serves on
the board of directors and/or compensation committee, and (ii) a director of
the registrant serves as an executive officer. Messrs. Ribis and Burke,
executive officers of the Partnership, have served on the board of directors
of other entities in which members of the Board of Directors of the Company
(namely, Messrs. Trump and Ribis) served and continue to serve as
executive officers. Management believes that such relationships have not
affected the compensation decisions made by the Board of Directors of the
Company in the last fiscal year.
Messrs. Ribis and Burke serve on the board of directors of Taj Mahal
Holding Corp., which holds an indirect equity interest in TTMA, the
partnership that owns the Taj Mahal, of which Messrs. Trump and Ribis are
executive officers. Such persons also serve on the board of directors of
TM/GP Corporation (a subsidiary of Taj Mahal Holding Corp.), the managing
general partner of TTMA, of which Messrs. Trump and Ribis are executive
officers. Mr. Ribis is compensated by TTMA for his services as its chief
executive officer.
Mr. Ribis also serves on the board of directors of Trump Taj Mahal
Realty Corp. ("Taj Realty Corp."), which leases certain real property to TTMA,
of which Trump is an executive officer. Trump, however, does not receive any
compensation for serving as an executive officer of Taj Realty Corp. Mr.
Ribis receives compensation from TCA for acting as its chief executive
officer.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
------- BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------
Trump has owned 100% of the Common Stock since June 25, 1993. Trump
has sole voting and investment power regarding the Common Stock owned by him.
In connection with the PIK Note Offering which was consummated on June
25, 1993, TP/GP was merged with and into the Company, and the Company became
the managing general partner of the Partnership. Trump contributed his
interest in the Partnership to Holding, which is beneficially-owned by Trump.
Since such date, the Company and Holding have been the sole partners in the
Partnership.
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ITEM 13. CERTAIN RELATIONSHIPS
------- AND RELATED TRANSACTIONS.
------------------------
Although the Partnership has not fully considered all of the areas in
which it intends to engage in transactions with affiliates of the partners, it
is free to do so, subject to certain restrictions. Payments to affiliates in
connection with any such transactions are governed by the provisions of the
Mortgage Note Indenture and the PIK Note Indenture which generally require
that such transactions be on terms as favorable to the Partnership as would be
obtainable from an unaffiliated party, and requires the approval of a majority
of the Independent Directors of the Company for certain affiliated
transactions.
The Partnership has joint property insurance coverage with TCA, TTMA
and other entities affiliated with Trump for which the annual premium paid by
the Partnership was $247,000 for the twelve months ended May 1994.
The Partnership leased from TTMA certain office facilities located in
Pleasantville, New Jersey. In 1993 and 1992, lease payments by the
Partnership to TTMA totalled approximately $30,000 and $138,000, respectively.
Such lease terminated on March 19, 1993, and the Partnership vacated the
premises. Through February 1, 1993, the Partnership also leased from Trump
approximately 120 parking spaces at the Boardwalk Expansion Site for
approximately $5.50 per parking space per day, with payments under such
arrangement for the year ended December 31, 1993 and December 31, 1992
totalling $21,000 and $227,000, respectively.
The Partnership also leased portions of its warehouse facility located
in Egg Harbor Township, New Jersey to TCA until January 31, 1994; lease
payments by TCA to the Partnership totalled $6,000, $15,000 and $14,000 in
1994, 1993 and 1992, respectively.
Trump and Trump Boardwalk collectively own 100% of the interests in
Seashore Four. Seashore Four is the fee owner of a parcel of land
constituting a portion of the Casino Parcel, which it leases to the
Partnership pursuant to the SFA Lease, a long-term, triple-net lease.
Seashore Four was assigned the lessor's interest in the existing SFA Lease in
connection with its acquisition of fee title to such parcel from a non-
affiliated third party in November 1983. The SFA Lease was entered into by
the Partnership with such third party on an arm's-length basis. The
Partnership recorded rental expenses of approximately $900,000, $900,000 and
$900,000 in 1994, 1993 and 1992, respectively, concerning rent owed to
Seashore Four.
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Trump and Trump Seashore Associates, Inc. collectively own 100% of the
interests in Trump Seashore Associates ("Trump Seashore"). Trump Seashore is
the fee owner of a parcel of land constituting a portion of the Casino Parcel,
which it leases to the Partnership pursuant to the Trump Seashore Lease, a
long-term, triple-net lease. In July 1988, Trump Seashore exercised a $10
million option to purchase the fee title to such parcel from a non-affiliated
third party. In connection therewith, Trump Seashore was assigned the
lessors' interest in the Trump Seashore Lease, which interest has, however,
been transferred to UST. See "Properties." The Partnership paid rental
payments to Trump Seashore of approximately $1.0 million, $1.0 million and
$1.0 million in 1994, 1993 and 1992, respectively.
The Partnership has separately agreed to reimburse Trump for any
payments which he may make under (i) a note (the "Harrah's Note") for which
Trump and the Partnership are co-makers and which constitutes part of the
redemption price for Harrah's Atlantic City, Inc.'s ("HAC") prior interests in
the Partnership and Seashore Four, which were redeemed in 1986, pursuant to a
redemption agreement dated as of March 11, 1986 (the "Redemption Agreement");
and (ii) his or Trump Boardwalk's indemnity of HAC under the Redemption
Agreement, insofar as it relates to the Partnership. Trump and Trump
Boardwalk have agreed to assign to the Partnership any payment either receives
pursuant to HAC's and The Promus Companies Incorporated's (HAC's parent
corporation) indemnity, insofar as it relates to the Partnership. The
Harrah's Note was repaid by the Partnership on May 16, 1993.
The financial statements of the Company included herein include a
provision for Federal income taxes, based on distributions from the
Partnership relating to the Company's Preferred Stock which was redeemed on
June 25, 1993. The Company will be reimbursed for such income taxes by the
Partnership in the amount of $3.8 million when due.
BOARDWALK EXPANSION SITE
See "Business -- Narrative Description of Business --Expansion Sites --
Boardwalk Expansion Site" and "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources."
TRUMP REGENCY
See "Business -- Narrative Description of Business --Expansion Sites --
Trump Regency."
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SERVICES AGREEMENT
On June 24, 1993, the Partnership and Trump Plaza Management Corp.
("TPM") entered into an Amended and Restated Services Agreement (the "Services
Agreement") pursuant to which TPM is required to provide to the Partnership,
from time to time when reasonably requested, consulting services on a non-
exclusive basis, relating to marketing, advertising, promotional and other
similar and related services (the "Services") with respect to the business and
operations of the Partnership. In addition, the Services Agreement contains a
non-exclusive "license" of the "Trump" name. TPM is not required to devote
any prescribed amount of time to the performance of its duties. In
consideration for the Services, the Partnership pays TPM an annual fee of $1.0
million in equal monthly installments. In addition to such annual fee, the
Partnership reimburses TPM on a monthly basis for all reasonable out-of-pocket
expenses incurred by TPM in performing its obligations under the Services
Agreement. The Partnership paid TPM $1,288,000, $1,247,000 and $708,000 in
1994, 1993 and 1992, respectively, for the Services. Pursuant to the Services
Agreement, the Partnership will agree to hold TPM, its officers, directors and
employees harmless from and against any loss arising out of or in connection
with the performance of the Services and to hold Trump harmless from and
against any loss arising out of the license of the "Trump" name.
INDEMNIFICATION AGREEMENTS
The directors of the Company have entered into separate indemnification
agreements (collectively, the "Indemnification Agreements") with the
Partnership pursuant to which such persons are afforded the full benefits of
the indemnification provisions of the partnership agreement of the
Partnership. The Partnership has also entered into an Indemnification Trust
Agreement with an Indemnification Trustee (the "Trust Agreement") pursuant to
which the sum $100,000 has been deposited by the Partnership with the
Indemnification Trustee for the benefit of the directors of the Company and
the Class B Directors of TP/GP serving prior to the Offerings to provide a
source for indemnification for such persons if the Partnership or the Company,
as the case may be, fails to immediately honor a demand for indemnification by
such persons. In connection with the Offerings, the Indemnification
Agreements with the directors of the Company and the Class B Directors of
TP/GP were amended to provide, among other things, the Partnership would
maintain directors' and officers' insurance covering such persons during the
term of the Indemnification Agreements; provided, however, that if such
insurance would not be available on a commercially practicable basis, the
Partnership could, in lieu of obtaining such insurance, annually deposit an
amount in the Indemnification Trust Fund equal to $500,000 for
-65-
the benefit of such directors; provided, further, that deposits relating to
the failure to obtain such insurance shall not exceed $2.5 million.
-66-
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
------- SCHEDULES, AND REPORTS ON FORM 8-K.
----------------------------------
(a) FINANCIAL STATEMENTS. See the Index to Financial Statements
immediately following the signature pages.
(b) REPORTS ON FORM 8-K. The Registrants did not file any reports on
Form 8-K during the last quarter of the year ended December 31,
1994.
(c) EXHIBITS.
Exhibit No. Description of Exhibit
----------- ----------------------
3.1(1) Amended and Restated Certificate of Incorporation of the
Company.
3.1.1(8) Form of Second Amended and Restated Certificate of
Incorporation of the Company.
3.2(1) Amended and Restated By-Laws of the Company.
3.3(1) Amended and Restated Certificate of Incorporation of TP/GP.
3.4(1) Amended and Restated By-Laws of TP/GP.
3.5(8) Certificate of Incorporation of Holding Inc.
3.6(8) By-Laws of Holding Inc.
3.7(9) Second Amended and Restated Partnership Agreement of the
Partnership.
3.8(8) Partnership Agreement of Holding.
3.8.1(8) Amendment No. 1 to the Partnership Agreement of Holding.
3.9(8) Agreement and Plan of Merger between TP/GP and the Company.
-67-
4.1(9) Mortgage Note Indenture, among the Company, as issuer, the
Partnership, as guarantor, and the Mortgage Note Trustee, as
trustee.
4.2(9) Indenture of Mortgage, between the Partnership, as Mortgagor,
and the Company, as Mortgagee (the Note Mortgage.
4.3(9) Assignment Agreement between the Company and the Mortgage Note
Trustee.
4.4(9) Assignment of Operating Assets from the Partnership to the
Company.
4.5(9) Assignment of Leases and Rents from the Partnership to the
Company.
4.6(9) Indenture of Mortgage between the Partnership and the Mortgage
Note Trustee (the Guarantee Mortgage).
4.7(9) Assignment of Leases and Rents from the Partnership to the
Mortgage Note Trustee.
4.8(9) Assignment of Operating Assets from the Partnership to the
Mortgage Note Trustee.
4.9(9) The Partnership Note.
4.10(9) Mortgage Note (included in Exhibit 4.1).
4.11(9) Pledge Agreement of the Company in favor and for the benefit
of the Mortgage Note Trustee.
4.12(9) PIK Note Indenture between Holding, as Issuer, and the PIK
Note Trustee, as trustee.
4.13(9) PIK Note (included in Exhibit 4.12).
4.14(8) Warrant Agreement.
4.15(8) Warrant (included in Exhibit 4.14).
4.16(8) Pledge Agreement of Holding in favor and for the benefit of
the PIK Note Trustee.
10.1-10.6 Intentionally omitted.
10.7(12) Employment Agreement between the Partnership and Barry Cregan.
-68-
10.8-10.9 Intentionally omitted.
10.10(4) Agreement of Lease, dated as of July 1, 1980, by and between
SSG Enterprises, as lessor and Atlantic City Seashore 2, Inc.,
as lessee, as SSG Enterprises' interest has been assigned to
Seashore Four, and as Atlantic City Seashore 2, Inc.'s
interest has been, through various assignments, assigned to
the Partnership (with schedules).
10.11(4) Agreement of Lease, dated July 11, 1980, by and between Plaza
Hotel Management Company, as lessor, and Atlantic City
Seashore 3, Inc., as lessee, as Atlantic City Seashore 3,
Inc.'s interest has been, through various assignments,
assigned to the Partnership (with schedules).
10.12(4) Agreement of Lease, dated as of July 1, 1980, by and between
Magnum Associates and Magnum Associates II, as lessor and
Atlantic City Seashore 1, Inc., as lessee, as Atlantic City
Seashore 1, Inc.'s interest has been, through various
assignments, assigned to the Partnership (with schedules).
10.13-10.15 Intentionally omitted.
10.16(2) Trump Plaza Hotel and Casino Retirement Savings Plan effective
as of November 1, 1986.
10.17-10.20 Intentionally omitted.
10.21(5) Assignment of Lease, dated as of July 28, 1988, by and between
Magnum Associates and Magnum Associates II, as assignor, Trump
Seashore Associates, as assignee, and the Partnership, as
lessee.
10.22-10.23 Intentionally omitted.
10.24(5) Employment Agreement, dated January 28, 1991, between the
Partnership and Kevin DeSanctis.
10.24.1(7) Amendment to Employment Agreement, dated August 6, 1992,
between the Partnership and Kevin DeSanctis.
10.25 Intentionally omitted.
-69-
10.26(1) Employment Agreement, dated as of June 1, 1992 between the
Partnership and Ernest E. East.
10.27(3) Employment Agreement, dated as of March 13, 1991 between the
Partnership and William Velardo.
10.28(3) Option Agreement, dated as of February 2, 1993 between Trump
and the Partnership.
10.29(8) Appraisal of Trump Plaza by Appraisal Group International,
dated March 5, 1993.
10.30(6) Amended and Restated Services Agreement between the
Partnership and Trump.
10.31(1) Working Capital Facility between the Partnership and Belmont
Fund, L.P.
10.31.1(8) Mortgage and Security Agreement of the Partnership in favor of
Belmont Fund, L.P.
10.31.2(8) Assignment of Rents and Leases: by the Partnership to Belmont
Fund L.P., dated May 29, 1992.
10.31.3(8) Assignment of Operating Assets: by the Partnership to Belmont
Fund L.P., dated May 29, 1992.
10.32.1(8) Mortgage: from Trump, Nominee to Emil F. Aysseh, Trustee dated
January 12, 1983.
10.32.2(8) Mortgage: from Trump, Nominee to Emil F. Aysseh, Trustee dated
June 23, 1983.
10.32.3(8) Mortgage Consolidation, Modification, and Extension Agreement:
dated June 23, 1983.
10.32.4(8) Partial Assignment of Mortgage: (1/3 interest) by Alfred
Aysseh to New Canaan Bank Trust Company.
10.32.5(8) Partial Assignment of Mortgage: (1/3 interest) by New Canaan
Bank and Trust Company to Alfred Aysseh.
10.32.6(8) Assignment of Mortgage: Emil F. Aysseh, Trustee to Community
National Bank and Trust Company of New York.
-70-
10.32.7(8) Mortgage Note and Mortgage Modification Agreement: by and
between Emil F. Aysseh, Trustee and Donald J. Trump, Nominee
dated January 10, 1992.
10.33(8) Mortgage: from Donald J. Trump, Nominee to Albert Rothenberg
and Robert Rothenberg, dated October 3, 1983.
10.34(8) Mortgage: made by Harrah's Associates to Adeline Bordonaro,
dated January 28, 1986.
10.35(8) Mortgage: made by the Partnership to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
10.35.1(8) Collateral Assignment of Leases: made by the Partnership to
The Mutual Benefit Life Insurance Company, dated October 5,
1990.
10.36-10.37 Intentionally omitted.
10.38(11) Employment Agreement between the Partnership and Nicholas L.
Ribis.
10.39(11) Severance Agreement between the Partnership and Robert M.
Pickus.
10.40 Employment Agreement, dated February 7, 1995, between
the Partnership and Kevin S. Smith.
10.41 Employment Agreement, dated November 21, 1994, between the
Partnership and James A. Rigot.
10.42 Option and Right of First Offer Agreement between the
Partnership and Missouri Boardwalk Inc., dated as of June 24,
1993.
10.43 Lease between Trump and Missouri Boardwalk Inc., dated as of
June 24, 1993.
10.44 Sublease between Trump and Missouri Boardwalk Inc., dated June
24, 1993.
10.45 Option Agreement among Trump, ACFH and Chemical, dated
December 17, 1993.
10.45.1 Amended and Restated Option Agreement among Trump, ACFH and
Chemical, dated June 16, 1994.
-71-
10.45.2 First Amendment to Amended and Restated Option Agreement among
Trump, ACFH and Chemical, dated August 30, 1994.
10.45.3 Second Amendment to Amended and Restated Option Agreement
among Trump, ACFH and Chemical, dated March 6, 1995.
24 Power of Attorney of directors and certain officers of the
Company, Holding and the Partnership (included in the
signature pages).
27.1 Financial Data Schedule for Trump Plaza Funding, Inc.
27.2 Financial Data Schedule for Trump Plaza Holding Associates.
27.3 Financial Data Schedule for Trump Plaza Associates.
-------------
(1) Incorporated herein by reference to the Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1992.
(2) Incorporated herein by reference to the identically numbered
Exhibit in the Company's Annual Report on Form 10-K for the year
ended December 31, 1986.
(3) Incorporated herein by reference to the identically numbered
Exhibit in the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
(4) Incorporated herein by reference to the identically numbered
Exhibit in the Company's Registration Statement on Form S-1,
Registration No. 33-4604.
(5) Incorporated herein by reference to the identically numbered
Exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990.
(6) Previously filed in Holding's Registration Statement on Form S-
1, Registration No. 33-58608.
(7) Incorporated herein by reference to the Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1992.
(8) Incorporated herein by reference to the identically numbered
Exhibit in the Registration Statement of the Company and the
Partnership on Form S-1, Registration No. 33-58602.
-72-
(9) Incorporated herein by reference to the identically numbered
Exhibit in Holding's Registration Statement on Form S-1,
Registration No. 33-58608.
(10) Previously filed in the Registration Statement of the Company
and the Partnership on Form S-1, Registration No. 33-58602.
(11) Incorporated herein by reference to the identically numbered
Exhibit in the Annual Report of the Company and Holding on Form
10-K for the year ended December 31, 1993.
(12) Incorporated herein by reference to the identically numbered
Exhibit in the Quarterly Report of the Company and Holding on
Form 10-Q for the quarter ended September 30, 1994.
(d) FINANCIAL STATEMENT SCHEDULES. See the Index to Financial
Statements immediately following the signature pages.
-73-
PARTNERSHIP SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized this 29th day
of March, 1995.
TRUMP PLAZA ASSOCIATES
By: Trump Plaza Funding, Inc.
Its: Managing General Partner
/s/ Donald J. Trump
-----------------------------
By: Donald J. Trump
Title: President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed on the subsequent pages by the persons listed
therein in the capacities and on the dates indicated for Trump Plaza Funding,
Inc. and Trump Plaza Holding Associates, the general partners of the
Partnership.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized this 29th day
of March, 1995.
TRUMP PLAZA FUNDING, INC.
/s/ Donald J. Trump
-------------------------------
By: Donald J. Trump
Title: President and Treasurer
TRUMP PLAZA HOLDING ASSOCIATES
By: Trump Plaza Holding, Inc.
Its Managing General Partner
/s/ Donald J. Trump
-------------------------------
By: Donald J. Trump
Title: President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DONALD
J. TRUMP AND NICHOLAS L. RIBIS, AND EACH OF THEM, WITH FULL POWER TO ACT
WITHOUT THE OTHER, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS TO THIS
ANNUAL REPORT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM,
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS HE
MIGHT OR COULD DO IN PERSON HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR HIS OR THEIR SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
TRUMP PLAZA FUNDING, INC.
By: /s/ Donald J. Trump March 29, 1995
----------------------------
Donald J. Trump Principal
Executive
Officer and
Director
By: /s/ Francis X. McCarthy, Jr. March 29, 1995
----------------------------
Francis X. McCarthy, Jr. Principal
Financial and
Accounting
Officer
By: /s/ Nicholas L. Ribis March 29, 1995
----------------------------
Nicholas L. Ribis Director
By: /s/ Wallace B. Askins March 29, 1995
-------------------------------
Wallace B. Askins Director
By: /s/ Don M. Thomas March 29, 1995
----------------------------
Don M. Thomas Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
TRUMP PLAZA HOLDING ASSOCIATES
By: Trump Plaza Holding, Inc.
Its Managing General Partner
By: /s/ Donald J. Trump March 29, 1995
----------------------------
Donald J. Trump Principal
Executive
Officer and
Director
By: /s/ Francis X. McCarthy, Jr. March 29, 1995
----------------------------
Francis X. McCarthy, Jr. Principal
Financial and
Accounting
Officer
By: /s/ Nicholas L. Ribis March 29, 1995
----------------------------
Nicholas L. Ribis Director
By: /s/ Wallace B. Askins March 29, 1995
-------------------------------
Wallace B. Askins Director
By: /s/ Don M. Thomas March 29, 1995
----------------------------
Don M. Thomas Director
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants..................... F-2
Balance Sheets of Trump Plaza Funding, Inc. as of
December 31, 1994 and 1993............................... F-3
Statements of Income of Trump Plaza Funding, Inc. for
the years ended December 31, 1994, 1993 and 1992......... F-4
Statements of Capital of Trump Plaza Funding, Inc. for
the years ended December 31, 1994, 1993 and 1992......... F-5
Statements of Cash Flows of Trump Plaza Funding, Inc. for
the years ended December 31, 1994, 1993 and 1992......... F-6
Report of Independent Public Accountants..................... F-7
Consolidated Balance Sheets of Trump Plaza Holding
Associates and Trump Plaza Associates as of
December 31, 1994 and 1993............................... F-8
Consolidated Statements of Operations of Trump Plaza
Holding Associates and Trump Plaza Associates
for the years ended December 31, 1994, 1993 and 1992..... F-9
Consolidated Statements of Capital (Deficit) of Trump
Plaza Holding Associates and Trump Plaza Associates for
the years ended December 31, 1994, 1993 and 1992......... F-10
Consolidated Statements of Cash Flows of Trump Plaza
Holding Associates and Trump Plaza Associates
for the years ended December 31, 1994, 1993 and 1992..... F-11
Notes to Financial Statements of Trump Plaza Funding,
Inc., Trump Plaza Holding Associates and Trump
Plaza Associates......................................... F-13
Schedules
---------
II Valuation and Qualifying Accounts of Trump Plaza Holding
Associates and Trump Plaza Associates for the years
ended December 31, 1994, 1993 and 1992................... F-27
Other Schedules are omitted for the reason that they are not required or
are not applicable, or the required information is shown in the consolidated
financial statements or notes thereto.
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Funding, Inc.:
We have audited the accompanying balance sheets of Trump Plaza Funding, Inc.
(a New Jersey Corporation) as of December 31, 1994 and 1993, and the related
statements of income, capital and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the management of Trump Plaza Funding, Inc. Our
responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in
all material respects, the financial position of Trump Plaza Funding, Inc. as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 18, 1995
F-2
TRUMP PLAZA FUNDING, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
------
1994 1993
------------ ------------
CURRENT ASSETS:
Cash $ 2,000 $ 2,000
Mortgage Interest Receivable 1,495,000 1,495,000
Receivable From Partnership - 974,000
------------ ------------
Total current assets 1,497,000 2,471,000
Mortgage Note Receivable 326,234,000 325,859,000
Receivable From Partnership 3,822,000 2,949,000
------------ ------------
Total assets $331,553,000 $331,279,000
============ ============
LIABILITIES AND CAPITAL
-----------------------
CURRENT LIABILITIES:
Accrued Interest Payable $ 1,495,000 $ 1,495,000
Income Taxes Payable - 974,000
------------ ------------
Total current liabilities 1,495,000 2,469,000
10 7/8% Mortgage Bonds,
net of discount
due 2001 (Notes 1, 2, and 3) 326,234,000 325,859,000
Deferred Income Taxes Payable 3,822,000 2,949,000
------------ ------------
Total liabilities 331,551,000 331,277,000
------------ ------------
Commitments and
Contingencies (Note 6) - -
Common Stock, $.01 par value,
1,000 shares authorized,
100 shares issued
and outstanding - -
Additional Paid in Capital 2,000 2,000
Retained Earnings - -
------------ ------------
Total liabilities
and capital $331,553,000 $331,279,000
============ ============
The accompanying notes to financial statements are an
integral part of these balance sheets.
F-3
TRUMP PLAZA FUNDING, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
------------- ------------ -------------
Interest Income
From Partnership $36,262,000 $32,642,000 $27,720,000
Preferred Partnership
Investment Income - 3,993,000 4,468,000
Reimbursement
for Income Taxes 101,000 1,802,000 2,202,000
Interest Expense (36,262,000) (32,642,000) (27,720,000)
Directors' Fees
and Other Expenses (101,000) (497,000) (224,000)
------------ ----------- -----------
Income Before
Provision for Taxes - 5,298,000 6,446,000
Provision for
Income Taxes - 1,802,000 2,202,000
------------ ----------- -----------
Net Income $ - $ 3,496,000 $ 4,244,000
============ =========== ===========
The accompanying notes to financial statements are an
integral part of these statements.
F-4
TRUMP PLAZA FUNDING, INC.
STATEMENTS OF CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Common Stock
---------------------
Number of Additional Paid Retained
Shares Amount in Capital Earnings Total
---------- -------- --------------- ---------- -----------
Balance
December 31, 1991 200 $ 2,000 $ - $ - $ 2,000
Net Income - - - 4,244,000 4,244,000
Accrued dividends on
preferred stock - - - (4,126,000) (4,126,000)
Preferred Stock Accretion - - - (342,000) (342,000)
Capital contribution from
partnership - - - 224,000 224,000
Redemption of stock units upon
consummation of offering,
effective May 29, 1992 (200) (2,000) - - (2,000)
Issuance of stock upon
consummation of offering,
effective May 29, 1992 2,999,580 - 2,000 - 2,000
---------- ------- ------------ ----------- ------------
Balance,
December 31, 1992 2,999,580 - 2,000 - 2,000
Net Income - - - 3,496,000 3,496,000
Accrued dividends on
preferred stock - - - (3,678,000) (3,678,000)
Preferred stock accretion - - - (315,000) (315,000)
Capital contribution from
partnership - - 40,000,000 497,000 40,497,000
Capital contribution from
Donald J. Trump - - 35,000,000 - 35,000,000
Redemption of Preferred
Stock - - (75,000,000) - (75,000,000)
Redemption of Stock Units upon
consummation of offering,
effective, June 25, 1993 (2,999,580) - - - -
Issuance of stock upon
consummation of offering,
effective June 25, 1993 100 - - - -
---------- ------- ------------ ----------- ------------
Balance,
December 31, 1993 100 - 2,000 - 2,000
Net Income - - - - -
---------- ------- ------------ ----------- ------------
Balance,
December 31, 1994 100 $ $ 2,000 $ $ 2,000
========== ======= ============ =========== ============
The accompanying notes to financial statements are an integral part of these
statements.
F-5
TRUMP PLAZA FUNDING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
---------- -------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ - $ 3,496,000 $4,244,000
Adjustments to Reconcile Net Income
To Net Cash Flows Provided by
Operating Activities:
Accretion of Discount on Indebtedness 375,000 172,000 -
Preferred Stock Accretion - (315,000) (342,000)
Deferred Income Taxes Payable - 747,000 116,000
--------- ------------ ----------
375,000 4,100,000 4,018,000
Decrease (increase) in receivable
from Partnership 101,000 305,000 (4,228,000)
Decrease (increase) in interest receivable - 6,455,000 (6,573,000)
(Decrease) increase in income taxes payable (101,000) 974,000 2,086,000
(Decrease) increase in accrued
interest payable - (6,455,000) 6,573,000
--------- ------------ ----------
Net Cash Flows Provided by
Operating Activities 375,000 5,379,000 1,876,000
--------- ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Preferred Stock Dividends - (5,704,000) (2,100,000)
--------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution - 35,000,000 224,000
Distribution from Partnership - 40,497,000 -
Increase in Mortgage Note receivable (375,000) (100,859,000) -
Additional borrowings - 325,687,000 -
Payment of long term debt - (225,000,000) -
Redemption of Preferred Stock - (75,000,000) -
--------- ------------ ----------
Net Cash Flows (used in) provided by
Financing Activities (375,000) 325,000 224,000
--------- ------------ ----------
Net Change in Cash - - -
Cash at Beginning of Year 2,000 2,000 2,000
--------- ------------ ----------
Cash at End of Year $ 2,000 $ 2,000 $ 2,000
========= ============ ==========
The accompanying notes to financial statements
are an integral part of these statements.
F-6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Holding Associates and
Trump Plaza Associates:
We have audited the accompanying consolidated balance sheets of Trump Plaza
Holding Associates (a New Jersey general partnership) and Trump Plaza
Associates (a New Jersey general partnership) as of December 31, 1994 and
1993, and the related consolidated statements of operations, capital (deficit)
and cash flows for each of the three years in the period ended December 31,
1994. These consolidated financial statements, and the schedule referred to
below, are the responsibility of the management of Trump Plaza Holding
Associates and Trump Plaza Associates. Our responsibility is to express an
opinion on these financial statements 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 financial statements referred to above present fairly, in
all material respects, the financial position of Trump Plaza Holding
Associates and Trump Plaza Associates as of December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
the financial statements and schedules is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basis financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 18, 1995
F-7
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
--------------
1994 1993
-------------- --------------
Current Assets:
Cash and cash equivalents $ 11,144,000 $ 14,393,000
Trade receivables, net of allowances for doubtful
accounts of $8,493,000 and $10,616,000, respectively 6,685,000 6,759,000
Accounts receivable, other 112,000 198,000
Inventories 3,657,000 3,566,000
Prepaid expenses and other current assets 4,280,000 2,701,000
------------- ------------
Total current assets 25,878,000 27,617,000
------------- ------------
Property and Equipment (Notes 4, 6 and 8):
Land and land improvements 36,463,000 35,613,000
Buildings and building improvements 297,573,000 295,617,000
Furniture, fixtures and equipment 84,709,000 78,173,000
Leasehold improvements 2,404,000 2,404,000
Construction in progress 14,864,000 3,784,000
------------- ------------
436,013,000 415,591,000
Less-Accumulated depreciation and amortization (137,659,000) (122,450,000)
------------- ------------
Net property and equipment 298,354,000 293,141,000
------------- ------------
Land Rights, net of accumulated amortization of
$3,780,000 and $3,410,000, respectively 29,688,000 30,058,000
------------- ------------
Other Assets:
Deferred bond issuance costs, net of accumulated
amortization of $3,270,000 and $1,088,000, respectively 14,125,000 16,254,000
(Note 3) 7,598,000 7,428,000
------------- ------------
Total other assets 21,723,000 23,682,000
------------- ------------
Total assets $ 375,643,000 $374,498,000
============= ============
LIABILITIES AND CAPITAL
-----------------------
Current Liabilities:
Current maturities of long-term debt (Note 3) $ 2,969,000 $ 1,633,000
Accounts payable 9,156,000 6,309,000
Accrued payroll 4,026,000 5,806,000
Accrued interest payable (Note 3) 1,871,000 1,829,000
Due to affiliates, net (Note 8) 206,000 97,000
Other accrued expenses 8,998,000 7,109,000
Other current liabilities 4,602,000 5,330,000
Distribution payable to Trump Plaza Funding, Inc. - 974,000
------------- ------------
Total current liabilities 31,828,000 29,087,000
------------- ------------
Non-Current Liabilities:
Long-term debt, net of current maturities (Note 3) 403,214,000 395,948,000
Distribution payable to Trump Plaza Funding, Inc. 3,822,000 2,949,000
Deferred state income taxes 359,000 1,224,000
------------- ------------
Total non-current liabilities 407,395,000 400,121,000
------------- ------------
Total liabilities 439,223,000 429,208,000
------------- ------------
Commitments and Contingencies (Notes 4 and 6) - -
Capital (Deficit):
Partner's Deficit (78,772,000) (78,772,000)
Retained Earnings 15,192,000 24,062,000
------------- ------------
Total Capital (Deficit) (63,580,000) (54,710,000)
------------- ------------
Total liabilities and capital $ 375,643,000 $374,498,000
============= ============
The accompanying notes to financial statements are an integral part of these
consolidated statements.
F-8
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
------------ ------------ ------------
REVENUES:
Gaming $261,451,000 $264,081,000 $265,448,000
Rooms 18,312,000 18,324,000 18,369,000
Food and Beverage 40,149,000 41,941,000 43,889,000
Other 8,408,000 8,938,000 11,012,000
Trump Regency - - 9,465,000
------------ ------------ ------------
Gross Revenues 328,320,000 333,284,000 348,183,000
Less-Promotional
allowances 33,257,000 32,793,000 34,865,000
------------ ------------ ------------
Net Revenues 295,063,000 300,491,000 313,318,000
------------ ------------ ------------
COSTS AND EXPENSES:
Gaming 139,540,000 136,895,000 146,328,000
Rooms 2,715,000 2,831,000 2,614,000
Food and Beverage 17,050,000 18,093,000 18,103,000
General and Administrative 73,075,000 71,624,000 75,459,000
Depreciation and Amortization 15,653,000 17,554,000 15,842,000
Restructuring costs - - 5,177,000
Trump Regency - - 11,839,000
Other 3,615,000 3,854,000 2,953,000
------------ ------------ ------------
251,648,000 250,851,000 278,315,000
------------ ------------ ------------
Income from operations 43,415,000 49,640,000 35,003,000
------------ ------------ ------------
NON-OPERATING INCOME
(EXPENSE):
Interest income 842,000 546,000 487,000
Interest expense (Note 3) (49,061,000) (40,435,000) (31,843,000)
Other non-operating expense ( 4,931,000) ( 3,873,000) ( 1,462,000)
(Note 5) ------------ ------------ ------------
Non-operating expense, net (53,150,000) (43,762,000) (32,818,000)
------------ ------------ ------------
Income (loss) before state
income taxes and
extraordinary items (9,735,000) 5,878,000 2,185,000
PROVISION (BENEFIT) FOR
STATE INCOME TAXES (865,000) 660,000 (233,000)
------------ ------------ ------------
INCOME (LOSS) BEFORE (8,870,000) 5,218,000 2,418,000
EXTRAORDINARY ITEMS
EXTRAORDINARY GAIN (LOSS) - 4,120,000 (38,205,000)
(Note 5) ------------ ------------ ------------
NET INCOME (LOSS) $ (8,870,000) $ 9,338,000 $(35,787,000)
============ ============ ============
The accompanying notes to financial statements are
an integral part of these consolidated statements.
F-9
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Partners' Retained
Capital Earnings Total
------------ ------------ ------------
Balance
December 31, 1991 $ 40,502,000 $ 13,541,000 $ 54,043,000
Net Loss - (35,787,000) (35,787,000)
Preferred Partnership
Interest Distribution, Net (43,864,000) 36,970,000 (6,894,000)
------------ ------------ ------------
Balance
December 31, 1992 (3,362,000) 14,724,000 11,362,000
Net Income - 9,338,000 9,338,000
Preferred Partnership
Interest Distribution (6,317,000) - (6,317,000)
Distribution to Donald J.
Trump to repay certain
personal indebtedness (52,500,000) - (52,500,000)
Distribution to Donald J.
Trump to redeem Trump
Plaza Funding, Inc.
Preferred Stock Units (35,000,000) - (35,000,000)
Conversion of Preferred
Partnership Interest into
General Partnership
Interest 18,407,000 - 18,407,000
------------ ------------ ------------
Balance
December 31, 1993 (78,772,000) 24,062,000 (54,710,000)
Net Loss - (8,870,000) (8,870,000)
------------ ------------ ------------
Balance
December 31, 1994 $(78,772,000) $ 15,192,000 $(63,580,000)
============ ============ ============
The accompanying notes to financial statements are an
integral part of these consolidated statements.
F-10
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
----------- ----------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (loss) $(8,870,000) $ 9,338,000 $(35,787,000)
Adjustments to reconcile net income
(loss) to net cash flows provided by operating
activities-
Noncash charges-
Extraordinary (gain) loss - (4,120,000) 38,205,000
Depreciation and amortization of
property and equipment 15,276,000 17,177,000 15,211,000
Accretion of discount on
indebtedness 1,916,000 862,000 -
Amortization of other assets 377,000 377,000 631,000
Provision for losses on
receivables 396,000 90,000 4,675,000
Deferred state income taxes (865,000) 729,000 (233,000)
Utilization of CRDA credits and
donations 1,062,000 - 1,358,000
Valuation allowance of CRDA
investments 394,000 1,047,000 645,000
----------- ----------- ------------
9,686,000 25,500,000 24,705,000
(Increase) decrease in
receivables (236,000) 823,000 99,000
Increase in inventories (91,000) (498,000) (167,000)
Increase in prepaid expenses and
other current assets (1,385,000) (199,000) (580,000)
Decrease (increase) in other
assets 1,504,000 2,530,000 (828,000)
Increase in amounts due to
affiliates 109,000 188,000 374,000
Increase (decrease) in accounts
payable, accrued expenses and other
current liabilities 10,464,000 (6,524,000) 2,588,000
Decrease in distribution payable
to Trump Plaza Funding, Inc. (101,000) - -
----------- ----------- ------------
Net cash flows provided by
operating activities $19,950,000 $21,820,000 $ 26,191,000
----------- ----------- ------------
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-11
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
------------ -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment $(20,489,000) $ (10,052,000) $ (8,643,000)
Purchases of CRDA investments ( 2,525,000) (2,823,000) (1,853,000)
Cash refund of CRDA deposits 1,323,000 196,000 -
------------ ------------- -------------
Net cash flows used in investing
activities (21,691,000) (12,679,000) (10,496,000)
------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred Financing costs - (17,342,000) -
Distributions to Donald J. Trump - (87,500,000) -
Distributions to the Company - (40,000,000) -
Preferred Partnership Interest
Distribution - (6,282,000) (2,324,000)
Borrowings 375,000 386,147,000 251,575,000
Payments and current maturities of
long-term debt (1,883,000) (248,573,000) (256,618,000)
------------ ------------- -------------
Net cash flows used in financing
activities (1,508,000) (13,550,000) (7,367,000)
------------ ------------- -------------
Net (decrease) increase in
cash and cash equivalents (3,249,000) (4,409,000) 8,328,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 14,393,000 18,802,000 10,474,000
------------ ------------- -------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 11,144,000 $ 14,393,000 $ 18,802,000
============ ============= =============
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-12
TRUMP PLAZA FUNDING, INC.
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
The accompanying financial statements include those of Trump Plaza Funding,
Inc. (the "Company"), a New Jersey General Corporation as well as those of
Trump Plaza Holding Associates ("Holding"), a New Jersey General Partnership,
and its 99% owned subsidiary, Trump Plaza Associates (the "Partnership"), a
New Jersey General Partnership, which owns and operates Trump Plaza Hotel and
Casino ("Trump Plaza") located in Atlantic City, New Jersey. The Company owns
the remaining 1% interest in the Partnership. Holding's sole source of
liquidity is distributions in respect of its interest in the Partnership.
All significant intercompany balances and transactions have been eliminated in
the accompanying consolidated financial statements. The minority interest in
the Partnership has not been separately reflected in the consolidated
financial statements of Holding since it is not material.
The Company was incorporated on March 14, 1986 and was originally formed
solely to raise funds through the issuance and sale of its debt securities for
the benefit of the Partnership. As part of a Prepackaged Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy code consummated on May
29, 1992, the Company became a partner of the Partnership and issued
approximately three million Stock Units, each comprised of one share of
Preferred Stock and one share of Common Stock of the Company. On June 25,
1993, the Stock Units were redeemed with a portion of the proceeds of the
Company's 10 7/8% Mortgage Notes due 2001 (the "Mortgage Notes") as well as
Holding's Units.
Holding was formed in February 1993 for the purpose of raising funds for the
Partnership. On June 25, 1993, Holding completed the sale of 12,000 Units
(the "Units"), each Unit consisting of $5,000 principal amount of 12 1/2%
Pay-In-Kind Notes, due 2003 (the "PIK Notes"), and one Warrant to acquire
$1,000 principal amount of PIK Notes (collectively with the Mortgage Note
Offering, the "Offerings"). The PIK Notes and the Warrants are separately
transferable. Holding has no other assets or business other than its 99%
equity interest in the Partnership.
The Partnership was organized in June 1982. Prior to the date of the
consummation of the Offerings, the Partnership's three partners were TP/GP,
the managing general partner of the Partnership, the Company and Donald J.
Trump ("Trump"). On June 25, 1993, Trump
F-13
contributed his interest in TP/GP to the Company and TP/GP merged with and
into the Company. The Company then became the managing general partner of the
Partnership. In addition, Trump contributed his interest in the Partnership
to Holding, and the Company and Holding, each of which are wholly owned by
Trump, became the sole partners of the Partnership.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gaming Revenues and Promotional Allowances
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. The retail
value of accommodations, food, beverage and other services provided to
customers without charge is included in gross revenue and deducted as
promotional allowances. The estimated departmental costs of providing such
promotional allowance are included in gaming costs and expenses as follows:
YEARS ENDED DECEMBER 31,
-------------------------
(in thousands)
1994 1993 1992
------- ------- -------
Rooms $ 4,311 $ 4,190 $ 4,804
Food and
Beverage 15,373 14,726 14,982
Other 4,169 3,688 3,884
------- ------- -------
$23,853 $22,604 $23,670
======= ======= =======
During 1994 and 1992, certain Progressive Slot Jackpot Programs were
discontinued which resulted in $585,000 and $4,100,000, respectively, of
related accruals being taken into income.
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
Property and Equipment
Property and equipment is carried at cost and is depreciated on the straight-
line method using rates based on the following estimated useful lives:
F-14
Buildings and building improvements 40 years
Furniture, fixtures and equipment 3-10 years
Leasehold improvements 10-40 years
Interest associated with borrowings used to finance construction projects has
been capitalized and is being amortized over the estimated useful lives of the
assets.
Land Rights
Land rights represent the fair value of such rights, at the time of
contribution to the Partnership by the Trump Plaza Corporation, an affiliate
of the Partnership. These rights are being amortized over the period of the
underlying operating leases which extend through 2078.
Income Taxes
The Company, Holding and the Partnership adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
effective January 1, 1993. Adoption of this new standard did not have a
significant impact on the respective statements of financial condition or
results of operations. SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method deferred tax liabilities and assets are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
The accompanying financial statements of the Company include a provision for
Federal income taxes, based on distributions from the Partnership relating to
the Company's Preferred Stock which was redeemed on June 25, 1993. The
Company will be reimbursed for such income taxes by the Partnership. The
accompanying consolidated financial statements of Holding and the Partnership
do not include a provision for Federal income taxes since any income or losses
allocated to its partners are reportable for Federal income tax purposes by
the partners.
Under the New Jersey Casino Control Commission regulations, the Partnership is
required to file a New Jersey corporation business tax return. Accordingly, a
provision (benefit) for state income taxes has been reflected in the
accompanying consolidated financial statements of Holding and the Partnership.
F-15
The Partnership's deferred state income taxes result primarily from
differences in the timing of reporting depreciation for tax and financial
statement purposes.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company, Holding and the
Partnership consider all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The following
supplemental disclosures are made to the statements of cash flows.
1994 1993 1992
----------- ----------- -----------
Cash paid during the
year for interest $36,538,000 $41,118,000 $25,310,000
=========== =========== ===========
Cash paid for state
and Federal income taxes $ - $ 81,000 $ -
=========== =========== ===========
Issuance of debt
in exchange for accrued interest $ 8,194,000 $ 3,562,000 $ -
=========== =========== ===========
(3) LONG-TERM DEBT
Long-term debt consists of the following:
December 31, December 31,
1994 1993
------------ ------------
THE COMPANY:
10 7/8% Mortgage Notes, due 2001 net of
unamortized discount of $3,766,000 and
$4,141,000, respectively (A). $326,234,000 $325,859,000
------------ ------------
HOLDING AND THE PARTNERSHIP:
PARTNERSHIP
Partnership Note (10 7/8% Mortgage Notes,
due 2001 net of unamortized discount
of $3,766,000 and $4,141,000, respectively)(A) $326,234,000 $325,859,000
Mortgage notes payable (C) 5,494,000 6,410,000
Other notes payable 468,000 1,060,000
------------ ------------
332,196,000 333,329,000
Less - Current maturities 2,969,000 1,633,000
------------ ------------
329,227,000 331,696,000
HOLDING
PIK Notes (12 1/2% Notes due 2003 net of
discount of $9,769,000 and $11,310,000,
respectively) (B) 73,987,000 64,252,000
------------ ------------
$403,214,000 $395,948,000
============ ============
F-16
(A) On June 25, 1993 the Company issued $330,000,000 principal amount of 10
7/8% Mortgage Notes, due 2001, net of discount of $4,313,000. Net
proceeds of the offering were used to redeem all of the Company's
outstanding $225,000,000 principal amount 12% Mortgage Bonds, due 2002 and
together with other funds (see (B) Pay-In-Kind Notes) all of the Company's
Stock Units, comprised of $75,000,000 liquidation preference participating
cumulative redeemable Preferred Stock with associated shares of Common
Stock, to repay $17,500,000 principal amount 9.14% Regency Note due 2003,
to make a portion of a distribution to Trump to pay certain personal
indebtedness, and to pay transaction expenses.
The Mortgage Notes mature on June 15, 2001 and are redeemable at any time
on or after June 15, 1998, at the option of the Company or the
Partnership, in whole or in part, at the principal amount plus a premium
which declines ratably each year to zero in the year of maturity. The
Mortgage Notes bear interest at the stated rate of 10 7/8% per annum from
the date of issuance, payable semi-annually on each June 15 and December
15, commencing December 15, 1993 and are secured by substantially all of
the Partnership's assets. The accompanying consolidated financial
statements reflect interest expense at the effective interest rate of
11.12% per annum.
The Mortgage Note Indenture contains certain covenants limiting the
ability of the Partnership to incur indebtedness, including indebtedness
secured by liens on Trump Plaza. In addition, the Partnership may, under
certain circumstances, incur up to $25.0 million of indebtedness to
finance the expansion of its facilities, which indebtedness may be secured
by a lien on the Boardwalk Expansion Site (see Note 6 Commitments And
Contingencies) senior to the liens of the Note Mortgage and Guarantee
Mortgage thereon. The Mortgage Notes represent the senior indebtedness of
the Company. The Partnership Note and the Guarantee rank pari passu in
right of payment with all existing and future senior indebtedness of the
Partnership.
The Mortgage Notes, the Partnership Note, the Note Mortgage, the Guarantee
and the Guarantee Mortgage are non-recourse to the partners of the
Partnership, to the shareholders of the Company and to all other persons
and entities (other than the Company and the Partnership), including
Trump. Upon an event of default, holders of the Mortgage Notes would have
recourse only to the assets of the Company and the Partnership.
(B) On June 25, 1993 Holding issued $60,000,000 principal amount of 12 1/2%
PIK Notes, due 2003, together with Warrants to acquire an additional
$12,000,000 of PIK Notes at no additional cost.
F-17
The Warrants are exercisable following the earlier of certain triggering
events or June 15, 1996.
The PIK Notes mature on June 15, 2003 and bear interest at the rate of 12
1/2% per annum from the date of issuance, payable semi-annually on each
June 15 and December 15, commencing December 15, 1993. At the option of
Holding, interest is payable in whole or in part, in cash or, in lieu of
cash, through the issuance of additional PIK Notes valued at 100% of their
principal amount. The ability of Holding to pay interest in cash on the
PIK Notes is entirely dependent on the ability of the Partnership to
distribute available cash, as defined, to Holding for such purpose.
As of December 31, 1994 the Partnership has elected to issue in lieu of
cash a total of $11,756,000 in PIK Notes to satisfy its semi-annual PIK
Note interest obligation.
The PIK Notes are structurally subordinate to the Company's Mortgage Notes
and any other indebtedness of the Partnership and are secured by a pledge
of Holding's 99% equity interest in the Partnership. The indenture to
which the PIK Notes were issued (the "PIK Note Indenture") contains
covenants prohibiting Holding from incurring additional indebtedness and
engaging in other activities, and other covenants restricting the
activities of the Partnership substantially similar to those set forth in
the Mortgage Note Indenture. The PIK Notes and the Warrants are non-
recourse to the Partners of Holding, including Trump, and to all other
persons and entities (other than Holding). Upon an event of default,
holders of PIK Notes or Warrants will have recourse only to the assets of
Holding which consist solely of its equity interest in the Partnership.
(C) Interest on these notes are payable with interest rates ranging from 10.0%
to 11.0%. The notes are due at various dates between 1995 and 1998 and
are secured by real property.
The aggregate maturities of long-term debt in each of the years subsequent
to 1994 are:
1995 $ 2,969,000
1996 548,000
1997 2,012,000
1998 433,000
1999 -
Thereafter 400,221,000
------------
$406,183,000
============
F-18
(4) LEASES
The Partnership leases property (primarily land), certain parking space, and
various equipment under operating leases. Rent expense for the years ended
December 31, 1994, 1993 and 1992 was $3,613,000, $4,338,000 and $4,361,000,
respectively, of which $1,900,000, $2,513,000 and $2,127,000, respectively,
relates to affiliates of the Partnership.
Future minimum lease payments under the noncancelable operating leases are as
follows:
Amounts
Relating to
Total Affiliates
------------- -------------
1995 $ 6,445,000 $ 2,125,000
1996 6,670,000 2,350,000
1997 6,670,000 2,350,000
1998 5,110,000 2,350,000
1999 3,550,000 2,350,000
Thereafter 270,633,000 191,250,000
------------ ------------
$299,078,000 $202,775,000
============ ============
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms. At December 31, 1994, the
aggregate option price for these leases was approximately $58,000,000.
In October 1993, the Partnership assumed the Boardwalk Expansion Site Lease
and related expenses which are included in the above lease commitment amounts.
In connection with the Offerings, the Partnership acquired a five-year option
to purchase the Boardwalk Expansion Site. See "Note 6 to the Financial
Statements --Commitments and Contingencies -- The Boardwalk Expansion Site."
(5) EXTRAORDINARY GAIN (LOSS) AND NON-OPERATING EXPENSE
The excess of the carrying value of a note obligation over the amount of
the settlement payment net of related prepaid expenses in the amount of
$4,120,000 has been reported as an extraordinary gain for the year ended
December 31, 1993.
The extraordinary loss for the year ended December 31, 1992 consists of the
effect of stating the Bonds and Preferred Stock issued at fair value as
compared to the carrying value of these securities and the write off of
certain deferred financing charges and costs.
F-19
Non-operating expense in 1992 included $1,462,000 of legal expenses relating
to litigation associated with the Boardwalk Expansion Site. In 1994 and 1993
these costs included $4,931,000 and $3,873,000, respectively, in costs
associated with the Boardwalk Expansion Site (see Note 6-Commitments and
Contingencies Future Expansion), net of miscellaneous non-operating credits.
(6) COMMITMENTS AND CONTINGENCIES
Casino License Renewal
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the
New Jersey Casino Control Act (the "Act"), the Partnership is required to
maintain certain licenses.
In April 1993, the New Jersey Casino Control Commission ("CCC") renewed the
Partnership's license to operate Trump Plaza. This license must be renewed in
June 1995, is not transferable and will include a review of the financial
stability of the Partnership. Upon revocation, suspension for more than 120
days, or failure to renew the casino license, the Act provides for the
mandatory appointment of a conservator to take possession of the hotel and
casino's business and property, subject to all valid liens, claims and
encumbrances.
Legal Proceedings
The Partnership, its Partners, certain members of its former Executive
Committee, and certain of its employees, have been involved in various legal
proceedings. In general, the Partnership has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, judgements, fines and penalties )
incurred by them in said legal proceedings. Such persons and entities are
vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
Various legal proceedings are now pending against the Partnership. The
Partnership considers all such proceedings to be ordinary litigation incident
to the character of its business. The Partnership believes that the
resolution of these claims will not, individually or in the aggregate, have a
material adverse effect on its financial condition or results of operations.
The Partnership is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Act. The
Partnership believes that the final
F-20
outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on its financial condition,
results of operations or on the ability of the Partnership to otherwise retain
or renew any casino or other licenses required under the Act for the operation
of Trump Plaza.
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Act, the Partnership, commencing twelve
months after the date of opening of Trump Plaza in May 1984, and continuing
for a period of twenty-five years thereafter, must either obtain investment
tax credits (as defined in the Casino Control Act), in an amount equivalent
to 1.25% of its gross casino revenues, or pay an alternative tax of 2.5% of
its gross casino revenues, (as defined in the Casino Control Act). Investment
tax credits may be obtained by making qualified investments or by the purchase
of bonds at below market interest rates from the Casino Reinvestment
Development Authority ("CRDA"). The Partnership is required to make quarterly
deposits with the CRDA based on 1.25% of its gross revenue. For the years
ended December 31, 1994, 1993 and 1992, the Partnership charged to operations
$838,000, $1,047,000 and $645,000, respectively, to give effect to the below
market interest rates associated with CRDA bonds that have either been issued
or are expected to be issued from funds deposited.
In connection with the Boardwalk Expansion Site (see below), the CRDA has
approved the use of up to $1,519,000 in deposits made by the Partnership for
site improvements. Such deposits are being capitalized as part of property and
equipment as funds are appropriated by the CRDA.
Concentrations of Credit Risks
In accordance with casino industry practice, the Partnership extends credit to
a limited number of casino patrons, after extensive background checks and
investigations of credit worthiness. At December 31, 1994 approximately 28%
of the Partnership's casino receivables (before allowances) were from
customers whose primary residence is outside the United States, with no
significant concentration in any one foreign country.
The Boardwalk Expansion Site
In 1993, the Partnership received the approval of the CCC, subject to certain
conditions, for the expansion of its hotel facilities (the "Boardwalk
Expansion Site"). On June 25, 1993, Trump transferred title of the Boardwalk
Expansion Site to a lender in exchange for a reduction in indebtedness to such
lender in an amount equal to the sum of the fair market value of the Boardwalk
Expansion Site and all rent payments made to such lender by Trump
F-21
under the Boardwalk Expansion Site Lease. At that time, the lender leased the
Boardwalk Expansion Site to Trump (the "Boardwalk Expansion Site Lease") for a
term of five years, which expires on June 30, 1998, during which time Trump is
obligated to pay the lender $260,000 per month in lease payments. In October
1993, the Partnership assumed the Boardwalk Expansion Site Lease and related
expenses.
On June 25, 1993, the Partnership acquired a five-year option to purchase the
Boardwalk Expansion Site (the "Boardwalk Expansion Site Purchase Option"). In
addition, the Partnership has a right of first refusal upon any proposed sale
of all or any portion of the Boardwalk Expansion Site during the term of the
Boardwalk Expansion Site Purchase Option. Until such time as the Boardwalk
Expansion Site Purchase Option is exercised or expires, the Partnership will
be obligated, from and after the date it entered into the Boardwalk Expansion
Site Purchase Option, to pay the net expenses associated with the Boardwalk
Expansion Site. During 1994, the Partnership incurred $4.9 million of such
expenses. Under the Boardwalk Expansion Site Purchase Option, the Partnership
has the right to acquire the Boardwalk Expansion Site for a purchase price of
$27.0 million through 1995, increasing by $1.0 million annually thereafter
until expiration on June 30, 1998. The CCC has required that the Partnership
exercise the Boardwalk Expansion Site Purchase Option or its right of first
refusal no later than July 1, 1995. The Partnership intends to request a
waiver of this requirement; however, no assurance can be given that such
waiver will be granted or that any condition imposed by the CCC would be
acceptable to the Partnership. If the Partnership defaults in making payments
due under the Boardwalk Expansion Site Purchase Option, the Partnership would
be liable to the lender for the sum of (a) the present value of all remaining
payments to be made by the Partnership pursuant to the Boardwalk Expansion
Site Purchase Option during the term thereof and (b) the cost of demolition of
all improvements then located on the Boardwalk Expansion Site.
As of December 31, 1994, the Partnership had capitalized approximately $11.7
million in construction costs related to the Boardwalk Expansion Site
including a $1 million consulting fee paid to Trump (Note 8). The
Partnership's ability to acquire the Boardwalk Expansion Site pursuant to the
Boardwalk Expansion Site Purchase Option is dependent upon its ability to
obtain financing to acquire the property. The ability to incur such
indebtedness is restricted by the Mortgage Note Indenture and the PIK Note
Indenture and requires the consent of certain of Trump's personal creditors.
The Partnership's ability to develop the Boardwalk Expansion Site is dependent
upon its ability to use existing cash on hand and generate cash flow from
operations sufficient to fund development costs. No assurance can be given
that such cash on
F-22
hand will be available to the Partnership for such purposes or that it will be
able to generate sufficient cash flow from operations. In addition, exercise
of the Boardwalk Expansion Site Purchase Option or the right of first refusal
requires the consent of certain of Trump's personal creditors, and there can
be no assurance that such consent will be obtained at the time the Partnership
desires to exercise the Boardwalk Expansion Site Purchase Option or such
right.
The accompanying consolidated financial statements do not include any
adjustments that may be necessary should the Partnership be unable to exercise
the Boardwalk Expansion Site Purchase Option.
(7) EMPLOYEE BENEFIT PLANS
The Partnership has a retirement savings plan (the "Plan") for its nonunion
employees under Section 401(K) of the Internal Revenue Code. Employees are
eligible to contribute up to 15% of their earnings to the Plan and the
Partnership will match 50% of an eligible employee's contributions up to a
maximum of 4% of the employee's earnings. The Partnership recorded charges of
$848,000, $765,000 and $699,000 for matching contributions for the years ended
December 31, 1994, 1993 and 1992, respectively.
The Partnership provides no other material, post-retirement or post-employment
benefits.
(8) TRANSACTIONS WITH AFFILIATES
Due to/from Affiliates
Amounts due to affiliates was $206,000 and $97,000 as of December 31, 1994 and
1993, respectively. The Partnership leases warehouse facility space to Trump
Castle Associates. Lease payments of $6,000, $15,000 and $14,000 were
received from Trump Castle Associates in 1994, 1993 and 1992, respectively.
The Partnership leased office space from Trump Taj Mahal Associates, which
terminated on March 19, 1993. Lease payments of $30,000 and $138,000 were
paid to Trump Taj Mahal Associates in 1993 and 1992, respectively.
The Partnership leases two parcels of land under long-term ground leases from
Seashore Four Associates and Trump Seashore Associates. In 1994, 1993 and
1992, the Partnership paid $900,000, $900,000 and $900,000, respectively, to
Seashore Four Associates, and paid $1,000,000, $1,000,000 and $1,000,000 in
1994, 1993 and 1992, respectively, to Trump Seashore Associates.
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Services Agreement
Pursuant to the terms of a Services Agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Donald J. Trump, in
consideration for services provided, the Partnership pays TPM each year an
annual fee of $1.0 million in equal monthly installments, and reimburses TPM
on a monthly basis for all reasonable out-of-pocket expenses incurred by TPM
in performing its obligations under the Services Agreement, up to certain
amounts. Under this Agreement, approximately $1.3 million, $1.2 million and
$708,000 was charged to expense for the years ended December 31, 1994, 1993
and 1992, respectively.
Trump Regency Option
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical Bank ("Chemical") and ACFH Inc.
("ACFH") a wholly owned subsidiary of Chemical. The Original Chemical Option
Agreement granted to Trump an option to purchase (i) the Trump Regency Hotel
(including the land, improvements and personal property used in the operation
of the hotel) ("Trump Regency") and (ii) certain promissory notes made by
Trump and/or certain of his affiliates and payable to Chemical (the "Chemical
Notes") which are secured by certain real estate assets located in New York,
unrelated to the Partnership.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $60 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option
by January 5, 1994. In addition, the Original Chemical Option Agreement
provided for an expiration of the option on May 6, 1994, subject to an
extension until June 30, 1994 upon payment of an additional $250,000 on or
prior to May 6, 1994. The Original Chemical Option Agreement did not allocate
the purchase price among the assets subject to the option or permit the option
to be exercised for some, but not all of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Trump agreed with the Partnership that, if Trump is able to acquire Trump
Regency pursuant to the exercise of the option, he would make Trump Regency
available for the sole benefit of the Partnership on a basis consistent with
the Partnership's contractual obligations and requirements. Trump further
agreed that the Partnership would not be required to pay any additional
consideration to Trump in connection with any assignment of the option to
purchase Trump Regency. On January 5, 1994, the Partnership obtained the
approval of the CCC to make the $1 million payment, which was made on that
date.
F-24
On June 16, 1994, Trump, Chemical and ACFH entered into, amended and restated
the Original Chemical Option Agreement, (the "First Amended Chemical Option
Agreement"). The First Amended Chemical Option Agreement provided for an
extension of the expiration of the Option through September 30, 1994, upon
payment of $250,000. Such payment was made on June 27, 1994. The First
Amended Chemical Option Agreement also provided for a $60 million option price
for Trump Regency and one of the Chemical Notes. On August 30, 1994, Trump,
Chemical and ACFH entered into an amendment to the First Amended Chemical
Option Agreement (the "Second Amended Chemical Option Agreement"). The Second
Amended Chemical Option Agreement provides for an extension of the expiration
of the Option through March 31, 1995 upon the payment of $50,000 a month for
the period October through December 1994, and $150,000 a month for the period
January through March 1995. The Partnership received the approval of the CCC
and has made such payments.
As of December 31, 1994, $1,550,000, representing option payments, is included
in other assets in the accompanying consolidated balance sheet. If the option
is exercised, these amounts are available to offset the $60 million option
price.
Other Payments to Donald J. Trump
During 1994, the Partnership paid to Trump $1,000,000 under a Construction
Management Service Agreement. The payment was made for construction
management services rendered by Trump with respect to the Boardwalk Expansion
Site. This payment was approved prior to disbursement by the CCC and has been
classified in construction in process in the accompanying consolidated balance
sheet as of December 31, 1994.
During 1994, the Partnership also paid Trump a commission of approximately
$572,000 for securing a retail lease at Trump Plaza.
F-25
The commission has been capitalized and is being amortized to expense over the
10-year term of the lease.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of the Company,
Holding and the Partnership approximates fair value, as follows: (a) cash and
cash equivalents, accrued interest receivables and payables are based on the
short term nature of these financial instruments. (b) CRDA bonds and deposits
are based on the allowances to give effect to the below market interest rates.
The estimated fair values of other financial instruments are as follows:
December 31, 1994
-----------------
Carrying Amount Fair Value
--------------- --------------
12 1/2% PIK $ 73,987,000 $ 51,791,000
10 7/8% Mortgage Notes $ 326,234,000 $ 247,122,000
The fair values of the PIK and Mortgage Notes are based on quoted market
prices obtained by the Partnership from its investment advisor.
There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
F-26
SCHEDULE II
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Balance at Charged to Other Balance at
Beginning Costs and Changes End of
of Period Expenses (Deductions) Period
------------ ---------- ------------ ----------
YEAR ENDED DECEMBER 31, 1994
Allowances for doubtful
accounts $10,616,000 $ 323,000 $(2,446,000)(A) $ 8,493,000
=========== ========= =========== ===========
Valuation allowance for
interest differential on
CRDA bonds $ 2,981,000 $ 838,000 $(1,645,000)(B) $ 2,174,000
=========== ========= =========== ===========
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful
accounts $14,402,000 $ 90,000 $ (3,876,000)(A) $10,616,000
=========== ========= ============ ===========
Valuation allowance for
interest differential on
CRDA bonds $ 1,934,000 $1,047,000 $ - $ 2,981,000
=========== ========== =========== ===========
YEAR ENDED DECEMBER 31, 1992:
Allowance for doubtful
accounts $20,231,000 $4,675,000 $(10,504,000)(A) $14,402,000
========== ========= ============ ===========
Valuation allowance for
interest differential on
CRDA bonds $ 1,385,000 $ 645,000 $ (96,000)(B) $1,934,000
=========== ========== =========== ==========
(A) Write-off of uncollectible accounts.
(B) Write-off of allowance applicable to
contribution of CRDA deposits.
F-27