================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 333-643
TRUMP ATLANTIC CITY ASSOCIATES
(Exact Name of Registrant as specified in its charter)
New Jersey 22-3213714
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2500 Boardwalk 08401
Atlantic City, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (609) 441-6060
TRUMP ATLANTIC CITY FUNDING, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 22-3418939
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2500 Boardwalk 08401
Atlantic City, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (609) 441-6060
TRUMP ATLANTIC CITY FUNDING II, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 22-3550202
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2500 Boardwalk 08401
Atlantic City, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (609) 441-6060
TRUMP ATLANTIC CITY FUNDING III, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 22-3550203
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2500 Boardwalk 08401
Atlantic City, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (609) 441-6060
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
---
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 Atlantic City Funding,
Inc. held by non-affiliates as of March 30, 2000 was $0.
-----
The aggregate market value of the voting stock of Trump Atlantic City Funding
II, Inc. held by non-affiliates as of March 30, 2000 was $0.
-----
The aggregate market value of the voting stock of Trump Atlantic City Funding
III, Inc. held by non-affiliates as of March 30, 2000 was $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. X No
---
As of March 30, 2000, there were 100 shares of Trump Atlantic City Funding,
Inc.'s Common Stock outstanding.
As of March 30, 2000, there were 100 shares of Trump Atlantic City Funding II,
Inc.'s Common Stock outstanding.
As of March 30, 2000, there were 100 shares of Trump Atlantic City Funding
III, 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
General................................................................... 1
Trump Plaza............................................................... 1
Taj Mahal................................................................. 4
TCS....................................................................... 7
Trademark/Licensing....................................................... 7
Certain Indebtedness...................................................... 7
Atlantic City Market...................................................... 8
Competition ............................................................. 9
Gaming and Other Laws and Regulations..................................... 12
ITEM 2. PROPERTIES......................................................... 18
Trump Plaza............................................................... 18
Taj Mahal................................................................. 19
ITEM 3. LEGAL PROCEEDINGS.................................................. 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 23
PART II..................................................................... 24
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................................ 24
ITEM 6. SELECTED FINANCIAL DATA............................................ 24
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.............................................. 26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........ 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................... 32
PART III.................................................................... 33
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 33
ITEM 11. EXECUTIVE COMPENSATION............................................ 37
Employment Agreements................................................... 39
Compensation of Directors............................................... 41
Compensation Committee Interlocks and Insider Participation............. 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................................... 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 42
i
PART IV..................................................................... 44
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K............................................... 44
IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS.................... 50
SIGNATURES.................................................................. 51
Trump Atlantic City Associates.......................................... 52
Trump Atlantic City Funding, Inc........................................ 53
Trump Atlantic City Funding II, Inc..................................... 54
Trump Atlantic City Funding III, Inc.................................... 55
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES............. F-1
PART I
ITEM 1. BUSINESS.
General
Trump Atlantic City Associates ("Trump AC"), a New Jersey general
partnership, was formed under the name of Trump Plaza Holding Associates on
February 17, 1993. Trump Atlantic City Funding, Inc., a Delaware corporation
("Trump AC Funding"), was formed on January 30, 1996. Trump Atlantic City
Funding II, Inc. ("Funding II") and Trump Atlantic City Funding III, Inc.
("Funding III"), each a Delaware corporation, were formed on November 18, 1997.
Each of the Registrants are wholly owned subsidiaries of Trump Hotels & Casino
Resorts Holdings, L.P. ("THCR Holdings"), of which Trump Hotels & Casino
Resorts, Inc. ("THCR") is the general partner. THCR is the exclusive vehicle
through which Donald J. Trump ("Trump") engages in new gaming activities in both
emerging and established gaming jurisdictions. Trump AC owns and operates the
Trump Plaza Hotel and Casino ("Trump Plaza") and the Trump Taj Mahal Casino
Resort (the "Taj Mahal"), each located on The Boardwalk in Atlantic City, New
Jersey ("The Boardwalk").
The following table profiles Trump AC's current casino and hotel capacity:
Trump
Plaza
Main Trump
Facility Plaza East Taj Mahal Total
---------- ------------ ----------- -------
Gaming square footage................... 71,979 13,933 152,350 238,262
Slot machines........................... 2,183 603 4,452 7,238
Table games............................. 94 0 210 304
Hotel rooms............................. 555 349 1,250 2,154
The Registrants operate in only one industry segment. See "Financial
Statements and Supplementary Data."
Trump Plaza
Management believes that Trump Plaza's Five Star Diamond Award from the
American Academy of Hospitality Sciences reflects the high quality amenities and
services that Trump Plaza provides to its casino patrons and hotel guests. These
amenities and services include a broad selection of dining choices, headline
entertainment, deluxe accommodations, tennis courts, swimming and health spa
facilities and a state of the art beauty salon.
Management believes that as a result of Trump Plaza's strategic location
and high quality amenities, Trump Plaza is one of the premier host properties in
Atlantic City. Management believes that the construction of the new convention
center and the tourist corridor linking the new convention center with The
Boardwalk enhances the desirability of Atlantic City generally and, as a result
of Trump Plaza's central location, benefits Trump Plaza in particular. Trump
Plaza's location on The Boardwalk at the end of the main highway into Atlantic
City makes it highly accessible for both "drive-in" and "walk-in" patrons.
The following table details Trump Plaza's current casino and hotel
capacity:
Trump
Plaza Main Trump Plaza
Facility East Total
------------ ------------- -------
Gaming square footage.................... 71,979 13,933 85,912
Slot machines............................ 2,183 603 2,786
Table games.............................. 94 0 94
Hotel rooms.............................. 555 349 904
Trump Plaza's management team has launched a variety of initiatives
designed to increase the level of casino gaming activity generally at Trump
Plaza and to attract casino patrons who tend to wager more frequently than the
typical Atlantic City
1
patron. These initiatives include targeted marketing and advertising campaigns
directed to select groups of customers in the Boston-New York-Washington, D.C.
corridor, and the introduction of new updated gaming products.
Atlantic City Marketing Strategy
Trump Plaza. Trump Plaza East has been integrated into Trump Plaza and
together the two are operated as a single casino hotel facility. Trump Plaza
presently intends to continue the marketing strategies it has found successful
in the past, including targeting lucrative high-end drive-in slot customers.
Management believes the additional hotel rooms and gaming facilities at Trump
Plaza East better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the typical
walk-in or bus patron.
Trump World's Fair. During the fourth quarter of 1999, Trump World's Fair
("Trump World's Fair") was closed and is in the process of being demolished to
make way for a new development site. Trump World's Fair was situated in a
twenty year old structure with a casino on three levels, lacked a parking garage
and was inefficient to operate. Management believes that Trump Plaza will
capture a significant portion of the customers displaced by the closure of Trump
World's Fair and will be able to service those customers with available
capacity, while at the same time creating what management believes is perhaps
the finest development site in Atlantic City for either sale or future
development by THCR.
Trump Plaza Business Strategy
General. A primary element of Trump Plaza's business strategy is 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.
Trump Plaza also caters to the mid to high level segment. Trump Plaza's
concentration of special events, entertainment, suites and variety of gourmet
restaurants define its presence and highly perceived image. Trump Plaza's suite
product, high-end slot clubs and fine dining restaurants indicate Plaza
Associates' commitment to this segment of the market. While Trump Plaza strives
to accommodate the more lucrative drive-in patron, it also offers a fun,
relaxing experience which is extremely appealing to the bus rider. A combination
of lower slot denominations, including one of Atlantic City's largest nickel
lounges, lower table limits, sweepstakes, bus bingo programs and tournaments,
make this possible.
"Comping" Strategy. In order to compete effectively with other Atlantic
City casino hotels, Plaza Associates offers complimentary drinks, meals, room
accommodations and/or travel arrangements to its patrons ("complimentaries" or
"comps"). Management monitors Trump Plaza's policy so as to provide
complimentaries primarily to patrons with a demonstrated propensity to wager at
Trump Plaza. A patron's propensity to wager is determined by a review of the
patron's prior gaming history at Trump Plaza as well as other gaming
establishments in Atlantic City. Each patron is analyzed to ensure that the
patron's gaming activity, net of any complimentaries, is potentially profitable
to Plaza Associates.
Entertainment. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end and other patrons. Trump Plaza offers a variety of
headline entertainment throughout the year.
Player Development/Casino Hosts. Plaza Associates currently employs gaming
representatives in New Jersey, Pennsylvania and other states 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 frequent
player slot card (the "Trump Card") sign-ups in order to increase Plaza
Associates' marketing base.
Promotional Activities. The Trump 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. Plaza Associates' computer systems record data
about the cardholders, 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
2
slot play. Trump Plaza also utilizes a special events calendar (e.g., birthday
parties, sweepstakes and special competitions) to promote its gaming operations.
Bus Program. Trump Plaza has a bus program, which transports approximately
1,800 gaming patrons per day during the week and 3,600 per day on the weekends.
Trump Plaza's bus program offers incentives and discounts to certain scheduled
and chartered bus customers. Trump Plaza's Transportation Facility (as defined)
contains 13 bus bays and is connected by an enclosed pedestrian walkway to Trump
Plaza. The Transportation Facility provides 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 on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1997, 1998 and 1999 credit play as a percentage of total dollars wagered was
approximately 18.9% , 22.4% and 22.8%, respectively. Trump Plaza bases credit
limits on all individual patron's creditworthiness, as determined by an
examination of the following criteria: (i) checking each patron's personal
checking account for current and average balances, (ii) performing a credit
check using a credit agency specializing in casino credit on each domestic
patron and (iii) checking each patron's credit limits and indebtedness at all
casinos in the United States as well as many island casinos. The above
determination of a patron's continued creditworthiness is performed for
continuing patrons on a yearly basis or more frequently if Trump Plaza deems a
re-determination of creditworthiness is necessary. In addition, depositing of
markers is regulated by the State of New Jersey. Markers in increments of $1,000
or less are deposited in a maximum of 7 days; markers of increments of $1,001 to
$5,000 are deposited in a maximum of 14 days; and markers in increments of over
$5,001 are deposited in a maximum of 45 days. Markers may be deposited sooner at
the request of patrons or at Trump Plaza's discretion.
Facilities and Amenities
Trump Plaza. The casino in Trump Plaza's main tower currently offers 94
table games and 2,183 slot machines. In addition to the casino, Trump Plaza's
main tower consists of a 31-story tower with 555 guest rooms, including 62
suites. Trump Plaza's main tower 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's main tower includes a cocktail lounge,
three gift shops, a deli, a coffee shop, a pastry shop and a buffet. The casino
level houses the casino, an exclusive slot lounge for high-end patrons and an
ocean view high-end slot area and a private gaming area themed with various
elements of Asian decor. An enclosed walkway connects Trump Plaza at the casino
level with the original Atlantic City Convention Center.
Trump Plaza East offers 349 hotel rooms and a casino with windows
overlooking the Atlantic Ocean and The Boardwalk.
Trump Plaza's guest rooms are located in two towers which afford 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's main tower also
features 16 one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites." The
Super Suites are located on the top two floors of Trump Plaza's main tower and
offer luxurious accommodations and 24-hour butler and maid service. The Super
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 that
offers food and bar facilities.
Trump Plaza's main tower 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 a waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino, and is located directly off the Atlantic City
Expressway, the main highway into Atlantic City.
Trump Plaza opened a new table gaming area named "Shangri-La" to cater
specifically to the Asian gaming customer. Shangri-La features 15 Asian style
games (Pai-gow Poker, etc.) in a private gaming area themed with various
elements of Asian decor. Adjacent to the Shangri-La gaming area is the Shangri-
La Cafe, an existing eatery that was also themed with Asian decor and offers
additional amenities targeted to attract Asian customers to include a kareoke
stage area, sushi bar and more. The cost to renovate both of these areas was
approximately $700,000.
In January 2000, Trump Plaza completed an approximately $425,000 renovation
and expansion of its salon. The new 2,720 square foot salon offers state of the
art equipment and a full range of services geared towards Trump Plaza's high end
clientele.
3
Time Warner Entertainment Company, L.P. ("Time Warner") operates a Warner
Brothers Studio Store occupying the entire first floor of retail space on The
Boardwalk at Trump Plaza East (approximately 17,000 square feet).
The original Atlantic City Convention Center, which is immediately adjacent
to Trump Plaza, is undergoing a $72 million renovation funded by the CRDA.
These improvements are expected to be complete by the summer of 2001 and will
convert the East Hall into a modern special events venue that management
believes will benefit Trump Plaza.
Employees and Labor Relations
Plaza Associates has approximately 3,100 full-time equivalent employees of
whom approximately 1,100 employees are covered by collective bargaining
agreements. The collective bargaining agreement with Local No. 54 expires on
September 15, 2004. Management believes that its relationships with its
employees are satisfactory. Certain of Plaza Associates' employees must be
licensed or registered under the New Jersey Casino Control Act (the "Casino
Control Act").
Historical Background
The 1997 Events. In December 1997, Trump AC and Funding II issued the TAC
II Notes (as defined) and Trump AC and Funding III issued the TAC III Notes (as
defined).
Taj Mahal
The Taj Mahal continues to rank first among all Atlantic City casinos in
terms of total gaming revenues for the year ended December 31, 1999 as well as
in each previous year since opening in 1990. The Taj Mahal capitalizes on the
widespread recognition and marquee status of the "Trump" name and its
association with high quality amenities and first-class service as evidenced by
its Five Star Diamond Award from the American Academy of Hospitality Sciences.
Management believes that the breadth and diversity of the Taj Mahal's casino,
entertainment and convention facilities and its status as a "must see"
attraction will enable the Taj Mahal to benefit from growth of the Atlantic City
market.
In past years, Taj Associates has completed construction of the Taj
Entertainment Complex (as defined), reconfigured and expanded the casino floor
to provide race simulcasting, poker wagering and keno, opened an Asian themed
table game area, opened the Bengal Club for mid-level slot players and increased
the number of poker tables and slot machines. The Taj Mahal's poker room is the
largest in Atlantic City, which management believes adds to its customers'
overall gaming experience. Taj Associates continually monitors operations to
adapt to and anticipate industry trends. From 1994 to mid-1997, the Taj Mahal
refurbished substantially all of its hotel guest rooms and corridors and
replaced all of its existing slot machines with new, more efficient machines
with bill acceptors. Moreover, to further attract high-end players, the Taj
Mahal opened the Dragon Room, an Asian themed table gaming area with 16 table
games, and the Sultan's Palace, a separate 5,900 square-foot high-end slot
lounge. In connection with the Sultan's Palace, the Taj Mahal opened the
relocated and expanded President's Club for high-end slot players.
Also, in recent years, the Taj Mahal constructed a 2,400 space expansion of
the existing self parking facilities, which was completed in May 1997, and an
approximately 7,000 square foot casino expansion accommodating approximately 260
slot machines with frontage on The Boardwalk, which was completed in July 1997.
In addition, to increase entertainment opportunities for customers, the Hard
Rock Cafe, the All Star Cafe and the Stage Deli of New York were opened at the
Taj Mahal. A Warner Brothers Studio Store opened at the Taj Mahal in May 1997.
In 1999, Taj Associates again expanded its casino floor boardwalk frontage by
approximately 4,600 square feet, accommodating the addition of approximately 200
slot machines.
The Taj Mahal recently completed the expansion of the retail shopping area
along the length of its parking garage promenade walkway which immediately
adjoins the Taj Mahal's main retail shopping area. The first tenant, Starbucks,
operated by Host International, Inc., opened in September 1996. Sbarro's, an
Italian eatery, operated by Sbarro America Properties, Inc., opened in October
1998. Boardwalk Treats, Beka's Pastries and a Harley Davidson retail
merchandise outlet opened at various times during 1999. A Sunglass Hut,
operated by Sunglass Hut International, opened in August 1998 in a separate
location also adjoining the Taj Mahal's main retail shopping area.
In November 1998, the Taj Mahal entered into a development agreement with
the New Jersey Casino Reinvestment Development Authority (the "CRDA") for the
redevelopment of the road corridors and surrounding neighborhoods leading from
Route 30, one of its major access routes, and the Taj Mahal. The project, which
is expected to cost approximately $20.8 million
4
and will use the Taj Mahal's funds on deposit with the CRDA, is scheduled to be
completed in phases through the summer of 2000 and will greatly enhance the Taj
Mahal's customer's experience and ease in reaching the Taj Mahal. The project
itself will greatly improve the road infrastructure and lighting, provide
extensive landscaping, involve the acquisition and demolishing of deteriorated
buildings and involve the completion of a new housing development.
Taj Mahal Operations
General. The Taj Mahal currently has approximately 152,350 square feet of
gaming space, 210 table games and 4,452 slot machines, which includes an
approximately 12,000 square-foot poker, keno and race simulcasting room with 67
poker tables. The casino's offerings include blackjack, craps, roulette,
baccarat, mini baccarat, sic-bo, pai gow, pai gow poker, Caribbean stud poker,
big six, Spanish 21, mini dice and let it ride poker. In addition, the Taj
Mahal offers an Asian themed table game area which offers 16 popular Asian table
games catering to the Taj Mahal's growing Asian clientele. As a special bonus
to high-end players, the Taj Mahal offers three clubs for the exclusive use of
select customers: the Maharajah Club for high-end table game players, the
President's Club for high-end slot players and the Bengal Club for other
preferred slot players.
In recent years, to increase entertainment opportunities for customers, the
Hard Rock Cafe, the All Star Cafe and the Stage Deli of New York were opened at
the Taj Mahal. A Warner Brothers Studio Store opened in May 1997.
The Taj Mahal currently consists of a 42-story hotel tower and contiguous
low-rise structure sited on approximately 30 acres of land. The Taj Mahal has
1,250 guest rooms (including 242 suites), 19 dining and 12 beverage locations,
parking for approximately 6,950 cars, a 14-bay bus terminal and approximately
65,000 square feet of ballroom, meeting room and pre-function area space. In
addition, the Taj Mahal features a 20,000 square-foot multi-purpose
entertainment complex known as the Xanadu Theater with seating capacity for
approximately 1,200 people which can be used as a theater, concert hall, boxing
arena or exhibition hall (the "Taj Entertainment Complex") and the Mark Etess
Arena, which comprises an approximately 63,000 square-foot exhibition hall and
entertainment facility. The Xanadu Theater and Mark Etess Arena have allowed the
Taj Mahal to offer longer running, more established productions that cater to
the tastes of the Taj Mahal's high-end international guests, and has afforded
the Taj Mahal more flexibility in the use of its facilities for sporting and
other headline programs. The Taj Mahal regularly engages well-known musicians
and entertainment personalities and will continue to emphasize weekend marquee
events such as high visibility sporting events, international festivals and
contemporary concerts to maximize casino traffic and to maintain the highest
level of glamour and excitement at the Taj Mahal.
Gaming Environment. The Taj Mahal's management continues to capitalize on
the Taj Mahal's status as one of the largest facilities in Atlantic City and a
"must see" attraction, while maintaining the attractiveness of the property and
providing a comfortable gaming experience. In the period 1994 through 1997, the
Taj Mahal substantially replaced all of its existing slot machines with new,
more efficient machines with bill acceptors. In addition, the Taj Mahal features
a 12,000 square-foot poker and simulcast area, which features 67 poker tables in
the largest poker room in Atlantic City. For the year ended December 31, 1999,
the Taj Mahal captured approximately 55.3% of the total Atlantic City poker
revenues. In 1997 the Taj Mahal expanded its casino floor by approximately 8,600
square feet. The 1997 expansion accommodated casino space with Boardwalk
frontage and a second horserace simulcasting location. In 1999 the Taj Mahal
again expanded its casino floor boardwalk frontage by approximately 4,600 square
feet, accommodating the addition of approximately 200 additional slot machines.
The Taj Mahal currently intends to reconfigure its casino floor, subject to
approval by the New Jersey Casino Control Commission (the "CCC") on an ongoing
basis, to accommodate changes in patron demand. Management continuously monitors
the configuration of the casino floor and the games it offers to patrons with a
view towards making changes and improvements. For example, the Taj Mahal's
casino floor has clear, large signs for the convenience of patrons.
Additionally, as new games have been approved by the CCC, management has
integrated such games to the extent it deems appropriate. Mini dice was added in
1997. Spanish 21 was added in 1999.
"Comping" Strategy. In order to compete effectively with other casino
hotels, the Taj Mahal offers Complimentaries. Currently, the policy at the Taj
Mahal is to focus promotional activities, including Complimentaries, on middle
and upper middle market "drive in" patrons with a propensity to wager who visit
Atlantic City frequently and have proven to be the most profitable market
segment. Comping policy is determined by a patron's propensity to wager. A
patron's propensity to wager is determined by a review of the patron's prior
gaming history at the Taj Mahal as well as other gaming establishments in
Atlantic City. Each patron is analyzed to ensure that the patron's gaming
activity, net of any Complimentaries, is potentially profitable to Taj
Associates. Additionally, as a result of increased regulatory flexibility, the
Taj Mahal has implemented a cash comping policy to high-end players in order to
compete with similar practices in Las Vegas and to attract international
business.
5
Entertainment. Management of the Taj Mahal believes headline
entertainment, as well as other sporting and entertainment events, is an
effective means of attracting and retaining gaming patrons. The Xanadu Theater,
together with the Mark Etess Arena (an approximately 63,000 square-foot
exhibition hall facility), afford the Taj Mahal more flexibility in the use of
its larger entertainment arena for sporting and other headline programs. The Taj
Mahal regularly engages well-known musicians and entertainment personalities and
will continue to emphasize weekend "marquee" events such as high visibility
sporting events, festivals and contemporary concerts to maintain the highest
level of glamour and excitement. Mid-week uses for the facilities include
convention events and casino marketing sweepstakes.
Player Development. Management of the Taj Mahal employs marketing
representatives as a means of attracting high-end slot and table gaming patrons
to the property and to host special events, offer incentives and contact patrons
directly in the United States, Canada and South America. In addition, targeted
marketing to international clientele will be continued in Latin America, Mexico,
Europe, the Far East and the Middle East.
The casino hosts assist patrons on the casino floor, make room and dinner
reservations and provide general assistance. They also solicit Trump Card sign-
ups in order to increase the Taj Mahal's marketing base.
The Taj Mahal also plans to continue the development of its slot and coin
programs through direct mail and targeted marketing campaigns emphasizing the
high-end player. "Motorcoach Marketing," the Taj Mahal's customer bus-in
program, has been an important component of player development and will continue
to focus on tailoring its player base and maintaining a low-cost package.
Promotional Activities. The Trump Card, a player identification card,
constitutes a key element in the Taj Mahal's direct marketing program. Both
table and slot machine players are encouraged to register for and utilize their
personalized Trump Card to earn various complimentaries and incentives based on
their level of play. The Trump Card is inserted during play into a card reader
attached to the table or slot machine for use in computerized rating systems.
These computer systems record data about the cardholder, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced. Sales and management personnel are able to monitor the
identity and location of the cardholder and the frequency and denomination of
such cardholder's play. They can also use this information to provide attentive
service to the cardholder while the patron is on the casino floor.
The Taj Mahal 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 games supervisor.
Promotional activities at the Taj Mahal include the mailing of vouchers for
complimentary slot and table game play and utilization of a special events
calendar (e.g., birthday parties, sweepstakes and special competitions) to
promote its gaming operations.
The Taj Mahal 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. Special events such as "Slot
Sweepstakes" and "bingo" are designed to increase mid-week business. Players at
these tournaments also tend to play on the casino floor 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 the Taj Mahal.
Credit Policy. Historically, the Taj Mahal has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1997, 1998 and 1999, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 31.2%, 26.6% and 23.7%, respectively. The Taj
Mahal bases credit limits on all individual patron's creditworthiness, as
determined by an examination of the following criteria: (i) checking each
patron's personal checking account for current and average balances, (ii)
performing a credit check using a credit agency specializing in casino credit on
each domestic patron and (iii) checking each patron's credit limits and
indebtedness at all casinos in the United States as well as many island casinos.
The above determination of a patron's continued creditworthiness is performed
for continuing patrons on a yearly basis or more frequently if the Taj Mahal
deems a re-determination of creditworthiness is necessary. In addition,
depositing of markers is regulated by the State of New Jersey. Markers in
increments of $1,000 or less are deposited in a maximum of 7 days; markers of
increments of $1,001 to $5,000 are deposited in a maximum of 14 days; and
markers in increments of over $5,001 are deposited in a maximum of 45 days.
Markers may be deposited sooner at the request of patrons or at the Taj Mahal's
discretion.
6
Employees
Taj Associates has approximately 4,500 full time equivalent employees for
the operation of the Taj Mahal, of whom approximately 1,875 employees are
covered by collective bargaining agreements. The collective bargaining agreement
with Local No. 54 expires on September 15, 2004. Management believes that its
relationships with its employees are satisfactory and that its staffing levels
are sufficient to provide superior service. Certain of Taj Associates' employees
must be licensed or registered under the Casino Control Act.
TCS
Trump Casino Services, L.L.C. ("TCS"), a New Jersey limited liability
company, was formed on June 27, 1996 for the purpose of reducing operating costs
by consolidating certain administrative functions of, and providing certain
services to, each of Plaza Associates and Taj Associates, the owner and operator
of Trump Plaza and the Taj Mahal, respectively. Trump AC and Trump Atlantic City
Corporation ("TACC"), a wholly owned subsidiary of Trump AC, own a 99% and 1%
interest, respectively, in TCS. In June 1996, the CCC granted TCS an initial
casino license through July 1997 which has been renewed through July 2003. On
July 8, 1996, TCS, Plaza Associates and Taj Associates entered into an agreement
(the "TCS Services Agreement") pursuant to which TCS provides to each of Taj
Associates and Plaza Associates certain management, financial and other
functions and services necessary and incidental to the respective operation of
each of their casino hotels. Management believes that TCS' services to Taj
Associates and Plaza Associates result in cost savings and operational
synergies. On October 23, 1996, TCS, Plaza Associates, Taj Associates and Trump
Castle Associates, L.P. ("Castle Associates"), the owner and operator of Trump
Marina Hotel Casino ("Trump Marina"), entered into an Amended and Restated
Services Agreement pursuant to which TCS also provides those same functions and
services to Castle Associates in connection with the operation of Trump Marina.
Trademark/Licensing
Subject to certain restrictions, THCR has the exclusive right to use the
"Trump" name and likeness in connection with gaming and related activities
pursuant to a trademark license agreement and the amendment thereto between
Trump and THCR, as amended (the "License Agreement"). Pursuant to the License
Agreement, Trump granted to THCR the world-wide right and license to use the
names "Trump," "Donald Trump" and "Donald J. Trump" (including variations
thereon, the "Trump Names") and related intellectual property rights
(collectively, the "Marks") in connection with casino and gaming activities and
related services and products. The License Agreement does not restrict or
restrain Trump from the right to use or further license the Trump Names in
connection with services and products other than casino services and products.
The license is for a term of the later of: (i) June 2015; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant to
an employment, management, consulting or similar services agreement with THCR.
Upon expiration of the term of the license, Trump will grant THCR a non-
exclusive license for a reasonable period of transition on terms to be mutually
agreed upon between Trump and THCR. Trump's obligations under the License
Agreement are secured by a security agreement, pursuant to which Trump granted
THCR a first priority security interest in the Marks for use in connection with
casino services, as well as related hotel, bar and restaurant services.
Certain Indebtedness
TAC I Notes. In April 1996, Trump AC and Trump AC Funding issued in an
underwritten offering $1,200,000,000 aggregate principal amount of Mortgage
Notes which mature on May 1, 2006 (the "TAC I Notes"). The TAC I Notes include
restrictive covenants prohibiting or limiting, among other things, the sale of
assets, the making of acquisitions and other investments, capital expenditures,
the incurrence of additional debt and liens and the payment of dividends and
distributions. Non-compliance could result in the acceleration of such
indebtedness.
TAC II Notes. In December 1997, Trump AC and Funding II issued $75,000,000
principal amount of Mortgage Notes which mature on May 1, 2006 (the "TAC II
Notes"). The TAC II Notes include restrictive covenants prohibiting or limiting,
among other things, the sale of assets, the making of acquisitions and other
investments, capital expenditures, the incurrence of additional debt and liens
and the payment of dividends and distributions. Non-compliance could result in
the acceleration of such indebtedness.
TAC III Notes. In December 1997, Trump AC and Funding III issued
$25,000,000 principal amount of Mortgage Notes which mature on May 1, 2006 (the
"TAC III Notes"). The TAC III Notes include restrictive covenants prohibiting or
7
limiting, among other things, the sale of assets, the making of acquisitions and
other investments, capital expenditures, the incurrence of additional debt and
liens and the payment of dividends and distributions. Non-compliance could
result in the acceleration of such indebtedness.
Plaza Notes. The 10-7/8% First Mortgage Notes due 2001 (the "Plaza Notes")
of Trump Plaza Funding, Inc. ("Plaza Funding") were retired in April 1996. The
Plaza Notes were issued by Plaza Funding, with Plaza Associates providing a full
and unconditional guaranty thereof. The Plaza Notes were retired through
repurchase and defeasance and Plaza Funding and Plaza Associates were released
from their obligations under all financial and negative covenants and certain
other provisions contained in the indenture under which the Plaza Notes were
issued (the "Plaza Note Indenture"), and the Plaza Note Security (as defined in
the Plaza Note Indenture) was released against the deposit of cash or U.S.
government obligations in an amount sufficient to effect the redemption on June
15, 1998 of all of the Plaza Notes so defeased, at a redemption price of 105% of
the principal amount thereof, together with accrued and unpaid interest to such
date. Additionally, Plaza Funding irrevocably instructed the Plaza Note Trustee
(as defined in the Plaza Note Indenture) to provide notice of such redemption
not less than 30 or more than 60 days prior to June 15, 1998.
Other Indebtedness. In addition to the foregoing, Trump AC's long-term
indebtedness includes approximately $10.1 million of indebtedness, including, as
of December 31, 1999, approximately $1.3 million due under outstanding mortgage
notes described above.
Atlantic City Market
The Atlantic City Market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $4.18 billion in gaming revenues
in 1999, an increase of approximately 3.2% over 1998 gaming revenues of
approximately $4.05 billion. From 1995 to 1999, total gaming revenues in
Atlantic City have increased approximately 11.1%, while hotel rooms increased by
20.6% during that period. Although total visitor volume to Atlantic City
remained relatively constant in 1999, the volume of bus customers decreased to
9.5 million in 1999 from 9.9 million in 1998, also representing a decline from
9.6 million in 1995. The volume of customers traveling by other means to
Atlantic City has grown from 23.7 million in 1995 to 24.7 million in 1999.
Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
Management believes that this relatively slower growth is primarily attributable
to two key factors. First, there were no significant additions to hotel capacity
in Atlantic City until 1996. Las Vegas visitor volumes have increased, in part,
due to the continued addition of new hotel capacity. Both markets have exhibited
a strong correlation between hotel room inventory and total casino revenues.
Secondly, the regulatory environment and infrastructure problems in Atlantic
City have made it more difficult and costly to operate than in Las Vegas. Total
regulatory costs and tax levies in New Jersey have exceeded those in Nevada
since inception, and there is generally a higher level of regulatory oversight
in New Jersey than in Nevada. The infrastructure problems, manifested by
impaired accessibility of the casinos, downtown Atlantic City congestion and the
condition of the areas surrounding the casinos have made Atlantic City less
attractive to the gaming customer.
Total Atlantic City slot revenues increased 4.6% in 1999 from 1998,
continuing a trend of increases over the past seven years. From 1995 through
1999, slot revenue growth in Atlantic City has averaged 5.2% per year. Total
table game revenue decreased 0.1% in 1999, while table game revenue from 1995 to
1999 has increased on average approximately 1.6% per year. Management believes
the slow growth in table game revenue is primarily attributable to two factors.
First, the slot product has been significantly improved over the last seven
years. Bill acceptors, new slot machines, video poker, themed slot machines and
other improvements have increased the popularity in slot play to include a
larger number of guests interested in its entertainment value. Casino operators
in Atlantic City have added slot machines in favor of table games due to
increased public acceptance of slot play and due to slot machines' comparatively
higher profitability as a result of lower labor and support costs. Since 1995,
the number of slot machines in Atlantic City has increased by 19.4%, while the
number of table games has increased by 2.5%. Slot revenues increased from 68.4%
of total casino revenues in 1995 to 70.8% in 1999. The second reason for
historic slow growth in table game revenue is that table game players are
typically higher end players and are more likely to be interested in overnight
stays and other amenities. During peak season and weekends, room availability in
Atlantic City is currently inadequate to meet demand, making it difficult for
casino operators to aggressively promote table play.
The regulatory environment in Atlantic City has improved over the years.
Most significantly, 24-hour gaming has been approved, poker, simulcasting and
keno have been added and certain regulatory burdens have been reduced. In
particular, comprehensive amendments to New Jersey gaming laws were made in
January 1995, which have eliminated duplicative regulatory oversight and
channeled a certain portion of operator's funds through 2003 from regulatory
support into uses of the
8
CRDA. Administrative costs of regulation will be reduced while increasing funds
will be available for new development in Atlantic City. In addition, in 1994,
legislation was enacted which eliminated the requirement that a casino consist
of a "single room" in a casino hotel. A casino may now consist of "one or more
locations or rooms" approved by the CCC for casino gaming.
Atlantic City's new convention center, with approximately 500,000 square
feet of exhibit and pre-function space, 45 meeting rooms, food-service
facilities and a 1,600-car underground parking garage, is the largest exhibition
space between New York City and Washington, D.C. It is located at the base of
the Atlantic City Expressway and opened in May 1997. Atlantic City's original
convention center is located on The Boardwalk, physically connected to the Trump
Plaza, and is owned by the New Jersey Sports and Exposition Authority (the
"NJSEA"). Its East Hall, which was completed in 1929 and is listed on the
National Register of Historic Places, is currently undergoing, with funding
approved by the CRDA in February 1999, a $72 million renovation to be completed
by the summer of 2001. These improvements, while preserving the historic
features of this landmark, will convert it into a modern special events venue
and will include new seating for 10,000 to 14,000 in its main auditorium, and
new lighting, sound and television-ready wiring systems.
In the fall of 1998, the South Jersey Transportation authority (the "SJTA")
began constructing a 2.2 mile roadway and tunnel system in Atlantic City which
will connect the Atlantic City Expressway to the Marina District and the City of
Brigantine and is scheduled to be completed in the spring of 2001. The $330
million roadway project, upon completion, will provide vehicles arriving in
Atlantic City on the Atlantic City Expressway with direct access to the Marina
District, including Trump Marina and the marina at Trump Marina. On January 25,
2000, the Appellate Division of the New Jersey Superior Court reversed, in part,
the issuance of certain development permits which authorized the SJTA to
construct this roadway and granted THCR the right to a trial-type administrative
hearing in the New Jersey Department of Environmental Protection to determine
whether the approved roadway design unfairly and unreasonably either impedes
patron access to Trump Marina and the marina at Trump Marina from the proposed
H-Tract casino resort development or obscures the visibility of Trump Marina's
electronic reader board signage.
In addition to the planned casino expansions (see "Competition"), major
infrastructure improvements have been completed. The CRDA oversaw the
development of the $88 million "Grand Boulevard" corridor that links the new
convention center with The Boardwalk. The project was completed in early 1998.
Furthermore, as set forth in a November 1998 agreement with the CRDA, a $20.8
million beautification project is now in progress for the five block Virginia
and Maryland Avenue corridors which connect the thirty acre Boardwalk site of
the Taj Mahal to Absecon Boulevard (Route 30), one of Atlantic City's principal
access roadways. This comprehensive project includes the repair, resurfacing
and resignalizing of these roads and the installation of new roadside lighting,
the acquisition and demolition of deteriorated structures on Virginia Avenue
and, to a lesser extent, Maryland Avenue, and the installation and maintenance
of roadside landscaping on those sites, the construction of a twenty-six unit
subdivision of two-story, single unit and duplex residences which will front on
opposing sides of Virginia Avenue, and the improvement of the exterior facades
of selected Virginia Avenue and other structures, with consents of the owners,
to achieve a harmony and continuity of design among closely proximate
properties. Construction of the roadway and housing elements of this project is
expected to be substantially completed by the summer of 2000.
Management believes that these gaming regulatory reforms will serve to
permit future reductions in operating expenses of casinos in Atlantic City and
to increase the funds available for additional infrastructure development
through the CRDA. Due principally to an improved regulatory environment, general
improvement of economic conditions and high occupancy rates, significant
investment in the Atlantic City Market has been initiated and/or announced.
Management believes that these increases in hotel capacity, together with
infrastructure improvements, will be instrumental in stimulating future revenue
growth in the Atlantic City Market. See "Competition."
Competition
Atlantic City. Competition in the Atlantic City Market is intense. Trump
Plaza, the Taj Mahal and Trump Marina (the "Atlantic City Properties") compete
with other casino hotels located in Atlantic City as well as with each other. At
present, there are 12 casino hotels located in Atlantic City, including the
Atlantic City Properties, all of which compete for patrons. In addition, there
are several sites on The Boardwalk and in the Marina District on which casino
hotels could be built in the future and various applications for casino licenses
have been filed and announcements with respect thereto made from time to time
(including a casino resort joint venture (the "Mirage Joint Venture") between
Mirage and the Boyd Gaming Corporation to be built in the Marina District which
will contain 1,200 rooms, and a casino resort by MGM Grand, Inc. ("MGM") to be
built on The Boardwalk after MGM purchases the land chosen as the site for the
casino resort). Although management is not aware of any current construction on
such sites by third parties, infrastructure improvements in the area have begun.
Mirage intends to build a casino resort called LeJardin which will contain
approximately 2,000 rooms and will be linked to the resort created as a
9
result of the Mirage Joint Venture. Substantial new expansion and development
activity has recently been completed or has been announced in Atlantic City,
including the expansion at Harrah's, Hilton, Caesar's, Resorts, Tropicana and
Bally's Wild West Casino, which intensifies competitive pressures in the
Atlantic City Market. While management believes that the addition of hotel
capacity would be beneficial to the Atlantic City Market generally, there can be
no assurance that such expansion would not be materially disadvantageous to the
Atlantic City Properties. There also can be no assurance that the Atlantic City
development projects which are planned or are underway will be completed.
In 1999, Park Place Entertainment, Inc. ("Park Place") completed the
acquisition of Caesar's Casino Hotels from Starwoods Hotel & Resorts Worldwide,
Inc. This acquisition included the Caesar's Atlantic City property, which is
adjacent to Bally's Park Place and Wild West casino hotel ("Bally's") owned by
Park Place. Park Place has announced plans to connect the Caesar's and Bally's
properties with a $24 million connector, which will include additional gaming
space, restaurants and retail shops. Announced completion is September 2000.
In March 2000, MGM announced an agreement to acquire Mirage, a deal which
includes Mirage's property holdings in Atlantic City. At this time, it is not
possible to determine the impact that this acquisition will have on Mirage's
planned development in the H-Tract or MGM's planned development on The
Boardwalk.
Total Atlantic City gaming revenues have increased over the past five
years, although at varying rates. During 1995, all 12 casinos experienced
increased gaming revenues compared to 1994. During 1996, six casinos (including
Trump Plaza and the Taj Mahal) experienced increased gaming revenues compared to
1995, while six casinos experienced decreased revenues. In 1997, eight casinos
(including Trump Plaza and the Taj Mahal) experienced increased gaming revenues
compared to 1996, while four casinos experienced decreased revenues. In 1998,
seven casinos experienced increased gaming revenues compared to 1997 (including
Trump Plaza), while five casinos experienced decreased revenues (including the
Taj Mahal). In 1999, ten casinos experienced increased gaming revenues compared
to 1998 (including the Taj Mahal), while two casinos experienced decreased
revenues (including Trump Plaza).
Between April 30, 1993 and December 31, 1995, many operators in Atlantic
City expanded their facilities in anticipation of and in connection with the
June 1993 legalization of simulcasting and poker, increasing total gaming square
footage by approximately 181,200 square feet (23.3%) of which approximately
136,200 square feet is currently devoted to poker, keno and race simulcasting.
During this same period, 172 poker tables and 5,500 slot machines were added.
During 1996, a total of approximately 65,870 square feet of casino floor space
was added, an increase of 47.2%, including Trump World's Fair's 49,211 square
feet. Slot machines increased by approximately 1,911 units during 1996 and table
games increased by approximately 44 units during 1996, of which Trump World's
Fair accounted for 1,518 units and 16 units, respectively. During 1997, a total
of approximately 51,870 square feet of casino floor space was added. Slot
machines increased by approximately 2,153 units and table games increased by
approximately 82 units during 1997. During 1998, a total of approximately
38,350 square feet of casino floor space was added. Slot machines increased by
approximately 822 units and table games decreased by approximately 71 units
during 1998. During 1999, casino floor space decreased by approximately 41,071
square feet of which approximately 49,211 was due to the closing of Trump
World's Fair. Slot machines decreased by approximately 1,191 units, 1,636 of
which were attributable to the closing of Trump World's Fair and table games
decreased by approximately 47 units during 1999.
The Atlantic City Properties also compete, 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 in the future may be,
authorized. To a minimal extent, the Atlantic City Properties face competition
from gaming facilities nationwide, including land-based, cruise line, riverboat
and dockside casinos located in Colorado, Illinois, Indiana, Iowa, Louisiana,
Michigan, Mississippi, Missouri, Nevada, South Dakota, Ontario (Windsor and
Niagara Falls), the Bahamas, Puerto Rico 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. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. Bay Cruises is operating a gambling cruise
ship where patrons are taken from a pier in Sheepshead Bay in Brooklyn, New York
to international waters to gamble. In September 1997, another gambling cruise
ship was launched off the coast of Montauk, New York. On April 24, 1998 Freeport
Casino Cruises began operating a gambling ship in Long Island, New York.
Manhattan Cruises, a company offering gambling cruises departing from Manhattan,
New York City since January 28, 1998, suspended operations in early May 1998,
but has announced plans to resume operations shortly. Other companies
(including South Shore Cruise Lines, President Casino and Circle Line) are
currently seeking permission to operate similar cruises in the New York City
area. On December 5, 1997, the mayor of New York City proposed the construction
of a casino on Governors Island, located in the middle of New York Harbor;
however, the proposal would require an amendment to the New York State
Constitution and the sale of the island to New York
10
by the federal government. In Delaware, a total of approximately 2,600 slot
machines were installed at three horse racetracks in 1996. Initial legislation
allowed a maximum of 1,000 slot machines at each of the three racetracks. In
1998, the Delaware legislature approved a bill which would more than double the
number of slot machines allowed at the three racetracks. At the end of 1999,
there was a total of approximately 4,200 slot machines installed and
operational. West Virginia also permits slot machines at racetracks, and track
owners in several other states, including Maryland and Pennsylvania, are seeking
to do the same. In December 1996, the temporary Casino Niagara opened in Niagara
Falls, Ontario. Ontario officials expect that two-thirds of Casino Niagara's
patrons will come from the United States, predominantly from western New York.
In February 1998, the Ontario Casino Commission designated a consortium whose
principal investor is Hyatt Hotels Corporation as the preferred developer of the
permanent Casino Niagara. Moreover, the Atlantic City Properties may also face
competition from various forms of internet gambling.
In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects of
certain of their respective marketing efforts, including the common use of the
"Trump" name, the Atlantic City Properties compete directly with each other for
gaming patrons.
Other Competition. In addition, the Atlantic City Properties also faces
competition from casino facilities in a number of states 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 Atlantic City Properties and the Indiana Riverboat.
In March 1996, the United States Supreme Court struck down a provision of IGRA
which allowed Native American tribes to sue states in federal court for failing
to negotiate gaming compacts in good faith. Management cannot predict the impact
of this decision on the ability of Native American tribes to negotiate compacts
with states.
In 1991, the Mashantucket Pequot Nation opened Foxwoods, a casino facility
in Ledyard, Connecticut, located in the far eastern portion of such state, an
approximately three-hour drive from New York City and an approximately two and
one- half hour drive from Boston, which currently offers 24-hour gaming and
contains approximately 5,900 slot machines. An expansion at Foxwoods, completed
in April 1998, includes additional hotel rooms, restaurants and retail stores. A
high-speed ferry operates seasonally between New York City and Foxwoods. The
Mashantucket Pequot Nation has also announced plans for a high-speed train
linking Foxwoods to the interstate highway and an airport outside Providence,
Rhode Island. In addition, in October 1996, the Mohegan Nation opened the
Mohegan Sun Resort in Uncasville, Connecticut, located 10 miles from Foxwoods.
Developed by Sun International Hotels, Ltd., the Mohegan Sun Resort has
approximately 3,000 slot machines. The Mohegan Nation has announced plans for an
expansion of the casino facilities and the construction of a hotel, convention
center and entertainment center to be completed in the spring of 2002. In
addition, the Eastern Pequots are seeking formal recognition as a Native
American tribe for the purpose of opening a casino in the North Stonington area.
There can be no assurance that any continued expansion of gaming operations of
the Mashantucket Pequot Nation, the gaming operations of the Mohegan Nation or
the commencement of gaming operations by the Eastern Pequots would not have a
materially adverse impact on the operations of the Atlantic City Properties.
A group in Cumberland County, New Jersey calling itself the "Nanticoke
Lenni Lenape" tribe has filed a notice of intent with the Bureau of Indian
Affairs seeking formal federal recognition as a Native American tribe. In March
1998, the Oklahoma-based Lenape/Delaware Indian Nation, which originated in New
Jersey and already has federal recognition, filed a lawsuit against the city of
Wildwood claiming that the city is built on ancestral land. The city of
Wildwood, which supported the plan to build a casino, had entered settlement
negotiations, offering to deed municipal land to the tribe. The plan, which was
opposed by the State of New Jersey, required state and federal approval. In
early 1999, however, the Delaware Indian Nation's lawsuit was dismissed. In July
1993, the Oneida Nation opened a casino featuring 24-hour table gaming and
electronic gaming systems, but without slot machines, near Syracuse, New York.
The Oneida Nation opened a hotel in October 1997 that included expanded gaming
facilities, and has constructed a golf course and convention center. In April
1999, the St. Regis Mohawk Nation opened a casino, with slot machines, in the
northern portion of the state close to the Canadian border. In April 1999, the
St. Regis Mohawks also announced their intent to open a casino at the Monticello
Race Track in the Catskill Mountains region of New York; however, any Native
American gaming operation in the Catskills is subject to the approval of the
Governor of New York. The Seneca Nation plans to negotiate with New York State
to open a casino in Western New York; however, the proposed casino would be
subject to the purchase of additional property that is declared reservation
territory by the federal government. The Narragansett Nation of Rhode Island,
which has federal recognition, is seeking to open a casino in Rhode Island. The
Aquinnah Wampanoag Tribe is seeking to open a casino in Massachusetts. Other
Native American nations are
11
seeking federal recognition, land and negotiation of gaming compacts in New
York, Pennsylvania, Connecticut and other states near Atlantic City.
State Legislation. 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 New York and Pennsylvania. Several
states are considering or have approved large scale land-based casinos.
Additionally, since 1993, the gaming space in Las Vegas has expanded
significantly, with additional capacity planned and currently under
construction. The operations of the Atlantic City Properties could be adversely
affected by such competition, particularly if casino gaming were permitted in
jurisdictions near or elsewhere in New Jersey or in 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. On November 17, 1995, a proposal to allow casino gaming in
Bridgeport, Connecticut was voted down by that state's Senate. On June 18, 1998,
the New York State Senate and General Assembly failed to enact a constitutional
amendment to legalize casino gambling in certain areas of New York State,
effectively postponing any referendum to authorize such a constitutional
amendment until not earlier than November 2001. To the extent that legalized
gaming becomes more prevalent in New Jersey or other jurisdictions near Atlantic
City, competition would intensify. In particular, proposals have been introduced
to legalize gaming in other locations, including Philadelphia, Pennsylvania. In
February 1999, the Pennsylvania State General Assembly approved a bill allowing
in May 1999 a non-binding public referendum on a variety of legalized gaming
issues including riverboats, video poker in taverns and slot machines at
racetracks, but the Pennsylvania State Senate failed to enact the General
Assembly Bill. 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,
which may require a state constitutional amendment, has been enacted. Management
is unable to predict whether any such legislation, in New Jersey, Indiana,
Illinois or elsewhere, will be enacted or whether, if passed, it would have a
material adverse impact on the Atlantic City Properties.
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. Unless otherwise
indicated, all references to "Trump Plaza" include Trump Plaza's main tower,
including Trump Plaza East.
New Jersey Gaming Regulations
In general, the Casino Control Act and its implementing regulations contain
detailed provisions concerning, among other things, the granting and renewal 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; the 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; the security standards;
the manufacture and distribution of gaming equipment; the simulcasting of horse
races by casino licensees; equal employment opportunities 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 and any other related entity
required to be qualified ("CCC Regulations").
Operating Licenses. In June 1999, the CCC renewed Taj Associates' license
to operate the Taj Mahal through March 2003, renewed Plaza Associates' license
to operate Trump Plaza through June 2003, and renewed TCS' license through July
2003.
Casino License. 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
12
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 licenses
currently held by Plaza Associates, Taj Associates and TCS are 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 Division of Gaming
Enforcement (the "Division").
To be considered financially stable, a licensee must demonstrate the
following abilities: to pay winning wagers when due; to achieve an annual 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 liabilities; requiring reasonable reserves or trust accounts;
denying licensure; or appointing a conservator. See "--Conservatorship."
Management believes that it has adequate financial resources to meet the
financial stability requirements of the Casino Control Act 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 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. Pursuant to a condition of its casino license, payments by Plaza
Associates or Taj Associates to or for the benefit of any related entity or
partner, with certain exceptions, are subject to prior CCC approval; and, if
Plaza Associates' or Taj Associates' cash position falls below $5.0 million for
three consecutive business days, such entity 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 Trump AC, Trump AC Holding, Plaza Funding or TACC 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 bear any relation to any casino project,
including holders of 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 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 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; any
13
investment company registered under the Investment Company Act of 1940, as
amended; any collective investment trust organized by banks under Part Nine of
the Rules of the Comptroller of the Currency; any closed end investment trust;
any chartered or licensed life insurance company or property and casualty
insurance company; any banking and other chartered or licensed lending
institution; any 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 Antitrust Division of the Department of
Justice upon request, any document or information which bears any relation to
such debt or equity securities.
Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed 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 and has executed
a trust agreement pursuant to such an application. See "--Interim Casino
Authorization."
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. Trump AC, Trump AC Funding, Funding II and
Funding III are deemed to be Regulated Companies, and instruments evidencing a
beneficial ownership or creditor interest therein, including a 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.
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.
14
Under the terms of the indentures which govern the TAC I Notes (the "TAC I
Note Indenture"), the TAC II Notes (the "TAC II Note Indenture") and the TAC III
Notes (the "TAC III Note Indenture"), if a holder of such securities does not
qualify under the Casino Control Act when required to do so, such holder must
dispose of its interest in such securities, and Trump AC, Trump AC Funding,
Funding II and Funding III may redeem the securities at the lesser of the
outstanding amount or fair market value.
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 casino authorization,
the property relating to the casino operation or the securities is 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, except as set forth below with respect to publicly
traded securities, the closing or settlement date in the contract at issue 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 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 (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 an existing licensee, such
as one of the Atlantic City Properties, 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.
Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
15
Unless otherwise determined by the CCC, agreements to lease an approved
hotel building or the land under the building must be for a durational term
exceeding 30 years, must concern 100% of the entire approved hotel building or
the land upon which it is located and must 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.
Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10% of all the outstanding equity
securities of the casino licensee. Such an agreement shall: (i) provide for the
complete management of the casino; (ii) provide for the unrestricted power to
direct the casino operations; and (iii) provide for a term long enough to ensure
the reasonable continuity, stability and independence and management of the
casino.
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 four-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, 1997,
1998 and 1999, Plaza Associates' gross revenue tax was approximately $30.1
million, $30.2 million and $28.6 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $6.0 million,
$5.2 million and $5.3 million, respectively. For the years ended December 31,
1997, 1998 and 1999, Taj Associates' gross revenue tax was approximately $41.7
million, $41.1 million and $40.3 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $3.9 million,
$4.4 million and $5.3 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 30
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"). CRDA Bonds may have terms as long as 50 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 tax 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 the CRDA Bonds issued to the licensee.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such CRDA Bonds or twice the amount
of its investments authorized in lieu of such bond 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 monies made available to the CRDA, the CRDA is required to set
aside $175 million 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. These monies will be held to fund up to 27% of the
cost to casino licensees of expanding their hotel facilities to provide
additional hotel rooms, a portion of which has been required to be available
with respect to the new Atlantic City Convention Center.
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 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. Plaza
Associates and Taj Associates currently charge their parking patrons $2.00 in
order to make their required payments to the New Jersey State Treasurer and
cover related expenses. Amounts in the special fund will be expended by the CRDA
for eligible projects in the corridor region of Atlantic City related to
improving the highways, roads, infrastructure, traffic regulation and public
safety of Atlantic City or otherwise necessary or useful to the economic
development and redevelopment of Atlantic City in this regard.
Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and known
as the Atlantic City Fund, its proportional share of an amount related to the
amount by which annual operating expenses of the CCC and the Division are less
than a certain fixed sum. Additionally, a
16
portion of the investment alternative tax obligation of each casino licensee for
the years 1994 through 1998 allocated for projects in northern New Jersey shall
be paid into and credited to the Atlantic City Fund. Amounts in the Atlantic
City Fund will be expended by the CRDA for economic development projects of a
revenue producing nature that foster the redevelopment of Atlantic City other
than the construction and renovation of casino hotels.
Conservatorship. If, at any time, it is determined that Plaza Associates,
Trump AC, Trump AC Funding, Funding II, Funding III, Taj Associates or any other
entity qualifier 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 a casino license is suspended for a period in
excess of 120 days or is revoked, or if the CCC fails or refuses to renew such
casino license, the CCC could appoint a conservator to operate and dispose of
such licensee's casino hotel facilities. A conservator would be vested with
title to all property of such licensee 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 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.
Qualification of Employees. Certain employees of Plaza Associates, Taj
Associates and TCS 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. Plaza Associates' and Taj Associates' 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. Gaming credit may not be collectible in foreign countries.
Control Procedures. Gaming at the Atlantic City Properties is conducted by
trained and supervised personnel. Plaza Associates and Taj Associates employ
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 cameras 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 (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 involves a transaction
in currency of more than $10,000 per patron, per gaming day (a "Currency
Transaction Report"). 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, Plaza Associates and Taj
Associates are required to maintain detailed records (including the names,
addresses, social security numbers and other information with respect to its
gaming 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.
From 1992 through 1995, the Service conducted an audit of Currency
Transaction Reports filed by Taj Associates for the period from April 2, 1990
through December 31, 1991. The Treasury has received a report detailing the
audit as well as the response of Taj Associates. As a result of Taj Associates'
audit, the Treasury has notified Taj Associates that it failed to timely
17
file Currency Transaction Reports in connection with certain currency
transactions. In December 1997, Taj Associates paid a fine of $477,000 in
connection with 106 of these violations.
Plaza Associates and Taj Associates have adopted the following internal
control procedures to increase compliance with these Treasury regulations: (i)
computer exception reporting; (ii) establishment of a committee to review
Currency Transaction Report transactions and reporting which consists of
executives from the Casino Operations, Marketing and Administration Departments;
(iii) internal audit testing of compliance with the Treasury regulations; (iv)
training for all new and existing employees in compliance with the Treasury
regulations; and (v) a self-disciplinary program for employee violations of the
policy.
Trump AC 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 the business of Trump AC has been obtained for operations
in New Jersey.
ITEM 2. PROPERTIES.
Trump Plaza
Plaza Associates 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
mortgages associated with the TAC I Notes, the TAC II Notes and the TAC III
Notes (collectively, the "Plaza Mortgages") and certain other liens.
Plaza Casino Parcel. Trump Plaza's main tower 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 "Plaza
Casino Parcel").
The Plaza Casino Parcel consists of four tracts of land, three of which are
currently owned by Plaza Associates and one of which is leased by Plaza Hotel
Management Company ("PHMC") to Plaza Associates pursuant to a non-renewable
ground lease, which expires on December 31, 2078 (the "PHMC Lease"). The land
which is subject to the PHMC Lease is referred to as the "Plaza Leasehold
Tract." Seashore Four Associates ("Seashore Four") and Trump Seashore Associates
("Trump Seashore") had leased to Plaza Associates two of the tracts which are
now owned by Plaza Associates. Trump Seashore and Seashore Four are 100%
beneficially owned by Trump and are, therefore, affiliates of THCR. Plaza
Associates purchased the tract from Seashore Four in January 1997 and the tract
from Trump Seashore in September 1996 for $10.1 million and $14.5 million,
respectively.
The PHMC Lease is a "net lease" pursuant to which Plaza Associates, 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 Plaza Leasehold Tract
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 Plaza Leasehold Tract are owned by Plaza Associates during the
term of the PHMC Lease, and upon the expiration of the term of the PHMC Lease
(for any reason), ownership of such improvements will vest in PHMC. The PHMC
Lease also contains an option pursuant to which Plaza Associates may purchase
the Plaza Leasehold Tract at certain times during the term of such PHMC Lease
under certain circumstances.
Trump Plaza East. In connection with the Taj Acquisition, Plaza Associates
exercised its option to purchase certain of the fee and leasehold interests
comprising Trump Plaza East for a purchase price of $28.0 million.. Plaza
Associates currently leases a portion of the land which comprises Trump Plaza
East from an unrelated third party.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into a sublease with Time Warner
(the "Time Warner Sublease") pursuant to which Time Warner subleased the entire
first floor of retail space for a new Warner Brothers Studio Store which opened
in July 1994. Time Warner renovated the premises in connection with the opening
of the Warner Brothers Studio Store. The lease term is for ten years and gives
Time Warner the option to renew for two additional 5-year terms. Time Warner is
required to pay percentage rent monthly in an amount equal to (i) 7.5% of gross
annual sales up to $15.0 million and (ii) 10% of gross annual sales in excess of
$15 million. The terms of the Time Warner Sublease give Time Warner the right to
terminate the sublease if (i) gross annual sales are less
18
than $5.0 million for year two or less than $5.0 million as adjusted by CPI for
years three through nine; and (ii) Trump Plaza ceases to operate as a first
class hotel.
Trump World's Fair. Pursuant to an option to purchase Trump World's Fair,
on June 12, 1995, using proceeds from equity and debt offerings in 1995 (the
"June 1995 Offerings"), Plaza Associates acquired title to Trump World's Fair.
Further, Plaza Associates had entered into an easement agreement with the NJSEA
with annual payments of $2 million. In December 1999, in connection with the
closure of Trump World's Fair, Plaza Associates terminated the easement in
accordance with its terms.
Parking Parcels. Plaza Associates owns a parcel of land (the "Plaza Garage
Parcel") located across the street from the Plaza Casino Parcel and along
Pacific Avenue in a portion of the block bound by Pacific Avenue, Mississippi
Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has constructed
the Transportation Facility on the Plaza Garage Parcel. 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.
Plaza Associates 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.
Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square feet, and subleases 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 Plaza Garage Parcel. They are used for signage
and surface parking and are not encumbered by any mortgage liens other than that
of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates 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, 1999, of approximately $1.3 million and is encumbered by the Plaza
Mortgages. This lien is senior to the liens of the Plaza Mortgages. This
facility is currently being utilized by TCS.
Plaza Associates 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 Plaza
Mortgages.
Taj Mahal
Taj Associates currently owns the parcels of land which are used in
connection with the operation of the Taj Mahal. Each of these parcels is
encumbered by the mortgages securing the TAC I Notes, the TAC II Notes and the
TAC III Notes.
The Casino Parcel. The land comprising the Taj Mahal site consists of
approximately 30 acres, bounded by The Boardwalk to the south, vacated former
States Avenue to the east, Pennsylvania Avenue to the west and Pacific Avenue to
the north. The Taj Mahal was opened to the public on April 2, 1990.
Taj Entertainment Complex. In connection with the Taj Acquisition, Taj
Associates purchased the Taj Entertainment Complex from Realty Corp. The Taj
Entertainment Complex is a 20,000-square-foot multipurpose entertainment complex
known as the Xanadu Theater with seating capacity for approximately 1,200
people, which can be used as a theater, concert hall, boxing arena or exhibition
hall.
Steel Pier. In connection with the Taj Acquisition, Taj Associates
purchased the approximately 3.6 acre pier and related property located across
The Boardwalk from the Taj Mahal (the "Steel Pier") from Realty Corp. Taj
Associates initially proposed a concept to improve the Steel Pier, the estimated
cost of which improvements was $30 million. Such concept was approved by the New
Jersey Department of Environment Protection ("NJDEP"), the agency which
administers the Coastal Area Facilities Review Act ("CAFRA"). A condition
imposed on Taj Associates' CAFRA permit initially required that Taj Associates
begin construction of certain improvements on the Steel Pier by October 1992,
which improvements were to be completed within 18 months of commencement. In
March 1993, Taj Associates obtained a modification of its CAFRA permit providing
for the extensions of the required commencement and completion dates of the
improvements to the Steel Pier for one year based upon an interim use of the
Steel Pier for an amusement park. Taj Associates received additional one-year
extensions of the required commencement and completion dates of the improvements
of the Steel Pier based upon the same interim use of the Steel Pier as
19
an amusement park pursuant to a sublease ("Pier Sublease") with an amusement
park operator. The Pier Sublease terminates on December 31, 2000 unless
extended.
Office and Warehouse Space. Taj Associates owns an office building located
on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Castle Associates which are presently leased to commercial tenants
and used for office space and vehicle maintenance facilities. In connection with
the Taj Acquisition, Taj Associates purchased from Realty Corp. a warehouse
complex of approximately 34,500 square feet. This warehouse complex was sold to
the CRDA as part of the location of a new neighborhood housing development to be
completed as part of the redevelopment of the road corridors and adjoining
neighborhoods to the Taj Mahal.
Taj Associates had entered into a lease with Trump-Equitable Company for
the lease of office space in Trump Tower in New York City, which Taj Associates
used as a marketing office. The monthly payments under the lease had been
$1,000, and the premises were leased at such rent for four months in 1992, the
full twelve months in 1993 and 1994 and eight months in 1995. On September 1,
1995, the lease was renewed for a term of five years with an option for Taj
Associates to cancel the lease on September 1 of each year, upon six months'
notice and payment of six months' rent. Under the renewed lease, the monthly
payments are $2,285. In March 2000, THCR assumed this lease and moved to this
office space from its previous location in Trump Tower.
Parking. The Taj Mahal provides parking for approximately 6,950 cars of
which 6,725 spaces are located in indoor parking garages and 225 surface spaces
are located on land purchased from Realty Corp. in connection with the Taj
Acquisition. In addition, Taj Associates entered into a lease agreement with
South Jersey Transportation Authority for employee parking facilities.
Themed Restaurants and Retail Shopping. Hard Rock Cafe International
(N.J.), Inc. ("Hard Rock") has entered into a fifteen-year lease (the "Hard Rock
Cafe Lease") with Taj Associates for the lease of space at the Taj Mahal for a
Hard Rock Cafe. The basic rent under the Hard Rock Cafe Lease is $750,000 per
year, paid in equal monthly installments, for the first 10 years of the lease
term, and will be $825,000 per year, paid in equal monthly installments, for the
remaining 5 years of the lease term. In addition, Hard Rock will pay percentage
rent in an amount equal to 10% of Hard Rock's annual gross sales in excess of
$10,000,000. Hard Rock has the right to terminate the Hard Rock Cafe Lease on
the tenth anniversary thereof and also has the option to extend the term of the
lease for an additional five-year period at an annual basic rent of $907,500
during such renewal term. The Hard Rock Cafe opened in November 1996.
All Star Cafe, Inc. ("All Star") had entered into a twenty-year lease (the
"All Star Cafe Lease") with Taj Associates for the lease of space at the Taj
Mahal to operate an All Star Cafe. The basic rent under the All Star Cafe Lease
was $1.0 million per year, paid in equal monthly installments. In addition, All
Star was to pay percentage rent to Taj Associates in an amount equal to the
difference, if any, between (i) 8% of All Star's gross sales made during each
calendar month during the first lease year, 9% of All Star's gross sales made
during each calendar month during the second lease year and 10% of All Star's
gross sales made during each calendar month during the third through the
twentieth lease years, and (ii) one-twelfth of the annual basic rent. The All
Star Cafe opened in March 1997.
On September 15, 1999 an agreement was reached between Taj Associates, All
Star and Planet Hollywood International, Inc. to terminate the All Star Cafe
Lease effective September 24, 1999. Upon termination of the All Star Cafe
Lease, all improvements, alterations and All Star's personal property, with the
exception of specialty trade fixtures, became the property of Taj Associates.
Taj Associates recorded the estimated $17.2 million fair market value of these
assets in other revenue based on an independent appraisal.
Taj Associates intends to continue to operate the facility as a themed
restaurant and entertainment complex.
Stage Deli of Atlantic City, Inc. ("Stage Deli") has entered into a ten-
year and five-month lease commencing July 7, 1997 (the "Stage Deli Lease") with
Taj Associates for the lease of space at the Taj Mahal for a Stage Deli of New
York restaurant. Stage Deli has an option to renew the Stage Deli Lease for an
additional five-year term. Commencing September 1, 1998 the Stage Deli Lease
was amended to eliminate the basic rent provisions and provide for monthly
percentage rents of 8% or 10% of gross monthly sales based on actual average
sales volumes as defined in the Stage Deli Lease.
Time Warner has entered into a ten-year lease (the "Time Warner Taj Lease")
with Taj Associates for the lease of space at the Taj Mahal for a Warner
Brothers Studio Store. Time Warner has an option to renew the Time Warner Taj
Lease for two additional five-year terms. Time Warner pays percentage rent
monthly in an amount equal to (i) 7.5% of gross annual sales up
20
to $5.0 million and (ii) 10% sales of gross annual sales in excess of $5.0
million. No minimum or "base" rent is payable under the Time Warner Taj Lease.
The terms of the lease give Time Warner the right to terminate the lease if (i)
gross annual sales are less than $2.5 million for the second year of the lease
or less than $2.5 million as adjusted by CPI for the third through ninth years
of the lease; and (ii) the Taj Mahal ceases to operate as a first class hotel.
The Warner Brothers Studio Store opened in May 1997.
The Taj Mahal recently completed the expansion of the retail shopping area
along the length of its parking garage promenade walkway which immediately
adjoins the Taj Mahal's main retail shopping area. The first tenant, Starbucks,
operated by Host International, Inc., opened in September 1996. Sbarro's, an
Italian eatery, operated by Sbarro America Properties, Inc., opened in October
1998. Boardwalk Treats, Beka's Pastries and a Harley Davidson retail
merchandise outlet opened at various times during 1999. A Sunglass Hut,
operated by Sunglass Hut International, opened in August 1998 in a separate
location also adjoining the Taj Mahal's main retail shopping area.
ITEM 3. LEGAL PROCEEDINGS.
General. Trump AC, its partners, certain members of its former executive
committee, and certain of its employees, have been involved in various legal
proceedings. Such persons and entities are vigorously defending the allegations
against them and intend to contest vigorously any future proceedings. In
general, Trump AC 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, judgments, fines and penalties) incurred by them in
said legal proceedings.
Other Litigation. On March 13, 1997, THCR filed a lawsuit in the United
States District Court, District of New Jersey, against Mirage, the State of New
Jersey ("State"), the New Jersey Department of Transportation ("NJDOT"), the
South Jersey Transportation Authority ("SJTA"), the CRDA, the New Jersey
Transportation Trust Fund Authority and others. THCR was seeking declaratory and
injunctive relief to recognize and prevent violations by the defendants of the
casino clause of the New Jersey State Constitution and various federal
securities and environmental laws relating to proposed infrastructure
improvements in the Atlantic City marina area. While this action was pending,
defendants State and CRDA then filed an action in the New Jersey State Court
seeking a declaratory judgment as to the claim relating to the casino clause of
the New Jersey State Constitution. On May 1, 1997, the United States District
Court dismissed the federal claims and ruled that the State constitutional
claims should be pursued in State Court. On April 2, 1998, the United States
Court of Appeals for the Third Circuit affirmed the dismissal and THCR's
petition to the Third Circuit for a rehearing was denied. On May 14, 1997 the
State Court granted judgment in favor of the State and CRDA. On March 20, 1998,
the Appellate Division affirmed. On August 2, 1999, the State Supreme Court
affirmed, with two justices dissenting.
On June 26, 1997, THCR filed an action against NJDOT, SJTA, Mirage and
others, in the Superior Court of New Jersey, Chancery Division, Atlantic County
(the "Chancery Division Action"). THCR sought to declare unlawful and enjoin
certain actions and omissions of the defendants arising out of and relating to a
certain Road Development Agreement dated as of January 10, 1997, by and among
NJDOT, SJTA and Mirage (the "Road Development Agreement") and the public funding
of a certain road and tunnel project to be constructed in Atlantic City, as
further described in the Road Development Agreement. THCR moved to consolidate
this action with other previously filed related actions. Defendants opposed
THCR's motion to consolidate the Chancery Division Action, initially moved to
dismiss this action on procedural grounds and subsequently moved to dismiss this
action on substantive grounds. On October 20, 1997, the Chancery Court denied
the defendants' motion to dismiss this action on procedural grounds, but entered
summary judgment dismissing this action on substantive grounds. This decision
was affirmed at the appellate level on June 19, 1999. On November 23, 1999, the
State Supreme Court denied THCR's petition for certification.
On June 26, 1997, THCR also filed an action, in lieu of prerogative writs,
against the CRDA, in the Superior Court of New Jersey, Law Division, Atlantic
County, seeking review of the CRDA's April 15, 1997 approval of funding ($120
million principal amount plus interest) for the road and tunnel project
discussed above, a declaratory judgment that the said project is not eligible
for such CRDA funding, and an injunction prohibiting the CRDA from contributing
such funding to the said project. Defendants moved to dismiss this action on
procedural grounds and also sought to transfer this action to New Jersey's
Appellate Division. On October 3, 1997, the New Jersey Superior Court
transferred this action to the Appellate Division. On June 19, 1999, the
Appellate Division dismissed THCR's claims and on November 23, 1999, the State
Supreme Court denied THCR's petition for certification.
21
On September 9, 1997, Mirage filed a complaint against Trump, THCR and
Hilton Hotels Corporation, in the United States District Court for the Southern
District of New York (the "New York Action"). The complaint sought damages for
alleged violations of antitrust laws, tortious interference with prospective
economic advantage and tortious inducement of a breach of fiduciary duties
arising out of activities purportedly engaged in by defendants in furtherance of
an alleged conspiracy to impede Mirage's efforts to build a casino resort in the
Marina district of Atlantic City, New Jersey. Among other things, Mirage
contended that the defendants filed several frivolous lawsuits and funded others
that challenge the proposed state funding mechanisms for the construction of a
proposed roadway and tunnel that would be paid for chiefly through government
funds and which would link the Atlantic City Expressway with the site of
Mirage's proposed new casino resort. On November 10, 1997, THCR and Trump moved
to dismiss the complaint. On December 18, 1998, the Court denied the motion to
dismiss brought by Trump and THCR. On April 20, 1999, Mirage and an affiliate,
the Mirage Casino Hotel filed a complaint against THCR and other defendants in
Nevada State Court (the "Nevada Action"). The Nevada Action, which was
subsequently removed to the United States District Court for the District of
Nevada, sought damages and an injunction for an alleged misappropriation of
trade secrets, intentional interference with prospective economic advantage and
contractual relations and conspiracy to injure Mirage. On February 23, 2000,
THCR and Mirage entered into an agreement whereby the New York Action and the
Nevada Action against THCR and all of its officers and directors will both be
dismissed with prejudice. The parties exchanged mutual releases and no money
was paid by either side.
On August 14, 1996, certain stockholders of THCR filed two derivative
actions in the Court of Chancery in Delaware (Civil Action Nos. 15148 and 15160)
(the "Delaware cases") against each of the members of the Board of Directors of
THCR, THCR, THCR Holdings, Castle Associates and Trump Casinos II, Inc. ("TCI-
II"). The plaintiffs claim that the directors of THCR breached their fiduciary
duties in connection with its acquisition of Castle Associates (the "Castle
Acquisition") by purchasing these interests at an excessive price in a self-
dealing transaction. The complaint sought to enjoin the transaction, and also
sought damages and an accounting. The injunction was never pursued. These
plaintiffs served a notice of dismissal in the Delaware cases on December 29,
1997. The Court of Chancery has not yet ordered the Delaware cases dismissed.
On October 16, 1996, a stockholder of THCR filed a derivative action in the
United States District Court, Southern District of New York (96 Civ. 7820)
against each member of the Board of Directors of THCR, THCR, THCR Holdings,
Castle Associates, TCI, TCI-II, TCHI and Salomon Brothers, Inc ("Salomon"). The
plaintiff claims that certain of the defendants breached their fiduciary duties
and engaged in ultra vires acts in connection with the Castle Acquisition and
that Salomon was negligent in the issuance of its fairness opinion with respect
to the Castle Acquisition. The plaintiff also alleges violations of the federal
securities laws for alleged omissions and misrepresentations in THCR's proxies,
and that Trump, TCI-II and TCHI breached the acquisition agreement by supplying
THCR with untrue information for inclusion in the proxy statement delivered to
THCR's stockholders in connection with the Castle Acquisition. The plaintiff
seeks removal of the directors of THCR, and an injunction, rescission and
damages.
The Delaware cases were amended and refiled in the Southern District of New
York and consolidated with the federal action for all purposes, including
pretrial proceedings and trial. On or about January 17, 1997, the plaintiffs
filed their Consolidated Amended Derivative Complaint (the "First Amended
Complaint"), reflecting the consolidation. On or about March 24, 1997, the
plaintiffs filed their Second Consolidated Amended Derivative Complaint (the
"Second Amended Complaint"). In addition to the allegations made in the First
Amended Complaint, the Second Amended Complaint claims that certain of the
defendants breached their fiduciary duties and wasted corporate assets in
connection with a previously contemplated transaction with Colony Capital, Inc.
("Colony Capital"). The Second Amended Complaint also includes claims against
Colony Capital for aiding and abetting certain of those violations. In addition
to the relief sought in the First Amended Complaint, the Second Amended
Complaint sought to enjoin the previously contemplated transaction with Colony
Capital or, if it was effectuated, to rescind it. On March 27, 1997, THCR and
Colony Capital mutually agreed to end negotiations with respect to such
transaction. On June 26, 1997, plaintiffs served their Third Consolidated
Amended Derivative Complaint (the "Third Amended Complaint"), which omitted the
claims against Colony Capital. THCR and the other defendants in the action moved
to dismiss the Third Amended Complaint on August 5, 1997. The plaintiffs opposed
the defendants' motions to dismiss the Third Amended Complaint by response dated
October 24, 1997. The defendants' reply was served December 9, 1997. By letter
dated April 2, 1998, the plaintiffs sought the Court's permission to amend
further the Third Amended Complaint to add certain additional factual
allegations. The defendants opposed the motion and the Court has not yet ruled
on it.
THCR. On or about July 30, 1999, William K. Steiner, a stockholder of
THCR, filed a derivative action in the Court of Chancery in Delaware (Civil
Action No. 17336NC) against each member of the Board of Directors of THCR. The
plaintiff claims that the directors of THCR breached their fiduciary duties by
approving certain loans from THCR to Trump. The complaint seeks to rescind the
loans, and also seeks an order requiring the defendants to account to THCR for
losses and damages allegedly resulting from the loans. The defendants believe
that the suit is without merit and on October 1, 1999, the
22
defendants moved to dismiss the complaint. On January 31, 2000 the director
defendants filed their opening brief in support of their motion to dismiss.
Various legal proceedings are now pending against Trump AC. Trump AC
considers all such proceedings to be ordinary litigation incident to the
character of its business. Trump AC 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 Trump AC.
From time to time, Plaza Associates and Taj Associates may be involved in
routine administrative proceedings involving alleged violations of certain
provisions of the Casino Control Act. However, management believes that the
final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on Plaza Associates or Taj Associates
or on the ability of Plaza Associates or Taj Associates to otherwise retain or
renew any casino or other licenses required under the Casino Control Act for the
operation of Trump Plaza and the Taj Mahal.
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 1999.
23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Trump AC. THCR Holdings has beneficially owned 100% of the partnership
interests in Trump AC since June 12, 1995.
Trump AC Funding. Trump AC has owned 100% of the common stock of Trump AC
Funding since its formation on January 30, 1996. There is no established trading
market for Trump AC Funding's common stock.
Funding II. Trump AC has owned 100% of the common stock of Funding II
since its formation on November 18, 1997. There is no established trading market
for Funding II's common stock.
Funding III. Trump AC has owned 100% of the common stock of Funding III
since its formation on November 18, 1997. There is no established trading market
for Funding III's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical consolidated financial
information of Trump AC for each of the five years ended December 31, 1995
through 1999 (see Notes 1 and 2 below).
All financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the consolidated and condensed financial statements and the related notes
thereto included elsewhere in this Form 10-K.
Years Ended December 31,
--------------------------------------------------------------------
Statement of Operations Data: 1995 1996 1997 1998 1999
----------- ----------- ---------- --------- -----------
(dollars in thousands)
Revenues:
Gaming............................................ $298,073 $ 752,228 $ 889,116 $ 888,518 $ 867,556
Other (a)......................................... 74,182 190,995 231,235 220,725 230,606
-------- ---------- ---------- ---------- ----------
Gross revenues.................................... 372,255 943,223 1,120,351 1,109,243 1,098,162
Promotional allowances............................ 45,077 113,743 138,085 130,151 124,735
-------- ---------- ---------- ---------- ----------
Net revenues...................................... 327,178 829,480 982,266 979,092 973,427
-------- ---------- ---------- ---------- ----------
Costs and expenses:
Gaming............................................ 164,396 453,841 555,457 545,204 550,441
Other............................................. 21,261 54,613 65,462 66,180 66,231
General and administrative........................ 65,521 147,464 168,143 168,183 173,578
Depreciation and amortization..................... 16,213 60,870 66,018 61,536 58,615
Pre-opening....................................... -- 4,145 -- -- --
Trump World's Fair closing costs (b).............. -- -- -- -- 123,959
-------- ---------- ---------- ---------- ----------
Total costs and expenses.......................... 267,391 720,933 855,080 841,103 972,824
-------- ---------- ---------- ---------- ----------
Income from operations............................ 59,787 108,547 127,186 137,989 603
Interest expense, net............................. (43,261) (112,122) (141,249) (149,070) (150,363)
Other nonoperating (expense) income (c)........... (5,743) 14,194 -- -- 417
Extraordinary loss (d)............................ (9,250) (59,132) -- -- --
-------- ---------- ---------- ---------- ----------
Net income (loss)................................. $ 1,533 $ (48,513) $ (14,063) $ (11,081) $ (149,343)
======== ========== ========== ========== ==========
Balance Sheet Data (at end of period):
Cash and cash equivalents......................... $ 15,937 $ 71,320 $ 114,879 $ 80,954 $ 75,061
Property and equipment, net....................... 425,262 1,456,267 1,460,050 1,432,965 1,322,599
Total assets...................................... 480,024 1,659,006 1,739,073 1,688,606 1,570,866
Total long-term debt, net of current maturities... 332,721 1,207,795 1,300,027 1,299,217 1,302,824
Total capital..................................... $110,812 $ 331,858 $ 327,939 $ 272,759 $ 123,416
24
__________________
Note 1: On June 12, 1995, as part of the June 1995 Offerings, THCR issued
$140,000,000 of THCR Common Stock and contributed the proceeds from
such offering to THCR Holdings, the beneficial owner of 100% of Trump
AC, for an approximately 60% general partnership interest in THCR
Holdings.
Note 2: On April 17, 1996, as part of the Taj Acquisition, THCR acquired Taj
Associates. In connection with the Taj Acquisition, Taj Associates
became a wholly owned subsidiary of Trump AC. Therefore, the financial
data as of December 31, 1996 includes the operations of Taj Associates
for the period from the date of acquisition (April 17, 1996) through
December 31, 1996.
(a) On September 15, 1999 an agreement was reached between Taj Associates,
All Star and Planet Hollywood International, Inc. to terminate the All
Star Cafe Lease effective September 24, 1999. Upon termination of the
All Star Cafe Lease, all improvements, alterations and All Star's
personal property, with the exception of specialty trade fixtures,
became the property of Taj Associates. Taj Associates recorded the
$17,200,000 estimated fair market value of these assets in other
revenue based on an independent appraisal.
Taj Associates intends to continue to operate the facility as a themed
restaurant and entertainment complex.
(b) On October 4, 1999, THCR closed Trump World's Fair. The estimated cost
of closing Trump World's Fair was approximately $123,959,000, which
includes $97,221,000 million for the writedown of the net book value of
the assets and $26,738,000 million of costs incurred and to be incurred
in connection with the closing and demolition of the building.
(c) Other nonoperating expense for the year ended December 31, 1995
includes $3,700,000 of real estate taxes and leasing costs associated
with Trump Plaza East. Other nonoperating expense for the year ended
December 31, 1995 also includes $2,000,000 in costs associated with
Trump World's Fair. Other nonoperating income for the year ended
December 31, 1996 includes $15,000,000 license fee revenue.
(d) The extraordinary loss for the years ended December 31, 1995 and 1996
relate to the redemption of the Plaza PIK Notes and Plaza PIK Note
Warrants and the write-off of related unamortized deferred financing
costs.
25
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS.
Capital Resources and Liquidity
Cash flows from operating activities are Trump AC's principal source of
liquidity. Trump AC expects to have sufficient liquidity to meet its obligations
during 2000. Cash flow is managed based upon the seasonality of the operations.
Any excess cash flow achieved from operations during peak periods is utilized to
subsidize non-peak periods when necessary.
The indentures under which the TAC Notes were issued restrict the ability
of Trump AC and its subsidiaries to make distributions or pay dividends, as the
case may be, unless certain financial ratios are achieved. In addition, the
ability of Plaza Associates and Taj Associates to make payments of dividends or
distributions (except for payment of interest) through Trump AC to THCR Holdings
may be restricted by the CCC.
Capital expenditures for Trump AC were $20.9 million and $21.5 million for
the years ended December 31, 1998 and 1999, respectively. Capital expenditures
for improvements to Trump Plaza's existing facilities were $12.0 million and
$10.7 million for the years ended December 31, 1998 and 1999, respectively. In
addition, in 1997, Plaza Associates exercised its option to purchase from
Seashore Four Associates, an entity beneficially owned by Trump, one of the
parcels of land underlying Trump Plaza's main tower for $10.1 million, pursuant
to the terms of a lease, the payments under which were terminated upon the
exercise of such option. In 1996 and 1997 Plaza Associates purchased related
property for $24.6 million with capital contributed by THCR Holdings. This
amount which was originally recorded as contributed capital was reclassified as
"Advances to Affiliates" during 1998. Also, in 1996 THCR Holdings contributed
$19.5 million of capital to Plaza Associates for improvements related to Trump
World's Fair. This amount, which was originally recorded as contributed capital,
was reclassified as "Advances to Affiliates" in October 1998.
Capital expenditures attributable to the Taj Mahal were $8.5 million and
$9.3 million for the years ended December 31, 1998 and 1999, respectively.
26
Results of Operations for the Years Ended December 31, 1997 and 1998
The financial information presented below reflects the results of
operations of Plaza Associates and Taj Associates. Because Trump AC has no
business operations other than its interest in Plaza Associates and Taj
Associates its results of operations are not discussed below.
The following table includes selected data of Plaza Associates and Taj
Associates for the years ended December 31, 1997 and 1998 (Trump AC also
includes TCS, which is not separately disclosed):
Year Ended December 31,
---------------------------------------------------------------------------
1997 1998 1997 1998 1997 1998
Plaza Plaza Taj Taj Total Total
Associates Associates Associates Associates Trump AC Trump AC
---------------------------------------------------------------------------
(in millions)
Revenues:
Gaming................................. $370.7 $374.5 $518.4 $514.0 $ 889.1 $ 888.5
Other.................................. 108.0 101.6 123.2 119.1 231.2 220.7
------ ------ ------ ------ -------- --------
Gross Revenues......................... 478.7 476.1 641.6 633.1 1,120.3 1,109.2
Less: Promotional Allowances........... 64.4 63.4 73.7 66.7 138.1 130.1
------ ------ ------ ------ -------- --------
Net Revenues........................... 414.3 412.7 567.9 566.4 982.2 979.1
------ ------ ------ ------ -------- --------
Costs & Expenses:
Gaming................................. 233.8 228.8 321.6 316.4 555.5 545.2
General & Administrative............... 80.2 79.1 88.0 89.2 168.1 168.6
Depreciation & Amortization............ 24.4 24.7 41.4 36.4 66.0 61.1
Other.................................. 32.0 32.4 33.5 33.8 65.5 66.2
------ ------ ------ ------ -------- --------
Total Costs and Expenses............... 370.4 365.0 484.5 475.8 855.1 841.1
------ ------ ------ ------ -------- --------
Income from Operations................. 43.9 47.7 83.4 90.6 127.1 138.0
------ ------ ------ ------ -------- --------
Non Operating Income................... .6 1.4 1.1 2.4 2.9 5.5
Interest Expense....................... (48.6) (47.7) (94.7) (94.1) (144.1) (154.6)
------ ------ ------ ------ -------- --------
Total Non Operating Expense............ (48.0) (46.3) (93.6) (91.7) (141.2) (149.1)
------ ------ ------ ------ -------- --------
Net (Loss) Income...................... $ (4.1) $ 1.4 $(10.2) $ (1.1) $ (14.1) $ (11.1)
====== ====== ====== ====== ======== ========
Year Ended December 31,
---------------------------------------------------------------------------
1997 1998 1997 1998 1997 1998
Plaza Plaza Taj Taj Total Total
Associates Associates Associates Associates Trump AC Trump AC
------------ ------------ ---------- ------------ ---------- ---------
(in millions)
Table Game Revenues.................... $ 96.4 $ 102.4 $ 202.7 $ 198.6 $ 299.1 $ 301.0
Incr (Decr) over Prior Period.......... $ 6.0 $ (4.1) $ 1.9
Table Game Drop........................ $ 654.4 $ 643.0 $1,279.1 $1,204.8 $1,933.5 $1,847.8
Incr (Decr) over Prior Period.......... $ (11.4) $ (74.3) $ (85.7)
Table Win Percentage................... 14.7% 15.9% 15.9% 16.5% 15.5% 16.3%
Incr (Decr) over Prior Period.......... 1.2pts 0.6pts 0.8pts
Number of Table Games.................. 117 108 155 147 272 255
Incr (Decr) over Prior Period.......... (9) (8) (17)
Slot Revenues.......................... $ 274.3 $ 272.1 $ 297.4 $ 295.0 $ 571.7 $ 567.1
Incr (Decr) over Prior Period.......... $ (2.2) $ (2.4) $ (4.6)
Slot Handle............................ $3,381.1 $3,366.8 $3,583.7 $3,623.7 $6,964.8 $6,990.5
Incr (Decr) over Prior Period.......... $ (14.3) $ 40.0 $ 25.7
Slot Win Percentage.................... 8.1% 8.1% 8.3% 8.1% 8.2% 8.1%
Incr (Decr) over Prior Period.......... 0pts (0.2)pts (0.1)pts
Number of Slot Machines................ 4,083 4,144 4,136 4,152 8,219 8,296
Incr (Decr) over Prior Period.......... 61 16 77
Poker Revenues......................... -- -- $ 16.0 $ 17.6 $ 16.0 $ 17.6
Incr (Decr) over Prior Period.......... $ 1.6 $ 1.6
Number of Poker Tables................. -- -- 63 64 63 64
Incr (Decr) over Prior Period.......... 1 1
Other Gaming Revenues.................. -- -- $ 2.3 $ 2.8 $ 2.3 $ 2.8
Incr (Decr) over Prior Period.......... $ 0.5 $ 0.5
Total Gaming Revenues.................. $ 370.7 $ 374.5 $ 518.4 $ 514.0 $ 889.1 $ 888.5
Incr (Decr) over Prior Period.......... $ 3.8 $ (4.4) $ (0.6)
Number of Guest Rooms.................. 1,404 1,404 1,250 1,250 2,654 2,654
Occupancy Rate......................... 87.4% 86.4% 91.7% 92.0% 89.4% 89.0%
Average Daily Rate (Room Revenue)...... $ 81.68 $ 79.78 $ 107.72 $ 99.50 $ 94.26 $ 89.38
________________________________
Gaming revenues are the primary source of Trump AC's revenues. The year
over year decrease in gaming revenues was due primarily to Taj Associates' first
quarter results in 1997 which included an unusual approximately $8 million
dollar table game win from one premium player, a decline in high-end
international table game players due to Asian economic conditions and the
decline in slot revenues at both the Taj Mahal and Trump Plaza as the result of
an increased competitive marketplace. Table games revenues represent the amount
retained by Trump AC from amounts wagered at table games. The table win
percentage tends to be fairly constant over the long term, but may vary
significantly in the short term, due to large wagers by high rollers. The
Atlantic City industry table win percentages were 15.0% and 15.3% for the years
ended December 31, 1997 and 1998, respectively. The year over year decrease in
slot revenues at both the Taj Mahal and Trump Plaza was primarily due to
increased competitiveness in the marketplace.
Gaming costs and expenses decreased $10.3 million or 1.9% from the
comparable period in 1997. This decrease primarily represents marketing and
promotional costs.
27
During 1998, self-insurance reserves decreased due to an internally focused
aggressive policy where potential lawsuits are challenged immediately.
Additionally, a more aggressive litigation policy was pursued to deter present
and future frivolous lawsuits. Trump AC also retained an outside consultant to
comprehensively review certain claims and to assist Trump AC in establishing the
estimated reserves at December 31, 1998.
During the second quarter of 1997, Trump AC revised its estimates of the
useful lives of buildings, building improvements, furniture and fixtures which
were acquired in 1996. Buildings and building improvements were re-evaluated to
have a forty year life and furniture and fixtures were determined to have a
seven year life. Trump AC believes these changes more appropriately reflect the
timing of the economic benefits to be received from these assets during their
estimated useful lives. For the years ended December 31, 1997 and 1998, the net
effect of applying these new lives was to increase net income by $6.0 million
and $7.7 million, respectively.
28
Results of Operations for the Years Ended December 31, 1998 and 1999
The financial information presented below reflects the results of
operations of Plaza Associates and Taj Associates. Because Trump AC has no
business operations other than its interest in Plaza Associates and Taj
Associates, its results of operations are not discussed below.
The following table includes selected data of Plaza Associates and Taj
Associates for the years ended December 31, 1998 and 1999 (Trump AC also
includes TCS, which is not separately disclosed):
Year Ended December 31,
--------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999
Plaza Plaza Taj Taj Total Total
Associates Associates Associates Associates Trump AC Trump AC
------------ ----------- ----------- ----------- ---------- ---------
(in millions)
Revenues:
Gaming................................. $374.5 $ 354.5 $514.0 $513.1 $ 888.5 $ 867.6
Other.................................. 101.6 97.8 119.1 132.8 220.7 230.6
------ ------- ------ ------ -------- -------
Gross Revenues......................... 476.1 452.3 633.1 645.9 1,109.2 1,098.2
Less: Promotional Allowances........... 63.4 59.8 66.7 64.9 130.1 124.7
------ ------- ------ ------ -------- -------
Net Revenues........................... 412.7 392.5 566.4 581.0 979.1 973.5
------ ------- ------ ------ -------- -------
Costs & Expenses:......................
Gaming................................. 228.8 215.2 316.4 335.2 545.2 550.4
General & Administrative............... 79.1 76.4 89.2 97.1 168.6 173.6
Depreciation & Amortization............ 24.7 21.9 36.4 36.7 61.1 58.6
Trump World's Fair closing............. -- 124.0 -- -- -- 124.0
Other.................................. 32.4 30.0 33.8 36.3 66.2 66.2
------ ------- ------ ------ -------- -------
Total Costs and Expenses............... 365.0 467.5 475.8 505.3 841.1 972.8
------ ------- ------ ------ -------- -------
Income (loss) from Operations.......... 47.7 (75.0) 90.6 75.7 138.0 0.7
------ ------- ------ ------ -------- -------
Non Operating Income................... 1.4 1.1 2.4 2.1 5.5 3.8
Interest Expense....................... (47.7) (47.5) (94.1) (93.6) (154.6) (153.8)
------ ------- ------ ------ -------- -------
Total Non Operating Expense............ (46.3) (46.4) (91.7) (91.5) (149.1) (150.0)
------ ------- ------ ------ -------- -------
Net Income/(loss)...................... $ 1.4 $(121.4) $ (1.1) $(15.8) $ (11.1) $(149.3)
====== ======= ====== ====== ======== =======
29
Year Ended December 31,
----------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999
Plaza Plaza Taj Taj Total Total
Associates Associates Associates Associates Trump AC Trump AC
----------- ------------ ----------- ------------ ---------- ----------
(in millions)
Table Game Revenues $ 102.4 $ 97.5 $ 198.6 $ 173.3 $ 301.0 $ 270.8
Incr (Decr) over Prior Period $ (4.9) $ (25.3) $ (30.2)
Table Game Drop $ 643.0 $ 631.5 $1,204.8 $1,079.4 $1,847.8 $1,710.9
Incr (Decr) over Prior Period $ (11.5) $ (125.4) $ (136.9)
Table Win Percentage 15.9% 15.4% 16.5% 16.1% 16.3% 15.8%
Incr (Decr) over Prior Period (0.5)pts (0.4)pts (0.5)pts
Number of Table Games 108 98 147 143 255 241
Incr (Decr) over Prior Period (10) (4) (14)
Slot Revenues $ 272.1 $ 256.9 $ 295.0 $ 317.1 $ 567.1 $ 574.0
Incr (Decr) over Prior Period $ (15.2) $ 22.1 $ 6.9
Slot Handle $3,366.8 $3,250.3 $3,623.7 $3,996.9 $6,990.5 $7,247.2
Incr (Decr) over Prior Period $ (116.5) $ 373.2 $ 256.7
Slot Win Percentage 8.1% 7.9% 8.1% 7.9% 8.1% 7.9%
Incr (Decr) over Prior Period (0.2)pts (0.2)pts (0.2)pts
Number of Slot Machines 4,144 3,807 4,152 4,452 8,296 8,259
Incr (Decr) over Prior Period (337) 300 (37)
Poker Revenues -- -- $ 17.6 $ 20.0 $ 17.6 $ 20.0
Incr (Decr) over Prior Period $ 2.4 $ 2.4
Number of Poker Tables -- -- 64 67 64 67
Incr (Decr) over Prior Period 3 3
Other Gaming Revenues -- -- $ 2.8 $ 2.7 $ 2.8 $ 2.7
Incr (Decr) over Prior Period $ (0.1) $ (0.1)
Total Gaming Revenues $ 374.5 $ 354.4 $ 514.0 $ 513.1 $ 888.5 $ 867.5
Incr (Decr) over Prior Period $ (20.1) $ (0.9) $ (21.0)
Number of Guest Rooms 1,404 1,283 1,250 1,250 2,654 2,533
Occupancy Rate 86.4% 89.9% 92.0% 95.2% 89.0% 92.5%
Average Daily Rate (Room Revenue) $ 79.78 $ 84.25 $ 99.50 $ 88.81 $ 89.38 $ 86.56
_________________________
Gaming revenues are the primary source of Trump AC's revenues. The year
over year decrease in gaming revenues was due primarily to a decrease in slot
revenues at Trump Plaza due to the closure of Trump World's Fair on October 4,
1999. Plaza Associates' slot revenues declined $15.2 million or 5.6% for the
year ended December 31, 1999 from the comparable period in 1998.
For the year ended December 31, 1999 table game revenues at the Taj Mahal
reflected a $25.3 million decrease from the year ended December 31, 1998 which
was generally offset by a $22.1 million increase in slot revenues. The increase
in slot revenues was due to increased marketing initiatives directed toward slot
customers. The decrease in table games revenue was a result of a decline in
high-end international table game players due to Asian economic conditions as
well as a decline in the table win percentage to 16.1% for the year ended
December 31, 1999 from 16.5% in 1998. The table win percentage decline resulted
in a reduction in table game revenues of approximately $4.3 million of the $25.3
million decline. Table games revenues represent the amount retained by Trump AC
from amounts wagered at table games. The table win percentage tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers". The Atlantic City
30
industry table win percentages were 15.3% and 15.3% for the years ended December
31, 1998 and 1999, respectively.
All Star had entered into the All Star Cafe Lease with Taj Associates for
the lease of space at the Taj Mahal to operate an All Star Cafe. The basic rent
under the All Star Cafe Lease was $1.0 million per year, paid in equal monthly
installments. In addition, All Star was to pay Percentage Rent (as defined).
On September 15, 1999 an agreement was reached between Taj Associates, All
Star and Planet Hollywood International, Inc. to terminate the All Star Cafe
Lease effective September 24, 1999. Upon termination of the All Star Cafe
Lease, all improvements, alterations and All Star's personal property, with the
exception of specialty trade fixtures, became the property of Taj Associates.
Taj Associates recorded the $17.2 million estimated fair market value of these
assets in other revenue based on an independent appraisal.
Taj Associates intends to continue to operate the facility as a themed
restaurant and entertainment complex.
Gaming costs and expenses increased $5.2 million or 1.0% for the year ended
December 31, 1999 from the comparable period in 1998 due primarily to additional
casino bad debt provisions at the Taj Mahal. The casino bad debt provisions at
the Taj Mahal were made after appropriate legal advice had been obtained which
indicated the likelihood of collection was remote. Trump AC's policy is to
aggressively pursue collection issues regarding markers if such issues occur.
These costs which were offset by reductions in costs and expenses at Trump Plaza
due to the closure of Trump World's Fair on October 4, 1999.
General and administrative costs and expenses increased $5.0 million or
3.0% for the year ended December 31, 1999 from the comparable period in 1998 due
primarily to charges at the Taj Mahal related to employee severance charges and
litigation settlement reserves.
On October 4, 1999, THCR closed Trump World's Fair. Management estimates
that the cost of closing Trump World's Fair will be approximately $124.0
million, which includes $97.2 million for the writedown of the net book value of
the assets and $26.8 million of costs incurred and to be incurred in connection
with the closing and demolition of the building.
Year 2000
Trump AC assessed the Year 2000 issue and implemented a plan to insure its
systems were Year 2000 compliant. Analysis was made of Trump AC's various
customer support and internal administration systems with appropriate
modifications having been made.
The cost of addressing the Year 2000 issue was not material as
modifications were made with existing systems personnel and no significant
expectations for new hardware or software. As a result of these efforts, Trump
AC was fully Year 2000 compliant.
This Year 2000 disclosure constitutes Year 2000 readiness disclosure within
the meaning of the Year 2000 Information and Readiness Disclosure Act.
Impact of New Accounting Standards
Trump AC has assessed the impact of newly issued accounting standards
expected to go into effect during 1999 in accordance with Staff Accounting
Bulletin No. 74 and, where applicable, disclosures have been provided in the
financial statements.
Seasonality
The gaming industry in Atlantic City is seasonal, with the heaviest
activity occurring during the period from May through September. Consequently,
Trump AC'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 operations as a result of
inflation during 1997, 1998 or 1999.
31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Management has reviewed the disclosure requirements for Item 7A and, based
upon Trump AC, Trump AC Funding, Funding II and Funding III's current capital
structure, scope of operations and financial statement structure, management
believes that such disclosure is not warranted at this time. Since conditions
may change, Trump AC, Trump AC Funding, Funding II and Funding III will
periodically review its compliance with this disclosure requirement to the
extent applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
An index to financial statements and required financial statement schedules
is set forth in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Management of Trump AC, Trump AC Funding, Funding II and Funding III
THCR is the general partner of THCR Holdings. As the sole general partner
of THCR Holdings, THCR generally has the exclusive rights, responsibilities and
discretion in the management and control of THCR Holdings. THCR Holdings owns
100% of Trump AC, directly and through its ownership of Trump AC Holding. Trump
AC Funding, Funding II and Funding III are wholly owned subsidiaries of Trump
AC. Trump AC and TACC are the general partners of Plaza Associates and Taj
Associates. The Board of Directors of each of Trump AC Funding, Funding II and
Funding III consists of Messrs. Trump, Nicholas L. Ribis, Robert M. Pickus,
Wallace B. Askins and Don M. Thomas. The TAC I Note Indenture, the TAC II Note
Indenture and the TAC III Note Indenture each requires that two directors of
Trump AC Funding, Funding II and Funding III be persons who would qualify as
"Independent Directors" as such term is defined by the rules of the American
Stock Exchange, Inc. ("Amex") (the "Independent Directors"). The Amex rules
define "independent directors" as those who are not officers of the company, are
neither related to its officers nor represent concentrated family holdings of
its shares and who, in view of the company's board of directors, are free of any
relationship that would interfere with the exercise of independent judgment.
Set forth below are the names, ages, positions and offices held with Trump
AC, Trump AC Funding, Funding II and Funding III and a brief account of the
business experience during the past five years of each member of the board of
directors of Trump AC Funding, Funding II and Funding III and of the executive
officers of Trump AC, Trump AC Funding, Funding II and Funding III.
Donald J. Trump--Trump, 53 years old, has been Chairman of the Board of
THCR and THCR Funding since their formation in 1995. Trump was a 50%
shareholder, Chairman of the Board of Directors, President and Treasurer of
Trump Plaza GP and the managing general partner of Plaza Associates prior to
June 1993. Trump was Chairman of the Executive Committee and President of Plaza
Associates from May 1986 to May 1992 and was a general partner of Plaza
Associates until June 1993. Trump has been a director of Trump AC Holding since
February 1993 and was President of Trump AC Holding from February 1993 until
December 1997. Trump was a partner in Trump AC from February 1993 until June
1995. Trump has been Chairman of the Board of Directors of Trump AC Funding
since its formation in January 1996 and the Chairman of the Board of Directors
of Funding II and Funding III since their formation in November 1997. Trump has
been Chairman of the Board of Directors of THCR Holding Corp. and THCR/LP since
October 1991; President and Treasurer of THCR Holding Corp. since March 4, 1991;
Chairman of the Board of Directors, President and Treasurer of TCI since June
1988; Chairman of the Executive Committee of Taj Associates from June 1988 to
October 1991; and President and sole Director of Realty Corp. since May 1986.
Trump has been the sole director of TACC since March 1991. Trump was President
and Treasurer of TACC from March 1991 until December 1997. Trump has been the
sole director of Trump Indiana since its formation. Trump has been Chairman of
the Board of Partner Representatives of Castle Associates, the partnership that
owns Trump Marina, since May 1992; and was Chairman of the Executive Committee
of Castle Associates from June 1985 to May 1992. Trump is the Chairman of the
Board of Directors of Castle Funding, and served as President and Treasurer of
Castle Funding until April 1998. Trump is the Chairman of the Board and
Treasurer of TCHI. Trump is the President, Treasurer, sole director and sole
shareholder of TCI-II. Trump has been a Director of THCR Enterprises, Inc., a
Delaware corporation ("THCR Enterprises"), since its formation in January 1997.
Trump is also the 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, 55 years old, has been President, Chief
Executive Officer and a director of THCR and THCR Funding and Chief Executive
Officer of THCR Holdings since their formation in 1995. Mr. Ribis has been the
Chief Executive Officer of Plaza Associates since February 1991, was President
from April 1994 to February 1995, was a member of the Executive Committee of
Plaza Associates from April 1991 to May 29, 1992 and was a director and Vice
President of Trump Plaza GP from May 1992 until June 1993. Mr. Ribis served as
Vice President of Trump AC Holding from February 1995 until December 1997. Mr.
Ribis has served as President of Trump AC Holding since December 1997. Mr. Ribis
has served as a director of Trump AC
33
Holding since June 1993. Mr. Ribis has been Chief Executive Officer, President
and a director of Trump AC Funding since its formation in January 1996 and Chief
Executive Officer, President and a director of Funding II and Funding III since
their formation in November 1997. Mr. Ribis served as Vice President of TACC
until December 1997. Mr. Ribis has served as the President of TACC since
December 1997. Mr. Ribis has been the President and Chief Executive Officer of
Trump Indiana since its formation. Mr. Ribis has been a Director of THCR/LP and
THCR Holding Corp. since October 1991 and was Vice President of THCR/LP and THCR
Holding Corp. until June 1995; Chief Executive Officer of Taj Associates since
February 1991; Vice President of TCI since February 1991 and Secretary of TCI
since September 1991; Director of Realty Corp. since October 1991; and a member
of the Executive Committee of Taj Associates from April 1991 to October 1991.
Mr. Ribis has served as Vice President of THCR/LP and THCR Holding Corp. since
February 1998. He has also been Chief Executive Officer of Castle Associates
since March 1991 and President of Castle Associates until April 1998; member of
the Executive Committee of Castle Associates from April 1991 to May 1992; member
of the Board of Partner Representatives of Castle Associates since May 1992; and
has served as the Vice President and Assistant Secretary of TCHI since December
1993 and January 1991, respectively, until April 1998. Mr. Ribis is now a
director of TCHI. Since April 1998, Mr. Ribis has served as President and Chief
Executive Officer of TCHI and Castle Funding. Mr. Ribis has served as Vice
President of TCI-II since December 1993 and had served as Secretary of TCI-II
from November 1991 to May 1992. Mr. Ribis has been Vice President of Trump Corp.
since September 1991. Mr. Ribis has been the President and a director of THCR
Enterprises since January 1997. From January 1993 to January 1995 Mr. Ribis
served as the Chairman of the Casino Association of New Jersey and has been a
member of the Board of Trustees of the CRDA since October 1993. From January
1980 to January 1991, Mr. Ribis was Senior Partner in, and from February 1991 to
December 1995, was Counsel to the law firm of Ribis, Graham & Curtin (now
practicing as Graham, Curtin & Sheridan, A Professional Association), which
serves as New Jersey legal counsel to all of the above-named companies and
certain of their affiliated entities.
Robert M. Pickus--Mr. Pickus, 45 years old, has been Executive Vice
President, General Counsel and Secretary of THCR since its formation in 1995. He
has also been the Executive Vice President of Corporate and Legal Affairs of
Plaza Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates.
Mr. Pickus served as the Assistant Secretary of Trump AC Holding from April 1994
until February 1998. Since February 1998, Mr. Pickus has served as the Secretary
of Trump AC Holding. Mr. Pickus has been Secretary and a director of Trump AC
Funding since its formation in January 1996 and Secretary and a director of
Funding II and Funding III since their formation in November 1997. Mr. Pickus
has been the Executive Vice President and Secretary of Trump Indiana since its
inception. Mr. Pickus has been the Executive Vice President of Corporate and
Legal Affairs of Taj Associates since February 1995, and a Director of THCR
Holding Corp. and THCR/LP since November 1995. He was the Senior Vice President
and Secretary of Castle Funding from June 1988 to December 1993 and General
Counsel of Castle Associates from June 1985 to December 1993. Mr. Pickus has
served as the Secretary of Castle Funding since April 1998. Mr. Pickus served as
the Assistant Secretary of TACC until February 1998. Since February 1998, Mr.
Pickus has served as the Secretary of TACC. Mr. Pickus was also Secretary of
TCHI from October 1991 until December 1993. Mr. Pickus is a director of TCHI,
and has served as the Assistant Secretary of TCHI from February 1998 until April
1998. Since April 1998, Mr. Pickus has served as the Secretary of TCHI. Mr.
Pickus has been the Executive Vice President of Corporate and Legal Affairs of
Castle Associates since February 1995, Secretary of Castle Associates since
February 1996 and a member of the Board of Partner Representatives of Castle
Associates since October 1995. Mr. Pickus is currently the Secretary of THCR
Holding Corp., has been the Vice President, Secretary and Director of THCR
Enterprises since January 1997 and has been Executive Vice President of TCS
since its inception and its President since November 1998. He has been admitted
to practice law in the states of New York and New Jersey since 1980, and in the
Commonwealth of Pennsylvania since 1981.
Francis X. McCarthy, Jr.--Mr. McCarthy, 47 years old, has served as
Executive Vice President of Corporate Finance and Chief Financial Officer of
THCR, THCR Holdings and THCR Funding since September 1998. Mr. McCarthy has
been the Chief Financial Officer of Trump AC, Trump AC Funding, Funding II and
Funding III since September 1998. Mr. McCarthy has been the Executive Vice
President of Finance of TCS since October 1996. Mr. McCarthy was Vice President
of Finance and Accounting of Trump Plaza GP from October 1992 until June 1993,
Senior Vice President of Finance and Administration of Plaza Associates from
August 1990 to June 1994 and Executive Vice President of Finance and
Administration of Plaza Associates from June 1994 to October 1996. Mr. McCarthy
previously served in a variety of financial positions for Greate Bay Hotel and
Casino, Inc. from June 1980 through August 1990.
34
John P. Burke--Mr. Burke, 52 years old, served as the Senior Vice President
of Corporate Finance of THCR from January 1996 until June 1997. Mr. Burke served
as the Senior Vice President of THCR, THCR Holdings and THCR Funding from June
1997 to January 1999. Mr. Burke has served as Executive Vice President of THCR,
THCR Holdings and THCR Funding since January 1999. Mr. Burke has been the
Corporate Treasurer of THCR, THCR Holdings and THCR Funding since their
formation in 1995. He has also been Corporate Treasurer of Plaza Associates and
Taj Associates since October 1991. Mr. Burke has been the Treasurer of Trump
Indiana since its formation. Mr. Burke has been Treasurer of Trump AC Funding
since its formation in January 1996 and Treasurer of Funding II and Funding III
since their formation in November 1997. Mr. Burke has been Treasurer of TACC
since February 1998. Mr. Burke was a Director of THCR/LP and THCR Holding Corp.
from October 1991 to April 1996 and was Vice President of THCR/LP until June
1995. Mr. Burke has served as the Assistant Treasurer of THCR Holding Corp. and
THCR/LP since February 1998. Mr. Burke has been the Corporate Treasurer of
Castle Associates since October 1991, the Vice President of Castle Associates,
Castle Funding, TCI-II and TCHI since December 1993, Assistant Treasurer of TCHI
since April 1998, Treasurer of Castle Funding since April 1998, a member of the
Board of Partner Representatives of Castle Associates since March 1997 and the
Vice President-Finance of The Trump Organization since September 1990. Mr. Burke
was an Executive Vice President and Chief Administrative Officer of Imperial
Corporation of America from April 1989 through September 1990. Mr. Burke has
been the Vice President and Treasurer of THCR Enterprises since January 1997.
Wallace B. Askins--Mr. Askins, 69 years old, has been a director of THCR
and THCR Funding since June 1995. He has also been a director of Trump AC
Holding since April 11, 1994, and was a partner representative of the Board of
Partner Representatives of Castle Associates from May 1992 to June 1995. Mr.
Askins has been a director of Trump AC Funding since April 1996 and a director
of Funding II and Funding III since December 1997. Mr. Askins served as a
director of TCI-II from May 1992 to December 1993. From June 1984 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.
Don M. Thomas--Mr. Thomas, 69 years old, has been a director of THCR and
THCR Funding since June 1995. Mr. Thomas has been a director of Trump AC Funding
since April 1996 and a director of Funding II and Funding III since December
1997. He has also 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 during a portion of which time
Mr. Thomas served as acting Chairman of the CCC. Mr. Thomas was a director of
Trump Plaza GP until June 1993 and has been a director of Trump AC Holding since
June 1993. Mr. Thomas is an attorney licensed to practice law in the State of
New York.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
Management of Trump Plaza
Trump AC is the managing general partner of Plaza Associates. Trump AC
Holding is the managing general partner of Trump AC. The Board of Directors of
Trump AC Holding consists of Messrs. Trump, Ribis, Wallace B. Askins and Don M.
Thomas.
Set forth below are the names, ages, positions and offices held with Plaza
Associates and a brief account of the business experience during the past five
years of each of the executive officers of Plaza Associates other than those who
are also directors or executive officers of Trump AC, Trump AC Funding, Funding
II or Funding III.
Fred A. Buro--Mr. Buro, 43 years old, has been President and Chief
Operating Officer of Plaza Associates since January 2000 and served as General
Manager of Plaza Associates from September 1998 until January 2000. Mr. Buro
served as Executive Vice President of Marketing of Plaza Associates from May
1994 to September 1998. 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.
35
Robert Schaffhauser--Mr. Schaffhauser, 53 years old, is a Certified Public
Accountant, and has been Executive Vice President of Finance of Plaza Associates
since September 1998. Mr. Schaffhauser served in a similar capacity at Trump
Marina from January of 1994 through October of 1996. From November of 1996
through August of 1998, Mr. Schaffhauser was associated with THCR as a
consultant. Mr. Schaffhauser also served as the Senior Vice President of Finance
and Administration for Greate Bay Hotel and Casino Corporation from 1989 through
1992.
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
Management of the Taj Mahal
Set forth below are the names, ages, positions and offices held with Taj
Associates and a brief account of the business experience during the past five
years of each of the executive officers and certain key employees of Taj
Associates other than those who are also directors or executive officers of
Trump AC, Trump AC Funding, Funding II or Funding III.
Mark A. Brown--Mr. Brown, 39 years old, has been President and Chief
Operating Officer of Taj Associates since January 2000. Mr. Brown was President
and Chief Operating Officer of Castle Associates from November 1997 until his
transfer to Taj Associates and Executive Vice President of Operations of Castle
Associates from July 1995 until November 1997 and was Vice President of TCHI
until his transfer to Taj Associates. Previously, Mr. Brown served as Senior
Vice President of Eastern Operations for Caesar's World Marketing Corporation,
National and International Divisions from 1993 until 1995. Prior to that, Mr.
Brown served as Vice President of Casino Operations at the Taj Mahal from 1989
until 1993. From 1979 until 1989, Mr. Brown worked for Resorts International
Hotel Casino departing as Casino Shift Manager in December 1989.
Rodolfo E. Prieto--Mr. Prieto, 56 years old, had been Chief Operating
Officer of Taj Associates since October 1996. Mr. Prieto's employment was
terminated in December, 1999. Mr. Prieto had been Vice President of Trump AC
Holding since February 1998. From December 1995 to October 1996, Mr. Prieto was
the Executive Vice President, Operations of Taj Associates. Prior to joining the
Taj Mahal, Mr. Prieto was Executive Vice President and Chief Operating Officer
for Elsinore Corporation from May 1995 to November 1995; Executive Vice
President in charge of the development of the Mojave Valley Resort for Elsinore
Corporation from December 1994 to April 1995.
Larry W. Clark--Mr. Clark, 55 years old, has been Executive Vice President,
Casino Operations of Taj Associates since November 1991, Senior Vice President,
Casino Operations of Taj Associates from May 1991 to November 1991, and Vice
President, Casino Administration of Taj Associates from April 1991 to May 1991
and from January 1990 to November 1990. Prior to joining the Taj Mahal, Mr.
Clark was Vice President, Casino Operations of the Dunes Hotel & Country Club
from November 1990 to April 1991 and Director of Casino Marketing and Vice
President, Casino Operations of the Showboat Hotel & Casino from November 1988
to January 1990.
Nicholas J. Niglio--Mr. Niglio, 53 years old, has been Executive Vice
President, International Marketing of Taj Associates since May 1996. From
November 1995 to May 1996, Mr. Niglio was Senior Vice President, Casino
Marketing of Taj Associates. From February 1995 to October 1995, Mr. Niglio was
Vice President, International Marketing of Taj Associates. Prior to joining Taj
Associates, Mr. Niglio was Executive Vice President of International
Marketing/Player Development for Castle Associates from 1993 until 1995. Prior
to that, Mr. Niglio served as Senior Vice President, Marketing of Caesar's World
Marketing Corporation from 1991 until 1993.
Stephen S. Oskiera--Mr. Oskiera, 41 years old, has served as Senior Vice
President of Finance of Taj Associates since January 2000. Mr. Oskiera
previously served as Vice President of Finance for TCS from November 1999 until
January 2000 and as Vice President of Finance of Castle Associates from October
1998 until November 1999. Mr. Oskiera served as Executive Director of Finance
for both Castle Associates and TCS from October 1995 to October 1998.
Previously, Mr. Oskiera served as Corporate Controller of American Gaming &
Entertainment, Ltd., a casino development company, from December 1993 to October
1995 and, prior to that, served as Financial Controller for Greate Bay Hotel &
Casino, Inc. d/b/a/ the Sands Hotel & Casino in Atlantic City, New Jersey from
May 1987 to December 1993.
36
Patrick J. O'Malley--Mr. O'Malley, 45 years old, had been the Executive
Vice President of Finance of Taj Associates since October 1996. Mr. O'Malley's
employment was terminated in December 1999. Prior to joining the Taj Mahal, Mr.
O'Malley was the Executive Vice President of Hotel Operations of Plaza
Associates from September 1995 to October 1996. Prior to joining Trump Plaza,
from September 1994 until September 1995, Mr. O'Malley was President of The
Plaza Hotel in New York City. From December 1989 until September 1994, Mr.
O'Malley was the Vice President of Finance of The Plaza Hotel in New York City.
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
Management of TCS
Set forth below are the names, ages, positions and offices held with TCS
and a brief account of the business experience during the past five years of
each of the executive officers of TCS, other than those who are directors and
officers of Trump AC or Trump AC Funding.
Joseph A. Fusco--Mr. Fusco, 55 years old, has been Executive Vice President
for Government Relations & Regulatory Affairs of THCR since June 1996 and of TCS
since July 1996. From August 1985 to June 1996, he practiced law as a partner in
various Atlantic City law firms specializing in New Jersey casino regulatory,
commercial and administrative law matters, most recently from January 1994 to
June 1996 as a partner in the law firm of Sterns & Weinroth. Mr. Fusco
previously served as Atlantic County Prosecutor, a Gubernatorial appointment,
from April 1981 to July 1985 and as Special Counsel for Licensing for the CCC
from the inception of that agency in September 1977 to March 1981. He has been
admitted to practice law in the State of New Jersey since 1969.
Kevin S. Smith--Mr. Smith, 43 years old, has been the Vice President of
Corporate Litigation of TCS since October 1996. Mr. Smith was the Vice
President, General Counsel of Plaza Associates from February 1995 to October
1996. Mr. Smith was previously associated with Cooper Perskie April Niedelman
Wagenheim & Levenson, an Atlantic City law firm specializing in trial
litigation. 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.
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
ITEM 11. EXECUTIVE COMPENSATION
Plaza Associates and Taj Associates 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, 1999, 1998 and 1997 to the Chairman of the Board of
Trump AC Holding, the Chief Executive Officer of Plaza Associates and Taj
Associates, each of the four most highly compensated executive officers of Plaza
Associates and Taj Associates whose salary and bonuses exceeded $100,000 for the
year ended December 31, 1999.
37
Summary Compensation Table
Name and Year Salary Bonus All Other
Principal Position ------------ ------------------ ------------------- Compensation
- ------------------------------------------------ ---------------------
Annual Compensation
-------------------------
Donald J. Trump 1999 $ -- $ -- $ --
Chairman of the Board, President & Treasurer of 1998 -- -- --
Trump AC Holding 1997 -- -- --
Nicholas L. Ribis............................... 1999 $1,098,075 $264,000(4) $2,640(1)
Chief Executive Officer of Plaza Associates and 1998 1,098,075 -- 2,640(1)
Taj Associates 1997 1,098,075 -- 2,613(1)
Fred A. Buro.................................... 1999 $ 299,775 $ -- $4,800(1)
President and Chief Operating Officer of Plaza 1998 339,852 -- 4,310(1)
Associates 1997 294,586 -- 3,958(1)
Robert Schaffhauser............................. 1999 $ 230,897 $ -- $1,323(1)
Executive Vice President of Finance of Plaza 1998 60,577 -- --
Associates 1997 -- -- --
Larry Clark..................................... 1999 $ 365,455 $125,000 $4,800(1)
Executive V.P. Casino Operations of Taj 1998 370,493 125,000 4,800(1)
Associates 1997 340,538 235,476 4,000(1)
Nicholas L. Niglio.............................. 1999 $ 365,461 $155,400 $4,800(1)
Senior V.P. Casino Marketing of Taj Associates 1998 365,744 178,058 4,800(1)
1997 332,515 287,563 4,000(1)
Rudolfo Prieto(2)............................... 1999 $ 648,006 $145,880(5) $4,800(1)
Former President and Chief Operating Officer of 1998 589,612 100,000 4,800(1)
Taj Associates 1997 459,116 -- 4,000(1)
Patrick O'Malley(3)............................. 1999 $ 287,391 $ -- $4,800(1)
Former Executive Vice President of Finance of 1998 265,860 -- 4,800(1)
Taj Associates 1997 279,071 -- 3,943(1)
___________
(1) Represents vested and unvested contributions made by Plaza Associates, Taj
Associates and/or TCS under the Trump Savings Plan and Trump Capital
Accumulation Plan, respectively. Funds accumulated for an employee under
these plans consisting of a certain percentage of the employee's
compensation plus the employer matching contributions equaling 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.
(2) Mr. Prieto's employment terminated in December 1999, and he was succeeded
by Mr. Mark A. Brown whose employment commenced in January 2000.
(3) Mr. O'Malley's employment terminated in December 1999 and he was succeeded
by Mr. Stephen S. Oskiera whose employment commenced in January 2000.
(4) In January 1999 Mr. Ribis received a net bonus of $137,500 which resulted
in a before tax bonus of $264,000. It is anticipated that the tax portion
of the bonus will be paid back to the Company.
(5) In January 1999 Mr. Prieto received a net bonus of $100,000 which resulted
in a before tax bonus of $145,880.
38
Employment Agreements
As a result of the June 1995 Offerings, THCR and THCR Holdings entered into
a revised employment agreement with Mr. Ribis (the "Ribis THCR Agreement"),
pursuant to which he agreed to serve as President and Chief Executive Officer of
THCR and Chief Executive Officer of THCR Holdings. The term of the Ribis THCR
Agreement is five years. Under the Ribis THCR Agreement, Mr. Ribis's annual
salary is $1,996,500. Mr. Ribis's annual salary is paid in equal parts by THCR,
Plaza Associates, Taj Associates and Castle Associates. In the event Mr. Ribis's
employment is terminated by THCR other than for "cause" or if he incurs a
"constructive termination without cause," Mr. Ribis will receive a severance
payment equal to one year's base salary, and the phantom stock units and options
will become fully vested. The Ribis THCR Agreement defines (a) "cause" as Mr.
Ribis's (i) conviction of certain crimes, (ii) gross negligence or willful
misconduct in carrying out his duties, (iii) revocation of his casino key
employee license or (iv) material breach of the agreement, and (b) "constructive
termination without cause" as the termination of Mr. Ribis's employment at his
initiative following the occurrence of certain events, including (i) a reduction
in compensation, (ii) failure to elect Mr. Ribis as Chief Executive Officer of
THCR, (iii) failure to elect Mr. Ribis a director of THCR or (iv) a material
diminution of his duties. The phantom stock units will also automatically vest
upon the death or disability of Mr. Ribis. The Ribis THCR Agreement also
provides for up to an aggregate of $2.0 million of loans to Mr. Ribis to be used
by him to pay his income tax liability in connection with stock options, phantom
stock units and stock bonus awards, which loans will be forgiven, including both
principal and interest, in the event of a "change of control or in accordance
with their terms." The Ribis THCR Agreement defines "change of control" as the
occurrence of any of the following events: (i) any person (other than THCR
Holdings, Trump or an affiliate of either) becomes a beneficial owner of 50% or
more of the voting stock of THCR, (ii) the majority of the Board of Directors of
THCR consists of individuals that were not directors on June 12, 1995 (the "June
12 Directors"), provided, however, that any person who becomes a director
subsequent to June 12, 1995, shall be considered a June 12 Director if his
election or nomination was supported by three-quarters of the June 12 Directors,
(iii) THCR adopts and implements a plan of liquidation or (iv) all or
substantially all of the assets or business of THCR are disposed of in a sale or
business combination in which shareholders of THCR would not beneficially own
the same proportion of voting stock of the successor entity. The Ribis THCR
Agreement also provides certain demand and piggyback registration rights for
THCR Common Stock issued pursuant to the foregoing. Pursuant to the Ribis THCR
Agreement, Mr. Ribis has agreed that upon termination of his employment other
than for "cause" or following a "change of control," he would not engage in any
activity competitive with THCR for a period of up to one year.
Mr. Ribis had an employment agreement with Taj Associates pursuant to which
Mr. Ribis acted as Chief Executive Officer of Taj Associates. This agreement has
been terminated in connection with the Taj Acquisition and the Castle
Acquisition and now Mr. Ribis is compensated for his services to Taj Associates
under the Ribis THCR Agreement.
Plaza Associates had an employment agreement with Fred Buro (the "Original
Buro Agreement") pursuant to which Mr. Buro acted as Executive Vice President of
Marketing of Plaza Associates. The original Buro Agreement was superseded by
new employment agreement dated as of March 22, 2000 (the "Buro Agreement"),
which reflected Mr. Buro's promotion to General Manager (and subsequently to
President and Chief Operating Officer) of Plaza Associates. The Buro Agreement
is for a term of one year, with any bonus and increases in salary provided in
Plaza Associates' sole and absolute discretion. Pursuant to the Buro Agreement,
Mr. Buro devotes all of his professional time to Plaza Associates. In the event
that Plaza Associates terminates the Buro Agreement because Mr. Buro has
committed an act constituting Cause (defined as the denial or revocation of Mr.
Buro's CCC license, conviction of the disqualifying crime, breach of trust,
certain disabilities or death), Plaza Associates shall pay to Mr. Buro all
compensation earned to the date of such termination.
TCS has an employment agreement with Kevin S. Smith, Esq. (the "Smith
Agreement") pursuant to which Mr. Smith acts as the Vice President of Corporate
Litigation & Risk Management of TCS. The Smith Agreement, which expires on
December 31, 2000, provides for a bonus of $25,000 upon signing and an annual
base salary of $160,000, with any bonus and increases in salary provided in
TCS's sole and absolute discretion. Pursuant to the Smith Agreement, Mr. Smith
devotes all of his professional time to TCS. In the event that TCS terminates
the Smith Agreement because Mr. Smith has committed an act constituting Cause
(defined as the denial or revocation of Mr. Smith's CCC license, conviction of a
disqualifying crime, breach of trust, certain disabilities or death), TCS shall
pay to Mr. Smith all compensation earned to the date of such termination.
39
Taj Associates has an employment agreement with Mark A. Brown (the "Brown
Agreement") pursuant to which Mr. Brown serves as the President and Chief
Operating Officer of Taj Associates. The Brown Agreement expires on January 2,
2003 and provides for an annual salary of $600,000 in its first year and
$650,000 and $700,000 during its second and third years, respectively. Pursuant
to the Brown Agreement, Mr. Brown devotes all of his professional time to Taj
Associates. In the event that Taj Associates terminates the Brown Agreement
because Mr. Brown has committed an act constituting cause (defined as the denial
or revocation of Mr. Brown's CCC license, conviction of a disqualifying crime,
breach of trust, certain disabilities or death) Taj Associates shall pay to Mr.
Brown all compensation earned to the date of such termination. The Brown
Agreement provides for a discretionary bonus. Factors considered by Taj
Associates in the awarding of all discretionary bonuses generally are the
attainment by Taj Associates of budgeted or forecasted goals and the
individual's perceived contribution to the attainment of such goals.
Taj Associates had an employment agreement with Rodolfo E. Prieto (the
"Prieto Agreement") pursuant to which he served as President and Chief Operating
Officer of Taj Associates. The Prieto Agreement, was to expire December 31,
2000, provided for a bonus of $100,000 upon signing, an annual salary of
$550,000 through July 1998, $600,000 through July 1999, and $650,000 through
expiration, and, in addition, an annual bonus at the sole discretion of Taj
Associates. Pursuant to the Prieto Agreement, Mr. Prieto has agreed that in the
event the agreement is terminated by him, he would not solicit or contact,
directly or through any other casino in Atlantic City, any customers whom he
developed during his employment with Taj Associates for a period of one year.
The Prieto Agreement provided that, if Taj Associates terminated Mr. Prieto's
employment without cause, Taj Associates would be obligated to pay Mr. Prieto
for the months remaining in the term of the Prieto Agreement plus moving
expenses to Nevada. Mr. Prieto terminated his employment in December 1999.
Taj Associates had an employment agreement with Patrick O'Malley (the
"O'Malley Agreement") pursuant to which Mr. O'Malley served as Executive Vice
President of Finance and Accounting of Taj Associates. The O'Malley Agreement,
which expired on October 13, 1999, provided for an annual base salary of
$250,000 per year and an annual bonus at the sole discretion of Taj Associates.
Mr. O'Malley terminated his employment in December 1999.
Taj Associates has an employment agreement with Larry W. Clark (the "Clark
Agreement") pursuant to which he serves as Executive Vice President, Casino
Operations of Taj Associates. The Clark Agreement, which expires on June 30,
2001, provides for a bonus of $50,000, net of taxes, upon signing, an annual
salary of $350,000 and, in addition, a minimum guaranteed bonus of $125,000 per
annum. Pursuant to the Clark Agreement, Mr. Clark has agreed that in the event
the agreement is terminated by him for any reason or by Taj Associates for
cause, he would not engage in employment for or on behalf of any other casino
hotel located in Atlantic City for a period of one year.
Taj Associates has an employment agreement with Nicholas J. Niglio (the
"Niglio Agreement") pursuant to which he serves as Executive Vice President,
International Marketing of Taj Associates. The Niglio Agreement, which expires
on June 30, 2001, provides for a bonus of $100,000, net of taxes, upon signing,
an annual salary of $350,000 and, in addition, a minimum guaranteed bonus of
$100,000, net of taxes. Pursuant to the Niglio Agreement, Mr. Niglio has agreed
that upon termination of his employment he would not solicit or contact,
directly or through any other casino in Atlantic City, any customers whom he had
developed during his employment with Taj Associates for a period of one year.
Taj Associates may terminate the employment agreements of Messrs. Clark and
Niglio in its sole discretion, without cause. If Mr. Clark's employment
agreement is terminated without cause, Taj Associates would be obligated to pay
Mr. Clark the greater of one year's salary or his salary for the number of
months remaining in the agreement, each at his then current salary. If Mr.
Niglio's employment agreement is terminated without cause, Taj Associates would
be obligated to pay Mr. Niglio the lesser of twelve month's salary or his salary
for the number of months remaining in the agreement, each at his then current
salary. Taj Associates may also terminate the Clark Agreement and the Niglio
Agreement (a) in the event that the CCC license of Mr. Clark, or Mr. Niglio,
respectively, is revoked or terminated or (b) for "cause," which is defined in
each of the agreements as (i) a material breach of the agreement or of any
employee conduct rules, (ii) dishonesty, (iii) intentional refusal to perform
duties or to properly perform them upon notice, (iv) alcohol or drug abuse or
(v) disability or death.
40
Compensation of Directors
All of the directors of Trump AC Funding, Funding II and Funding III
currently serve as an officer or on the Board of Directors of THCR and receive
no additional compensation for their service with Trump AC Funding, Funding II,
and Funding III. Directors of THCR who are also employees or consultants of THCR
and its affiliates receive no directors' fees. Non-employee directors are paid
an annual directors' fee of $50,000, plus $2,000 per meeting attended plus
reasonable out-of-pocket expenses incurred in attending these meetings.
Compensation Committee Interlocks and Insider Participation
In general, the compensation of executive officers of Plaza Associates and
Taj Associates is determined by Trump AC's managing general partner, Trump AC
Holding. No officer or employee of Trump AC Holding, other than Messrs. Trump
and Ribis who serve on the Board of Directors of Trump AC Holding, participated
in the deliberations concerning executive compensation.
Taj Acquisition. On April 17, 1996, a subsidiary of THCR was merged with
and into THCR Holding Corp. and each outstanding share of THCR Holding Corp.'s
Class A Common Stock, which in the aggregate represented 50% of the economic
interest in Taj Associates, was converted into the right to receive, at each
holder's election, either (a) $30 in cash or (b) that number of shares of THCR
Common Stock having a market value equal to $30. Trump held the remaining 50%
interest in Taj Associates and contributed such interest in Taj Associates to
Trump AC in exchange for limited partnership interests in THCR Holdings. The
outstanding shares of THCR Holding Corp.'s Class C Common Stock all of which
were held by Trump, were canceled in connection with the Taj Acquisition. In
addition, Trump received the Trump Warrants. See "Business--The Taj Mahal--Taj
Acquisition."
Certain Related Party Transactions--Trump AC. Beginning in late 1997, Trump
Plaza and the Taj Mahal began to utilize certain facilities owned by Trump to
entertain high-end customers. Management believes that the ability to utilize
these facilities has enhanced Trump's revenues. In 1997, 1998 and 1999, Trump AC
incurred approximately $43,000, $861,000 and $1,574,000, respectively, for
customer costs associated with such utilization. In exchange for having Trump's
plane available to customers of Trump Plaza and the Taj Mahal, Trump AC has
incurred pilot costs of approximately $212,000, $197,000 and $238,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.
Certain Related Party Transactions--Plaza Associates. Seashore Four was
the fee owner of a parcel of land constituting a portion of the Plaza Casino
Parcel, which it leased to Plaza Associates. In January 1997, Plaza Associates
exercised the option to purchase the land under the lease with Seashore Four for
$10 million.
Certain Related Party Transactions--Taj Associates. Taj Associates had
entered into a lease with Trump-Equitable Company for the lease of office space
in Trump Tower in New York City, which Taj Associates used as a marketing
office. The monthly payments under the lease had been $1,000, and the premises
were leased at such rent for four months in 1992, the full twelve months in 1993
and 1994 and eight months in 1995. On September 1, 1995, the lease was renewed
for a term of five years with an option for Taj Associates to cancel the lease
on September 1 of each year, upon six months' notice and payment of six months'
rent. Under the renewed lease, the monthly payments are $2,285. In March 2000,
THCR assumed this lease and moved to this office space from its previous
location in Trump Tower.
Other Relationships. The Commission 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,
Pickus and Burke, executive officers of THCR, have served on the boards of
directors of other entities in which members of the Board of Directors of THCR
(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 THCR in the last fiscal
year.
41
Mr. Ribis also serves on the Board of Directors of Realty Corp., which,
prior to April 17, 1996, leased certain real property to Taj Associates, of
which Trump is an executive officer. Trump, however, does not receive any
compensation for serving as an executive officer of Realty Corp.
In 1999, Trump's compensation pursuant to the Castle Services Agreement was
$2,258,000.
Messrs. Trump and Ribis serve on the Board of Directors of THCR, of which
Trump is Chairman of the Board. Messrs. Ribis, Pickus and Burke are executive
officers of THCR and are compensated for their services by THCR.
John Barry, Trump's brother-in-law, is a partner of Tompkins, McGuire,
Wachenfeld & Barry, a New Jersey law firm which provides, from time to time,
legal services to Plaza Associates and Taj Associates. In 1999, Tompkins,
McGuire, Wachenfeld & Barry received approximately $857,000 in fees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Trump AC Funding. Through its ownership of 100% of Trump AC and Trump AC
Holding, THCR Holdings has owned 100% of Trump AC Funding's common stock since
its formation on January 30, 1996.
Funding II. Through its ownership of 100% of Trump AC and Trump AC
Holding, THCR Holdings has owned 100% of Funding II's common stock since its
formation on November 18, 1997.
Funding III. Through its ownership of 100% of Trump AC and Trump AC
Holding, THCR Holdings has owned 100% of Funding II's common stock since its
formation on November 18, 1997.
Trump AC. Through its ownership of 100% of Trump AC Holding, THCR Holdings
currently beneficially owns 100% of Trump AC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Affiliate party transactions are governed by the provisions of the TAC I
Note Indenture, the TAC II Note Indenture and the TAC III Note Indenture which
provisions generally require that such transactions be on terms as favorable as
would be obtainable from an unaffiliated party, and require the approval of a
majority of the independent directors of Trump AC Funding, Funding II or Funding
III, as applicable.
Trump, Ribis and certain affiliates have engaged in certain related party
transactions with respect to THCR and its subsidiaries. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions--Plaza Associates," "--Taj Associates" and "-
- -Other Relationships."
Indemnification Agreements. In addition to the indemnification provisions
in THCR's and its subsidiaries' employment agreements (see "Executive
Compensation--Employment Agreements"), certain former and current directors of
Plaza Funding entered into separate indemnification agreements in May 1992 and
June 1993 with Plaza Associates pursuant to which such persons are afforded the
full benefits of the indemnification provisions of the partnership agreement
governing Plaza Associates. Plaza Associates also entered into an
indemnification trust agreement in November 1992 with Midlantic (the
"Indemnification Trustee") pursuant to which the sum of $100,000 was deposited
by Plaza Associates with the Indemnification Trustee for the benefit of the
directors of Plaza Funding and certain former directors of Trump Plaza GP to
provide a source for indemnification for such persons if Plaza Associates, Plaza
Funding or Trump Plaza GP, as the case may be, fails to immediately honor a
demand for indemnification by such persons. The indemnification agreements with
the directors of Plaza Funding and directors of Trump Plaza GP were amended in
June 1993 to provide, among other things, that Plaza Associates would (i) not
terminate, amend or modify certain agreements in a manner which may adversely
affect the rights or interests of such directors unless an additional sum of
$600,000 was first deposited with the Indemnification Trustee, and (ii) maintain
directors' and officers' insurance covering such persons during the ten-year
term (subject to extension) of the indemnification agreements; provided,
however, that if such insurance would not be available on a commercially
practicable basis, Plaza Associates could, in lieu of obtaining such insurance,
annually deposit an amount in a trust fund equal to $500,000 for the benefit of
such directors; provided further that deposits relating
42
to the failure to obtain such insurance shall not exceed $2.5 million. Such
directors are covered by directors' and officers' insurance maintained by Plaza
Associates. In June 1993, an additional sum of $600,000 was deposited with the
Indemnification Trustee for the benefit of the directors of Plaza Funding and
certain former directors of Trump Plaza GP.
In connection with the Taj Acquisition, Trump AC has agreed to provide to
the former officers and Directors of THCR Holding Corp. and THCR/LP (the "Taj
Indemnified Parties"), including Messrs. Ribis, Pickus and Burke,
indemnification as provided in the THCR's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws until April 17, 2002. In
addition, THCR agreed, and agreed to cause THCR Holding Corp. and THCR/LP to
agree, that until April 17, 2002, unless otherwise required by law, the
Certificate of Incorporation and By-Laws of THCR Holding Corp. and THCR/LP shall
not be amended, repealed or modified to reduce or limit the rights of indemnity
afforded to the former directors, officers and employees of THCR Holding Corp.
and THCR/LP or the ability of THCR Holding Corp. or THCR/LP to indemnify such
persons, nor to hinder, delay or make more difficult the exercise of such rights
of indemnity or the ability to indemnify. In addition, Trump AC has also agreed
to purchase and maintain in effect, until April 17, 2002, directors' and
officers' liability insurance policies covering the Taj Indemnified Parties on
terms no less favorable than the terms of the then current insurance policies'
coverage or, if such directors' and officers' liability insurance is unavailable
for an amount no greater than 150% of the premium paid by THCR Holding Corp. (on
an annualized basis) for directors' and officers' liability insurance during the
period from January 1, 1996, to April 17, 1996, Trump AC has agreed to obtain as
much insurance as can be obtained for a premium not in excess (on an annualized
basis) of such amount.
In March 2000, the Board of Directors of THCR authorized and directed THCR
to cause Taj Associates, Plaza Associates, Castle Associates and Trump Indiana
to enter into indemnification agreements with each of the Directors of THCR in
connection with the performance of their duties as Directors.
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements. See the index immediately following the signature
page.
(b) Reports on Form 8-K.
The Registrants did not file any reports on Form 8-K during the quarter
ended December 31, 1999.
(c) Exhibits.
3.1.1(19) Certificate of Incorporation of Trump Atlantic City Funding, Inc. (formerly THCR Atlantic
City Funding, Inc.).
3.1.2(19) Certificate of Amendment of Certificate of Incorporation of Trump Atlantic City Funding,
Inc. (formerly THCR Atlantic City Funding, Inc.).
3.2(19) By-Laws of Trump Atlantic City Funding, Inc. (formerly THCR Atlantic City Funding, Inc.).
3.3-3.7 Intentionally omitted.
3.8.1(5) Partnership Agreement of Trump Atlantic City Associates (formerly Trump Plaza Holding
Associates).
3.8.2(5) Amendment No. 1 to the Partnership Agreement of Trump Atlantic City Associates (formerly
Trump Plaza Holding Associates.).
3.8.3(12) Amendment No. 2 to the Partnership Agreement of Trump Atlantic City Associates (formerly
Trump Plaza Holding Associates).
3.8.4(20) Amended and Restated Partnership Agreement of Trump Atlantic City Associates.
3.9.1(4) Agreement and Plan of Merger between TP/GP Corp. and Trump Plaza Funding, Inc.
3.9.2(19) Form of Second Amended and Restated Agreement of Limited Partnership of Trump Hotels &
Casino Resorts Holdings, L.P.
3.10(25) Certificate of Incorporation of Trump Atlantic City Funding II, Inc.
3.11(25) By-Laws of Trump Atlantic City Funding II, Inc.
3.12(24) Certificate of Incorporation of Trump Atlantic City Funding III, Inc.
3.13(24) By-Laws of Trump Atlantic City Funding III, Inc.
3.14(26) Certificate of Incorporation of Trump Atlantic City Corporation, as amended.
3.15(26) By-Laws of Trump Atlantic City Corporation.
3.16(25) Certificate of Formation of Trump Casino Services, L.L.C.
3.17(25) Operating Agreement of Trump Casino Services, L.L.C.
3.18(25) Certificate of Formation of Trump Communications, L.L.C.
3.19(25) Operating Agreement of Trump Communications, L.L.C.
3.20(26) Third Amended and Restated Partnership Agreement of Trump Plaza Associates, dated April 17,
1996, by and between Trump Atlantic City Associates, Trump Plaza Funding, Inc. and Trump Taj
Mahal Corporation (now known as Trump Atlantic City Corporation).
3.21(26) Second Amended and Restated Partnership Agreement of Trump Taj Mahal Associates, dated April
17, 1996, by and between Trump Atlantic City Associates, TM/GP Corporation (now known as
THCR/LP Corporation), Trump Taj Mahal Corporation (now known as Trump Atlantic City
Corporation) and Trump Taj Mahal, Inc. (now known as Trump Casinos, Inc.).
4.1(5) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as issuer, Trump Plaza Associates,
as guarantor, and First Bank National Association, as trustee.
4.2(5) Indenture of Mortgage, between Trump Plaza Associates, as mortgagor, and Trump Plaza
Funding, Inc., as mortgagee.
4.3(5) Assignment Agreement between Trump Plaza Funding, Inc. and First Bank National Association,
as trustee.
4.4(5) Assignment of Operating Assets from Trump Plaza Associates to Trump Plaza Funding, Inc.
4.5(5) Assignment of Leases and Rents from Trump Plaza Associates to Trump Plaza Funding, Inc.
4.6(5) Indenture of Mortgage between Trump Plaza Associates and First Bank National Association, as
trustee.
44
4.7(5) Assignment of Leases and Rents from Trump Plaza Associates to First Bank National
Association, as trustee.
4.8(5) Assignment of Operating Assets from Trump Plaza Associates to First Bank National
Association, as trustee.
4.9(5) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(5) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(5) Pledge Agreement of Trump Plaza Funding, Inc., in favor and for the benefit of First Bank
National Association, as trustee.
4.12-4.18 Intentionally omitted.
4.19.6(20) Pledge Agreement, dated April 17, 1996, from Trump Atlantic City Associates, as pledgor, to
First Bank National Association, as Senior Note Trustee.
4.26.1(20) Indenture, among Trump Atlantic City Associates and Trump Atlantic City Funding, Inc., as
issuers, Trump Plaza Associates, Trump Taj Mahal Associates and The Trump Taj Mahal
Corporation, as guarantors, and First Bank National Association, as trustee.
4.27.1(20) First Mortgage Note Certificate (included in Exhibit 4.26.1).
4.28.1(20) Indenture of Mortgage and Security Agreement, among Trump Taj Mahal Associates, as
mortgagor, and First Bank National Association, as collateral agent, as mortgagee.
4.28.2(20) Indenture of Mortgage and Security Agreement, among Trump Plaza Associates, as mortgagor,
and First Bank National Association, as collateral agent, as mortgagee.
4.29.1(20) Assignment of Leases and Rents, among Trump Taj Mahal Associates, as assignor, and First
Bank National Association, as collateral agent, as mortgagee.
4.29.2(20) Assignment of Leases and Rents, among Trump Plaza Associates, as assignor, and First Bank
National Association, as collateral agent, as mortgagee.
4.30.1(20) Collateral Agency Agreement, among First Bank National Association, as collateral agent, and
First Bank National Association, as trustee, Trump Atlantic City Associates, Trump Atlantic
City Funding, Inc., the other secured parties signatory thereto and the guarantors under the
First Mortgage Note Indenture.
4.31(26) Indenture, dated as of December 10, 1997, by and among Trump Atlantic City Associates and
Trump Atlantic City Funding II, Inc., as issuers, Trump Atlantic City Corporation, Trump
Casino Services, L.L.C., Trump Communications, L.L.C., Trump Plaza Associates and Trump Taj
Mahal Associates, as guarantors, and U.S. Bank National Association, as trustee.
4.32(25) Registration Rights Agreement, dated as of December 10, 1997, by and among Trump Atlantic
City Associates and Trump Atlantic City Funding II, as issuers, Trump Atlantic City
Corporation, Trump Casino Services, L.L.C., Trump Communications, L.L.C., Trump Plaza
Associates and Trump Taj Mahal Associates, as guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchaser.
4.33(27) Indenture, dated as of December 10, 1997, by and among Trump Atlantic City Associates and
Trump Atlantic City Funding III, Inc., as issuers, Trump Atlantic City Corporation, Trump
Casino Services, L.L.C., Trump Communications, L.L.C., Trump Plaza Associates and Trump Taj
Mahal Associates, as guarantors, and U.S. Bank National Association, as trustee.
4.34(24) Registration Rights Agreement, dated as of December 10, 1997, by and among Trump Atlantic
City Associates and Trump Atlantic City Funding III, as issuers, Trump Atlantic City
Corporation, Trump Casino Services, L.L.C., Trump Communications, L.L.C., Trump Plaza
Associates and Trump Taj Mahal Associates, as guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchaser.
4.35(25) Indenture of Mortgage and Security Agreement by Trump Plaza Associates as mortgagor and U.S.
Bank National Association (as Collateral Agent) as mortgagee.
4.36(25) Indenture of Mortgage and Security Agreement by Trump Taj Mahal Associates as mortgagor and
U.S. Bank National Association (as Collateral Agent) as mortgagee.
4.37(25) Assignment of Leases and Rents by Trump Plaza Associates as assignor and U.S. Bank National
Association (as Collateral Agent) as assignee.
4.38(25) Assignment of Leases and Rents by Trump Taj Mahal Associates as assignor and U.S. Bank
National Association (as Collateral Agent) as assignee.
4.39(25) Debtors' Consent by Trump Atlantic City Associates, Trump Atlantic City Funding II, Inc.,
Trump Atlantic City Corporation, Trump Plaza Associates, Trump Taj Mahal Associates, Trump
Casino Services, L.L.C. and Trump Communications, L.L.C.
45
4.40(24) Debtors' Consent by Trump Atlantic City Associates, Trump Atlantic City Funding III, Inc.,
Trump Atlantic City Corporation, Trump Plaza Associates, Trump Taj Mahal Associates, Trump
Casino Services, L.L.C. and Trump Communications, L.L.C.
10.1-10.6 Intentionally omitted.
10.7(7) Employment Agreement between Trump Plaza Associates and Barry Cregan.
10.8-10.27 Intentionally omitted.
10.28(2) Option Agreement, dated as of February 2, 1993, between Donald J. Trump and Trump Plaza
Associates.
10.29 Intentionally omitted.
10.30(3) Amended and Restated Services Agreement between Trump Plaza Associates and Trump Plaza
Management Corp.
10.31-10.32 Intentionally omitted.
10.33(4) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg and Robert Rothenberg, dated
October 3, 1983.
10.34(4) Mortgage made by Harrah's Associates to Adeline Bordonaro, dated January 28, 1986.
10.35.1(4) Mortgage from Trump Plaza Associates to The Mutual Benefit Life Insurance Company, dated
October 5, 1990.
10.35.2(4) Collateral Assignment of Leases from Trump Plaza Associates to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
10.36-10.37 Intentionally omitted.
10.38(11) Employment Agreement between Trump Hotels & Casino Resorts Holdings, L.P. and Nicholas L.
Ribis (with exhibits).
10.39.2(6) Severance Agreement between Trump Plaza Associates and Robert M. Pickus.
10.39.4(18) Employment Agreement between Robert M. Pickus and Trump Hotels & Casino Resorts, Inc.
10.40(9) Employment Contract, dated as of February 7, 1995, between Trump Plaza Associates and Kevin
S. Smith.
10.41(9) Employment Agreement between Trump Plaza Associates and James A. Rigot.
10.42(9) Option and Right of First Offer Agreement between Trump Plaza Associates and Missouri
Boardwalk Inc., dated June 24, 1993.
10.43(9) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated June 24, 1993.
10.44(9) Sublease between Donald J. Trump and Missouri Boardwalk Inc., dated June 24, 1993.
10.45(8) Employment Agreement, dated August 1, 1994, between R. Bruce McKee and Trump Taj Mahal
Associates.
10.46(11) Executive Agreement among Donald J. Trump, Trump Hotels & Casino Resorts, Inc. and Trump
Hotels & Casino Resorts Holdings, L.P.
10.47-10.49 Intentionally omitted.
10.50(10) Acquisition Agreement, dated April 27, 1995, between Trump Oceanview, Inc. and The New
Jersey Sports and Exposition Authority.
10.51-10.55 Intentionally omitted.
10.56(10) Agreement of Sublease between Donald J. Trump and Time Warner Entertainment Company, L.P.,
as amended.
10.57-10.62 Intentionally omitted.
10.63.2(20) Third Amended and Restated Partnership Agreement of Trump Plaza Associates.
10.65.1(21) Services Agreement, dated as of July 8, 1996, among Trump Plaza Associates, Trump Taj Mahal
Associates and Trump Casino Services, L.L.C.
10.65.2(22) Amended and Restated Service Agreement, dated as of October 23, 1996, by and among Trump
Plaza Associates, Trump Taj Mahal Associates, Trump's Castle Associates, L.P. and Trump
Casino Services, L.L.C.
10.66(21) Thermal Energy Service Agreement, dated as of June 30, 1996, by and between Atlantic Jersey
Thermal Systems, Inc. and Trump Taj Mahal Associates.
10.67(22) Thermal Energy Service Agreement, dated as of September 26, 1996, by and between Atlantic
Jersey Thermal Systems, Inc. and Trump Plaza Associates.
10.68(8) Employment Agreement, dated December 10, 1993, between Larry W. Clark and Trump Taj Mahal
Associates.
10.69(8) Employment Agreement, dated August 1, 1994, between Walter F. Kohlross and Trump Taj Mahal
Associates.
46
10.70(10) Lease Agreement between Trump's Castle Associates and Trump Taj Mahal Associates, dated as
of December 16, 1994.
10.71(13) Employment Agreement, extended and modified, dated October 10, 1995, between Larry W. Clark
and Trump Taj Mahal Associates.
10.71.1(26) Second Amendment to Employment Agreement dated May 27, 1997, between Larry W. Clark and
Trump Taj Mahal Associates.
10.72(15) Employment Agreement, dated October 25, 1995, between Rodolfo E. Prieto and Trump Taj Mahal
Associates.
10.73(23) Employment Agreement, dated October 14, 1996, between Trump Taj Mahal Associates and Patrick
J. O'Malley.
10.74(23) Employment Agreement, dated May 3, 1996, between Trump Taj Mahal Associates and Loretta I.
Viscount.
10.75 Intentionally omitted.
10.76 Employment Agreement, dated March 22, 2000, between Trump Plaza Associates and Fred
A. Buro.
10.77 Employment Agreement, dated January 4, 2000, between Trump Taj Mahal Associates and Mark A. Brown.
21 List of Subsidiaries of the Registrants.
27.1 Financial Data Schedule of Trump Atlantic City Associates
27.2 Financial Data Schedule for Trump Atlantic City Funding, Inc.
27.3 Financial Data Schedule for Trump Atlantic City Funding II, Inc.
27.4 Financial Data Schedule for Trump Atlantic City Funding III, Inc.
___________
(1) Incorporated herein by reference to the identically numbered Exhibit to the
Quarterly Report on Form 10-Q of Trump Plaza Funding, Inc., Trump Plaza
Associates and Trump Plaza Holding Associates for the quarter ended
September 30, 1992.
(2) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year ended
December 31, 1992.
(3) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58608, of Trump Atlantic City Associates (formerly Trump Plaza
Holding Associates).
(4) Incorporated herein by reference to the identically numbered Exhibit in the
Registration Statement on Form S-1, Registration No. 33-58602, of Trump
Plaza Funding, Inc. and Trump Plaza Associates.
(5) Incorporated herein by reference to the identically numbered Exhibit in the
Registration Statement on Form S-1, Registration No. 33-58608, of Trump
Atlantic City Associates (formerly Trump Plaza Holding Associates).
(6) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump Atlantic
City Associates (formerly Trump Plaza Holding Associates) for the year
ended December 31, 1993.
(7) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Plaza Funding, Inc. and Trump
Atlantic City Associates (formerly Trump Plaza Holding Associates) for the
quarter ended September 30, 1994
(8) Incorporated herein by reference to the Exhibit in the Quarterly Report on
Form 10-Q of Trump Taj Mahal Funding, Inc. and Trump Taj Mahal Associates
for the quarter ended September 30, 1994.
(9) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump Atlantic
City Associates (formerly Trump Plaza Holding Associates) for the year
ended December 31, 1994.
47
(10) Incorporated herein by reference to the Exhibit in the Annual Report on
Form 10-K of Trump Taj Mahal Funding, Inc. and Trump Taj Mahal Associates
for the year ended December 31, 1994.
(11) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc., Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc. for the quarter ended June 30, 1995.
(12) Incorporated herein by reference to the identically numbered Exhibit to the
Quarterly Report on Form 10-Q of Trump Plaza Funding, Inc., Trump Plaza
Associates and Trump Atlantic Associates (formerly Trump Plaza Holding
Associates) for the quarter ended June 30, 1995.
(13) Incorporated herein by reference to the Exhibit in the Quarterly Report on
Form 10-Q of Trump Taj Mahal Funding, Inc. and for the quarter ended
September 30, 1995.
(14) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump Plaza
Associates for the year ended December 31, 1995.
(15) Incorporated herein by reference to the Exhibit in the Annual Report on
Form 10-K of Taj Mahal Holding Corp. for the year ended December 31, 1995.
(16) Incorporated herein by reference to the identically numbered Exhibit in the
Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc., dated
January 10, 1996.
(17) Incorporated herein by reference to the identically numbered Exhibit in the
Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc. dated
February 1, 1996.
(18) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-153, of Trump
Hotels & Casino Resorts, Inc.
(19) Previously filed in Registration Statement on Form S-1, Registration No.
333-643, of Trump Atlantic City Associates, Trump Atlantic City Funding,
Inc. and Trump Plaza Associates.
(20) Incorporated herein by reference to the identically numbered Exhibit to the
Quarterly Report on Form 10-Q of Trump Atlantic city Associates and Trump
Atlantic City Funding, Inc. for the quarter ended March 31, 1996.
(21) Incorporated herein by reference to the identically numbered Exhibit to the
Quarterly Report on Form 10-Q of Trump Atlantic City Associates and Trump
Atlantic City Funding, Inc. for the quarter ended June 31, 1996.
(22) Incorporated herein by reference to the identically numbered Exhibit to the
Quarterly Report on Form 10-Q of Trump Atlantic City Associates and Trump
Atlantic City Funding, Inc. for the quarter ended September 31, 1996.
(23) Incorporated herein by reference to the identically numbered Exhibit to the
Annual Report on Form 10-K of Trump Atlantic City Associates and Trump
Atlantic City Funding, Inc. for the year ended December 31, 1996.
(24) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-43975, of Trump
Atlantic City Associates and Trump Atlantic City Funding III, Inc.
(25) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-43979, of Trump
Atlantic City Associates and Trump Atlantic City Funding II, Inc.
48
(26) Incorporated herein by reference to the identically numbered Exhibit in
Amendment No. 1 to Registration Statement on Form S-4, Registration No.
333-43979, of Trump Atlantic City Associates and Trump Atlantic City
Funding II, Inc.
(27) Incorporated herein by reference to the identically numbered Exhibit to the
Annual Report on Form 10-K of Trump Atlantic City Associates, Trump
Atlantic City Funding, Inc., Trump Atlantic City Funding II, Inc. and Trump
Atlantic City Funding III, Inc. for the year ended December 31, 1997.
(d) Financial Statement Schedules.
See "Financial Statements and Supplementary Date--Index to Financial
Statements and Financial Statement Schedule" for a list of the financial
statement schedule included in this Annual Report.
49
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of the Registrants, the
Registrants note that there are various factors that could cause actual results
to differ materially from those set forth in any such forward-looking
statements. The forward-looking statements contained in this Annual Report were
prepared by management and are qualified by, and subject to, significant
business, economic, competitive, regulatory and other uncertainties and
contingencies, all of which are difficult or impossible to predict and many of
which are beyond the control of the Registrants. Accordingly, there can be no
assurance that the forward-looking statements contained in this Annual Report
will be realized or that actual results will not be significantly higher or
lower. The statements have not been audited by, examined by, compiled by or
subjected to agreed-upon procedures by independent accountants, and no third-
party has independently verified or reviewed such statements. Readers of this
Annual Report should consider these facts in evaluating the information
contained herein. In addition, the business and operations of the Registrants
are subject to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Annual Report. The inclusion of the
forward-looking statements contained in this Annual Report should not be
regarded as a representation by the Registrants or any other person that the
forward-looking statements contained in this Annual Report will be achieved. In
light of the foregoing, readers of this Annual Report are cautioned not to place
undue reliance on the forward-looking statements contained herein.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Trump Atlantic City Associates
By: Trump Atlantic City Holding, Inc.,
its general partner
/s/ NICHOLAS L. RIBIS
---------------------
By: Nicholas L. Ribis
Title: President
Date: March 30, 2000
Trump Atlantic City Funding, Inc.
/s/ NICHOLAS L. RIBIS
---------------------
By: Nicholas L. Ribis
Title: Chief Executive Officer and President
Date: March 30, 2000
Trump Atlantic City Funding II, Inc.
/s/ NICHOLAS L. RIBIS
---------------------
By: Nicholas L. Ribis
Title: Chief Executive Officer and President
Date: March 30, 2000
Trump Atlantic City Funding III, Inc.
/s/ NICHOLAS L. RIBIS
---------------------
By: Nicholas L. Ribis
Title: Chief Executive Officer and President
Date: March 30, 2000
51
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Trump Atlantic City Associates
By: Trump Atlantic City Holding, Inc.,
its general partner
Signatures Title Date
---------- ----- ----
By: /s/ DONALD J. TRUMP Chairman of the Board of March 30, 2000
-------------------------------------------------------- Directors (principal
Donald J. Trump executive officer)
By: /s/ FRANCIS X. MCCARTHY, JR. Chief Financial Officer March 30, 2000
-------------------------------------------------------- (principal financial and
Francis X. McCarthy, Jr. accounting officer)
By: /s/ NICHOLAS L. RIBIS Director March 30, 2000
--------------------------------------------------------
Nicholas L. Ribis
By: /s/ WALLACE B. ASKINS Director March 30, 2000
--------------------------------------------------------
Wallace B. Askins
By: /s/ DON M. THOMAS Director March 30, 2000
--------------------------------------------------------
Don M. Thomas
52
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Trump Atlantic City Funding, Inc.
Signatures Title Date
---------- ----- ----
By: /s/ DONALD J. TRUMP Chairman of the Board of March 30, 2000
-------------------------------------------------------- Directors (principal
Donald J. Trump executive officer)
By: /s/ FRANCIS X. MCCARTHY, JR. Chief Financial Officer March 30, 2000
-------------------------------------------------------- (principal financial and
Francis X. McCarthy, Jr. accounting officer)
By: /s/ NICHOLAS L. RIBIS Director March 30, 2000
--------------------------------------------------------
Nicholas L. Ribis
By: /s/ WALLACE B. ASKINS Director March 30, 2000
--------------------------------------------------------
Wallace B. Askins
By: /s/ DON M. THOMAS Director March 30, 2000
--------------------------------------------------------
Don M. Thomas
53
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Trump Atlantic City Funding II, Inc.
Signatures Title Date
---------- ----- ----
By: /s/ DONALD J. TRUMP Chairman of the Board of March 30, 2000
-------------------------------------------------------- Directors (principal
Donald J. Trump executive officer)
By: /s/ FRANCIS X. MCCARTHY, JR. Chief Financial Officer March 30, 2000
-------------------------------------------------------- (principal financial and
Francis X. McCarthy, Jr. accounting officer)
By: /s/ NICHOLAS L. RIBIS Director March 30, 2000
--------------------------------------------------------
Nicholas L. Ribis
By: /s/ WALLACE B. ASKINS Director March 30, 2000
--------------------------------------------------------
Wallace B. Askins
By: /s/ DON M. THOMAS Director March 30, 2000
--------------------------------------------------------
Don M. Thomas
54
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Trump Atlantic City Funding III, Inc.
Signatures Title Date
---------- ----- ----
By: /s/ DONALD J. TRUMP Chairman of the Board of March 30, 2000
-------------------------------------------------------- Directors (principal
Donald J. Trump executive officer)
By: /s/ FRANCIS X. MCCARTHY, JR. Chief Financial Officer March 30, 2000
-------------------------------------------------------- (principal financial and
Francis X. McCarthy, Jr. accounting officer)
By: /s/ NICHOLAS L. RIBIS Director March 30, 2000
--------------------------------------------------------
Nicholas L. Ribis
By: /s/ WALLACE B. ASKINS Director March 30, 2000
--------------------------------------------------------
Wallace B. Askins
By: /s/ DON M. THOMAS Director March 30, 2000
--------------------------------------------------------
Don M. Thomas
55
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Securities Exchange Act of 1934 by Registrants Which Have
Not Registered Securities Pursuant to Section 12 of the Act.
The Registrants have not sent (and do not intend to send) an annual report
to security holders covering the Registrants' last fiscal year and have not sent
(and do not intend to send) a proxy statement, form of proxy or other proxy
soliciting materials to security holders.
56
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Page
----
Report of Independent Public Accountants.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999...................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999........ F-4
Consolidated Statements of Capital for the years ended December 31, 1997, 1998 and 1999........... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999........ F-6
Notes to Consolidated Financial Statements........................................................ F-8
Financial Statement Schedule Report of Independent Public Accountants............................. S-1
Schedule IIValuation and Qualifying Accounts for the Years Ended December 31,1999, 1998 and 1997.. S-2
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Atlantic City Associates and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Trump
Atlantic City Associates (a New Jersey general partnership) and Subsidiaries as
of December 31, 1998 and 1999, and the related consolidated statements of
operations, capital and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the management of Trump Atlantic City Associates and Subsidiaries. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 Atlantic City
Associates and Subsidiaries as of December 31, 1998 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
Arthur Andersen LLP
Roseland, New Jersey
February 4, 2000
F-2
TRUMP ATLANTIC CITY ASSOCIATES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(In Thousands)
1998 1999
------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................................. $ 80,954 $ 75,061
Trade receivables, net of allowances for doubtful accounts of $25,701 and $9,808,
respectively (Note 2)..................................................................... 50,796 29,182
Accounts receivable, other (Note 2)........................................................ 9,990 4,699
Inventories................................................................................ 9,183 9,458
Prepaid expenses and other current assets.................................................. 7,438 5,258
Due from affiliates, net (Note 6).......................................................... 35,031 62,948
---------- ----------
Total current assets..................................................................... 193,392 186,606
---------- ----------
PROPERTY AND EQUIPMENT (Notes 2 and 6):
Land and land improvements................................................................. 172,433 171,965
Buildings and building improvements........................................................ 1,343,324 1,267,799
Furniture, fixtures and equipment.......................................................... 229,927 215,901
Leasehold improvements..................................................................... 2,404 2,195
Construction in progress................................................................... 13,382 24,873
---------- ----------
1,761,470 1,682,733
Less-Accumulated depreciation and amortization............................................. (328,505) (360,134)
---------- ----------
Net property and equipment............................................................... 1,432,965 1,322,599
---------- ----------
OTHER ASSETS:
Deferred bond issuance costs, net of accumulated amortization of $18,206 and $24,100,
respectively (Note 3)..................................................................... 30,644 24,750
---------- ----------
Other assets (Note 2)...................................................................... 31,605 36,911
---------- ----------
Total other assets....................................................................... 62,249 61,661
---------- ----------
Total assets............................................................................. $1,688,606 $1,570,866
========== ==========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3).............................................. $ 3,482 $ 4,438
Accounts payable........................................................................... 32,632 31,782
Accrued payroll............................................................................ 18,842 22,797
Self-insurance reserves (Note 4)........................................................... 8,470 7,806
Accrued interest payable (Note 3).......................................................... 24,375 24,375
Other accrued expenses (Note 8)............................................................ 14,439 40,527
Other current liabilities 8,833 7,344
---------- ----------
Total current liabilities................................................................ 111,073 139,069
---------- ----------
NONCURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 3)......................................... 1,299,217 1,302,824
Other long-term liabilities................................................................ 5,557 5,557
---------- ----------
Total noncurrent liabilities............................................................. 1,304,774 1,308,381
---------- ----------
Total liabilities........................................................................ 1,415,847 1,447,450
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 4):
CAPITAL:
Partners' capital.......................................................................... 329,691 329,691
Accumulated deficit........................................................................ (56,932) (206,275)
---------- ----------
Total capital............................................................................ 272,759 123,416
---------- ----------
Total liabilities and capital............................................................ $1,688,606 $1,570,866
========== ==========
The accompanying notes are an integral part of these balance sheets.
F-3
TRUMP ATLANTIC CITY ASSOCIATES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands)
1997 1998 1999
----------------- ----------------- ----------------
REVENUES:
Gaming................................................. $ 889,116 $ 888,518 $ 867,556
Rooms.................................................. 81,619 77,060 74,057
Food and beverage...................................... 114,597 110,932 106,111
Other (Note 7)......................................... 35,019 32,733 50,438
---------- ---------- ----------
Gross revenues....................................... 1,120,351 1,109,243 1,098,162
Less-Promotional allowances............................ 138,085 130,151 124,735
---------- ---------- ----------
Net revenues......................................... 982,266 979,092 973,427
---------- ---------- ----------
COSTS AND EXPENSES:
Gaming................................................. 555,457 545,204 550,441
Rooms.................................................. 28,229 27,988 28,712
Food and beverage...................................... 37,233 38,192 37,519
General and administrative............................. 168,143 168,584 173,578
Depreciation and amortization.......................... 66,018 61,135 58,615
Trump World's Fair closing (Note 8).................... -- -- 123,959
---------- ---------- ----------
855,080 841,103 972,824
---------- ---------- ----------
Income from operations............................... 127,186 137,989 603
---------- ---------- ----------
NON-OPERATING INCOME (EXPENSE):
Interest income........................................ 2,891 5,508 3,396
Interest expense (Note 3).............................. (144,140) (154,578) (153,759)
Non-operating income............................... -- -- 417
---------- ---------- ----------
Non-operating expense, net............................. (141,249) (149,070) (149,946)
---------- ---------- ----------
Net loss............................................... $ (14,063) $ (11,081) $ (149,343)
========== ========== ==========
The accompanying notes are an integral part of these statements
F-4
TRUMP ATLANTIC CITY ASSOCIATES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands)
Retained
Earnings/
(Accumulated
Capital Deficit) Total
-------------------------------------------------
Balance, December 31, 1996.................................. $ 363,646 $ (31,788) $ 331,858
Capital Contributed by Trump Hotels & Casino Resorts
Holdings, L.P.............................................. 10,144 -- 10,144
Net Loss.................................................... -- (14,063) (14,063)
-------- --------- ---------
Balance, December 31, 1997.................................. 373,790 (45,851) 327,939
Reversal of Capital Contributed by Trump Hotels & Casino
Resorts Holdings, L.P. (Note 6)............................ (44,099) -- (44,099)
Net Loss.................................................... -- (11,081) (11,081)
-------- --------- ---------
Balance, December 31, 1998.................................. 329,691 (56,932) 272,759
Net Loss.................................................... -- (149,343) (149,343)
-------- --------- ---------
Balance, December 31, 1999.................................. $ 329,691 $(206,275) $ 123,416
======== ========= =========
The accompanying notes are an integral part of these statements
F-5
TRUMP ATLANTIC CITY ASSOCIATES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands)
1997 1998 1999
--------- --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................. $(14,063) $(11,081) $(149,343)
Adjustments to reconcile net loss to net cash flows provided by operating activities:
Noncash charges:
Depreciation and amortization......................................................... 66,018 61,135 58,615
Accretion of discount on indebtedness................................................. 68 765 681
Amortization of deferred loan offering costs.......................................... 6,561 6,593 5,894
Provision for losses on receivables................................................... 7,399 14,349 24,503
Valuation allowance of CRDA investments............................................... 3,815 2,306 4,270
Gain on acquisition of property....................................................... -- -- (17,200)
Gain on disposition of property....................................................... -- -- (460)
Write-off of net book value of Trump World's Fair closing............................. -- -- 97,221
(Increase) decrease in receivables....................................................... (20,944) (17,796) 2,435
(Increase) decrease in inventories....................................................... (486) 697 (276)
(Increase) decrease in prepaid expenses and other current assets......................... (408) 214 2,459
Decrease (increase) in other assets...................................................... 97 (5,053) (45)
Increase in amounts due from affiliates.................................................. (16,643) (57,249) (27,918)
(Decrease) increase in accounts payable, accrued expenses and other current liabilities.. (3,775) 9,930 26,768
Decrease in other long-term liabilities.................................................. (2,438) (1,258) --
-------- -------- ---------
Net cash provided by operating activities................................................ 25,201 3,552 27,604
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................................................... (54,814) (20,912) (21,506)
Purchases of CRDA investments............................................................ (8,723) (7,604) (10,960)
Proceeds from disposition of property.................................................... -- -- 4,502
-------- -------- ---------
Net cash used in investing activities.................................................... (63,537) (28,516) (27,964)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cost of issuing debt..................................................................... (4,254) (395) --
Issuance of Trump AC Mortgage Notes...................................................... 95,605 -- --
Additional Borrowings.................................................................... 1,886 -- --
Payments and current maturities of long-term debt........................................ (11,342) (8,566) (5,533)
-------- -------- ---------
Net cash provided by (used in) financing activities...................................... 81,895 (8,961) (5,533)
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................................... 43,559 (33,925) (5,893)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................................ 71,320 114,879 80,954
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................................................. $114,879 $ 80,954 $ 75,061
======== ======== =========
The accompanying notes are an integral part of these statements
F-6
TRUMP ATLANTIC CITY ASSOCIATES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands) (Continued)
1997 1998 1999
-------- --------- --------
Supplemental Disclosures of Cash Flow Information:
. Equipment purchased under capital leases $ 3,569 $ 3,509 $ 9,416
======== ======== ========
. Cash paid during the year for interest $128,617 $147,256 $147,308
======== ======== ========
Supplemental Disclosure of Noncash Activities:
. During 1997 Trump AC purchased certain parcels of land amounting to $10,144
with capital contributed by THCR Holdings. This amount which was originally
recorded as contributed capital was reclassified as "Due from affiliates,
net".
The accompanying notes are an integral part of these statements
F-7
TRUMP ATLANTIC CITY ASSOCIATES
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization
The accompanying consolidated financial statements include those of Trump
Atlantic City Associates ("Trump AC"), a New Jersey general partnership and its
subsidiaries, Trump Plaza Associates, a New Jersey general partnership ("Plaza
Associates"), which owns and operates the Trump Plaza Hotel and Casino located
in Atlantic City, New Jersey ("Trump Plaza"), Trump Taj Mahal Associates, a New
Jersey general partnership ("Taj Associates"), which owns and operates the Trump
Taj Mahal Casino Resort located in Atlantic City, New Jersey (the "Taj Mahal"),
Trump Atlantic City Funding, Inc., a Delaware corporation ("Trump AC Funding"),
Trump Atlantic City Funding II, Inc., a Delaware corporation ("Trump AC Funding
II"), Trump Atlantic City Funding III, Inc., a Delaware corporation ("Trump AC
Funding III)", Trump Atlantic City Corporation, a Delaware Corporation ("TACC"),
and Trump Casino Services, L.L.C., a New Jersey limited liability company
("Trump Services"). Trump AC's sole sources of liquidity are distributions in
respect of its interests in Plaza Associates and Taj Associates. Trump AC is
100% beneficially owned by Trump Hotels & Casino Resorts Holdings, L.P., a
Delaware limited partnership ("THCR Holdings"). Trump AC, Trump AC Funding,
Trump AC Funding II and Trump AC Funding III have no independent operations and,
therefore, their ability to service debt is dependent upon the successful
operations of Plaza Associates and Taj Associates. There are no restrictions on
the ability of the guarantors (the "Subsidiary Guarantors") of the Trump AC
Mortgage Notes (see Note 3) to distribute funds to Trump AC.
The separate financial statements of the Subsidiary Guarantors have not
been included because (i) the Subsidiary Guarantors constitute all of Trump AC's
direct and indirect subsidiaries; (ii) the Subsidiary Guarantors have fully and
unconditionally guaranteed the Trump AC Mortgage Notes on a joint and several
basis; (iii) the aggregate assets, liabilities, earnings and equity of the
Subsidiary Guarantors are substantially equivalent to the assets, liabilities,
earnings and equity of Trump AC on a consolidated basis; and (iv) the separate
financial and other disclosures concerning the Subsidiary Guarantors are not
deemed material to investors. The assets and operations of the nonguarantor
subsidiaries are not significant.
All significant intercompany balances and transactions have been
eliminated in the accompanying consolidated financial statements.
(2) Summary of Significant Accounting Policies
Organization and Basis of Presentation
Trump AC has no operations, except for its ownership of Plaza Associates
and Taj Associates. A substantial portion of Trump AC's revenues are derived
from its gaming operations. Competition in the Atlantic City casino market is
intense and management believes that this competition will continue as more
casinos are opened and new entrants into the gaming industry become operational.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. Revenue from
hotel and other services are recognized at the time the related service is
performed.
Trump AC provides an allowance for doubtful accounts arising from casino,
hotel and other services, which is based upon a specific review of certain
outstanding receivables as well as historical collection information. In
determining the amount of the allowance, management is required to make certain
estimates and
F-8
assumptions regarding the timing and amount of collection. Actual results could
differ from those estimates and assumptions.
Promotional Allowances
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 allowances are included in gaming costs and expenses as follows:
Year Ended December 31,
---------------------------------------------------------------
1997 1998 1999
----------------- ----------------- -----------------
Rooms................................................ $19,175,000 $19,530,000 $18,416,000
Food and Beverage.................................... 63,644,000 58,631,000 55,840,000
Other................................................ 15,783,000 13,519,000 15,263,000
----------- ----------- -----------
$98,602,000 $91,680,000 $89,519,000
=========== =========== ===========
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:
Buildings and building improvements.................. 40 years
Furniture, fixtures and equipment.................... 3-10 years
Leasehold improvements............................... 10-40 years
Long-Lived Assets
The provisions of Statement of Financial Accounting Standard No. 121
"Accounting for the Impairment of Long-Lived Assets" ("SFAS No. 121") requires,
among other things, that an entity review its long-lived assets and certain
related intangibles for impairment whenever changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. Impairment of
long-lived assets exists if, at a minimum, the future expected cash flows
(undiscounted and without interest charges) from an entity's operations are less
than the carrying value of these assets. Trump AC does not believe, except as
discussed in Note 8, that any such changes have occurred.
Income Taxes
State income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
SFAS No. 109 requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and the tax basis of assets and liabilities using enacted tax rates.
The accompanying consolidated financial statements do not include a
provision for federal income taxes since any income or losses are allocated to
the partners and are reportable for federal income tax purposes by the partners.
Under the New Jersey Casino Control Act (the "Casino Control Act"), both
Plaza Associates and Taj Associates are required to file a New Jersey
corporation business tax return. For New Jersey State Income Tax purposes, Plaza
Associates and Taj Associates have net operating loss carry-forwards of
approximately $146,000,000 and $210,000,000, respectively. A valuation allowance
of $146,000,000 and $210,000,000,
F-9
respectively, has been provided for the deferred tax benefits of the operating
loss carry forwards.
Statements of Cash Flows
For purposes of the statements of cash flows, cash and cash equivalents
include hotel and casino funds, funds on deposit with banks and temporary
investments purchased with a maturity of three months or less.
Reclassifications
Certain reclassifications have been made to prior year financial statements
to conform to the current year presentation.
Accounts Receivable
Plaza Associates is appealing a real estate tax assessment by the City of
Atlantic City. At December 31, 1998 and 1999 other assets include $5,764,000
and $8,014,000, respectively, which Plaza Associates believes will be
recoverable on the settlement of the appeal.
(3) Long-Term Debt
Long-term debt consists of the following:
December 31, December 31,
1998 1999
--------------------- ----------------------
Trump AC Mortgage Notes (11 1/4% First Mortgage Notes,
due 2006) (a)....................................................... $1,200,000,000 $1,200,000,000
Trump AC Mortgage Notes (11 1/4% First Mortgage Notes, due 2006),
net of unamortized discount of $2,388,000 and $1,932,000,
respectively (a).................................................. 72,612,000 73,068,000
Trump AC Mortgage Notes (11 1/4% First Mortgage Notes, due 2006),
net of unamortized discount of $1,174,000 and $949,000,
respectively (a).................................................. 23,826,000 24,051,000
Mortgage notes payable (b).......................................... 1,348,000 1,295,000
Capitalized lease obligations (c)................................... 4,913,000 8,848,000
-------------- --------------
1,302,699,000 1,307,262,000
Less-Current maturities............................................. (3,482,000) (4,438,000)
-------------- --------------
$1,299,217,000 $1,302,824,000
============== ==============
___________________
(a) On April 17, 1996, Trump AC together with Trump AC Funding issued the Trump
AC Mortgage Notes in an aggregate principal amount of $1,200,000,000 which
bear interest at 11.25% and are due May 1, 2006. Interest on the Trump AC
Mortgage Notes is due semiannually. The Trump AC Mortgage Notes are
guaranteed as to payment of principal and interest jointly and severally by
Taj Associates, Plaza Associates, Trump AC and all future subsidiaries of
Trump AC (other than Trump AC Funding). The Trump AC Mortgage Notes are
jointly and severally secured by mortgages representing a first lien and
security interest on substantially all of the assets of Taj Associates and
Plaza Associates.
The indenture pursuant to which the Trump AC Mortgage Notes were issued
restricts the ability of Trump AC and its subsidiaries to make distributions
or to pay dividends, as the case may be, unless certain financial ratios are
achieved. In addition, the ability of Plaza Associates and Taj Associates to
make payments of dividends or distributions (except for payment of interest)
through Trump AC to THCR Holdings may be restricted by the New Jersey Casino
Control Commission ("CCC").
On December 10, 1997, Trump AC together with Trump AC Funding II issued
Trump AC Mortgage Notes in an aggregate principal amount of $75,000,000
which bear interest at 11.25% and are due
F-10
May 1, 2006. Interest on the Trump AC Mortgage Notes is due semiannually.
The Trump AC Mortgage Notes are guaranteed as to payment of principal and
interest jointly and severally by Taj Associates, Plaza Associates, Trump AC
and all future subsidiaries of Trump AC (other than Trump AC Funding). The
Trump AC Mortgage Notes are jointly and severally secured by mortgages
representing a first lien and security interest on substantially all of the
assets of Taj Associates and Plaza Associates.
On December 10, 1997, Trump AC together with Trump AC Funding III issued
Trump AC Mortgage Notes in an aggregate principal amount of $25,000,000
which bear interest at 11.25% and are due May 1, 2006. Interest on the Trump
AC Mortgage Notes is due semiannually. The Trump AC Mortgage Notes are
guaranteed as to payment of principal and interest jointly and severally by
Taj Associates, Plaza Associates, Trump AC and all future subsidiaries of
Trump AC (other than Trump AC Funding). The Trump AC Mortgage Notes are
jointly and severally secured by mortgages representing a first lien and
security interest on substantially all of the assets of Taj Associates and
Plaza Associates.
Costs of $48,850,000 associated with the issuance of the Trump AC Mortgage
Notes are being amortized over the term of the Trump AC Mortgage Notes.
Amortization is included in interest expense in the accompanying statements
of operations and totaled $6,561,000, $6,593,000 and $5,894,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.
(b) Interest on these notes is payable with an interest rate of 8.5%. The notes
are due in 2012 and are secured by certain real property.
(c) Interest on these leases are payable with interest rates ranging from 6.5%
to 13.0%. The leases are due at various dates between 2000 and 2004 and are
secured by equipment.
Future minimum payments under capital leases (principal portion included in the
table of debt maturities below) are as follows:
2000........................................................... $ 5,511,000
2001........................................................... 3,476,000
2002........................................................... 1,432,000
2003........................................................... 31,000
2004........................................................... 12,000
-----------
Total minimum payments......................................... 10,462,000
Less: Amount representing interest............................ (1,614,000)
-----------
Present Value of minimum lease payments........................ $ 8,848,000
===========
The aggregate maturities of long-term debt as of December 31, 1999 are as
follows:
2000........................................................ $ 4,438,000
2001........................................................ 3,148,000
2002........................................................ 1,412,000
2003........................................................ 102,000
2004........................................................ 92,000
Thereafter.................................................. 1,298,070,000
--------------
$1,307,262,000
==============
The ability of Trump AC to repay its long-term debt when due will depend on
the ability of Plaza Associates and Taj Associates to generate cash from
operations sufficient for such purposes or on the ability of Trump AC to
refinance such indebtedness. Cash Flow from operations may not be sufficient to
repay a substantial portion of the principal amount of the Trump AC Mortgage
Notes upon maturity in 2006. The future operating
F-11
performance and the ability to refinance such indebtedness will be subject to
the then prevailing economic conditions, industry conditions and numerous other
financial, business and other factors, many of which are beyond the control of
Trump AC. There can be no assurance that the future operating performance of
Plaza Associates and Taj Associates will be sufficient to meet these repayment
obligations or that the general state of the economy, the status of the capital
markets generally or the receptiveness of the capital markets to the gaming
industry will be conducive to refinancing or other attempts to raise capital.
(4) Commitments and Contingencies
Leases and Employment Agreements
Plaza Associates had entered into a 25 year easement agreement with the New
Jersey Sports and Exposition Authority which provided for annual payments of
$2,000,000. In December 1999, in connection with the closure of Trump World's
Fair, Plaza Associates terminated the lease in accordance with its terms (See
Note 8).
Trump AC leases certain property (primarily land), office, warehouse space,
certain parking space, and various equipment under operating leases. Rent
expense for the years ended December 31, 1997, 1998 and 1999 was $9,269,000,
$8,470,000 and $6,890,000, respectively.
Future minimum lease payments under the noncancelable operating leases are
as follows:
Total
-----------------
2000...................................................................... $ 3,455,000
2001...................................................................... 2,093,000
2002...................................................................... 1,667,000
2003...................................................................... 1,102,000
2004...................................................................... 1,103,000
Thereafter................................................................ 84,504,000
-----------
$93,924,000
===========
Certain of these leases contain options to purchase the leased properties
at various prices throughout the leased terms.
As of December 31, 1999, Trump AC had employment agreements with certain
key employees with commitments of approximately $9,506,000. These commitments
mature at various dates through 2002.
Taj Associates received a permit under the Coastal Area Facilities Review
Act ("CAFRA") (which included a condition of Taj Associates' casino license)
that initially required Taj Associates begin construction of certain
improvements on the Steel Pier by October 1992, which improvements were to be
completed within 18 months of commencement. Taj Associates initially proposed a
concept to improve the Steel Pier, the estimated cost of which was $30,000,000.
Such concept was approved by the New Jersey Department of Environmental
Protection, the agency which administers CAFRA. In March 1993, Taj Associates
obtained a modification of its CAFRA permit providing for the extension of the
required commencement and completion dates of the improvements to the Steel Pier
for one year, which has been renewed annually based upon an interim use of the
Steel Pier as an amusement park. The pier sublease terminates on December 31,
2000 unless extended.
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 Casino Control Act, Plaza Associates and Taj Associates are required
to maintain certain licenses. Casino licenses must be renewed periodically, are
not transferable, are dependent on the financial stability of the licensee and
can be revoked at any time.
In June 1999, the CCC renewed Plaza Associates' and Taj Associates' casino
licenses to operate Trump Plaza and the Taj Mahal for a period of four years
through June 30, 2003 and March 31, 2003, respectively. Also, in June 1999, the
CCC renewed Trump Casino Services' casino license for a period of four years
through July 23, 2003. Upon revocation, suspension for more than 120 days, or
failure to renew the casino license, the Casino
F-12
Control 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
Plaza Associates, Taj Associates, its Partners, certain members of its
former Executive Committee, and certain of its employees, have been involved in
various legal proceedings. In general, Plaza Associates and Taj Associates have
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,
judgments, fines and penalties) incurred by them in said legal proceedings.
Various legal proceedings are now pending against Plaza Associates and Taj
Associates. Plaza Associates and Taj Associates consider all such proceedings to
be ordinary litigation incident to the character of their business. Plaza
Associates and Taj Associates believe that the resolution of these claims will
not, individually or in the aggregate, have a material adverse effect on their
financial condition or results of operations.
Plaza Associates and Taj Associates are also a party to various
administrative proceedings involving allegations that they have violated certain
provisions of the Casino Control Act. Plaza Associates and Taj Associates
believe that the final outcome of these proceedings will not, either
individually or in the aggregate, have a material adverse effect on their
financial condition, results of operations or on the ability of Plaza Associates
or Taj Associates to otherwise retain or renew any casino or other licenses
required under the Casino Control Act for the operation of the respective
properties.
Self-Insurance Reserves
Self-insurance reserves represent the estimated amounts of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the normal course of business. These
reserves are established by management based upon specific review of open
claims, with consideration of incurred but not reported claims as of the balance
sheet date. During 1998 and 1999 self insurance reserves decreased due to an
internally focused aggressive policy whereby potential lawsuits are challenged
immediately. Additionally, a more aggressive litigation policy was pursued to
deter present and future frivolous lawsuits. Trump AC also retained an outside
consultant to comprehensively review certain claims and to assist Trump AC in
establishing the estimated reserves at December 31, 1998 and 1999. The costs of
the ultimate disposition of these claims may differ from these reserve amounts.
Federal Income Tax Examination
Plaza Associates and Taj Associates are currently involved in examinations
with the Internal Revenue Service ("IRS") concerning Plaza Associates' federal
partnership income tax returns for the years 1993 through 1996 and Taj
Associates' federal partnership income tax returns for the tax years 1994
through 1996. While any adjustment which results from this examination could
affect Plaza Associates' and Taj Associates' state income tax returns, Plaza
Associates and Taj Associates do not believe that adjustments, if any, will have
a material adverse effect on its financial condition or results of operations.
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Casino Control Act, Plaza Associates and
Taj Associates, 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").
Plaza Associates and Taj Associates intend on satisfying their obligations
primarily by depositing funds to be used for the purchase of bonds or by making
qualified investments. Plaza Associates and Taj Associates are required to make
quarterly deposits with the CRDA based on 1.25% of its gross revenue. For the
years ended December 31, 1997, 1998 and 1999, Trump AC charged to operations
$3,736,000, $3,758,000 and $4,195,000 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.
F-13
Concentrations of Credit Risks
In accordance with casino industry practice, Plaza Associates and Taj
Associates extend credit to qualified casino patrons, after background checks
and investigations of credit worthiness. For the years ended December 31, 1998
and 1999, approximately 52.0% and 29.1%, respectively, of casino receivables
(before allowances) were from customers whose primary residence is outside the
United States, and approximately 26.0% and 5.9%, respectively, represents credit
extended to patrons from the Far East.
(5) Employee Benefit Plans
Plaza Associates and Taj Associates have 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 in 1997 and 1998, and 20% in 1999. Plaza Associates and Taj Associates
will match 50% of the first 5% of an eligible employee's contributions in 1997,
and 50% of the first 6% in 1998 and 1999. Trump AC recorded charges of
$2,680,000, $3,483,000 and $3,560,000 for matching contributions for the years
ended December 31, 1997, 1998 and 1999, respectively.
Plaza Associates and Taj Associates make payments to various trusteed
multi-employer pension plans under industry-wide union agreements. The payments
are based on the hours worked by or gross wages paid to covered employees. Under
the Employee Retirement Income Security Act, Plaza Associates and Taj Associates
may be liable for their share of the plan's unfunded liabilities, if any, if the
plans are terminated. Pension expense charged to operations for the years ended
December 31, 1997, 1998 and 1999 was $1,595,000, $1,682,000 and $2,074,000
respectively.
(6) Transactions with Affiliates
In 1996 and 1997, Plaza Associates purchased certain property for
$24,599,000 with capital contributed by THCR Holdings. In addition, in 1996
THCR Holdings contributed $19,500,000 in capital to Plaza Associates for
improvements related to Trump World's Fair. In 1998, these amounts, which were
originally recorded as capital, were reversed and reclassified as amounts due to
affiliates. Trump AC subsequently repaid $33,074,000 to THCR Holdings.
Trump AC has engaged in certain transactions with Trump and entities that
are wholly or partially owned by Trump. Amounts receivable at December 31 are as
follows:
Year Ended December 31,
------------------------------------------
1998 1999
---------------- ----------------
Castle Associates (a).................................... $20,679,000 $19,173,000
Trump Organization (a)................................... 483,000 --
THCR Holdings (a)........................................ 13,869,000 43,775,000
----------- -----------
$35,031,000 $62,948,000
=========== ===========
(a) Trump Atlantic City Associates engages in various transactions with the
other Atlantic City hotel/casinos and related casino entities owned by
Trump. These transactions are charged at cost or normal selling price in the
case of retail items and include certain shared professional fees,
insurance, and payroll costs as well as complimentary services offered to
customers.
Beginning in late 1997 Trump Plaza and the Taj Mahal began to utilize
certain facilities owned by Trump to entertain high-end customers.
Management believes that the ability to utilize these facilities has
enhanced Trump's revenues. In 1997, 1998 and 1999, Trump AC incurred
approximately $43,000, $861,000 and $1,574,000, respectively, for customer
costs associated with such utilization. In exchange for having Trump's plane
available to customers of Trump Plaza and the Taj Mahal, Trump AC has
incurred pilot costs of approximately $212,000, $197,000 and $238,000 for
the years ended December 31, 1997, 1998 and 1999, respectively.
F-14
TCS was formed for the purpose of realizing cost savings and operational
synergies by consolidating certain administrative functions of, and providing
certain services to, Plaza Associates, Taj Associates and Castle Associates.
(7) All Star Cafe Transaction
All Star Cafe, Inc. ("All Star") had entered into a twenty-year lease (the
"All Star Cafe Lease") with Taj Associates for the lease of space at the Taj
Mahal to operate an All Star Cafe. The basic rent under the All Star Cafe Lease
was $1.0 million per year, payable in equal monthly installments. In addition,
All Star was to pay percentage rent as defined.
On September 15, 1999 an agreement was reached between Taj Associates, All
Star and Planet Hollywood International, Inc. to terminate the All Star Cafe
Lease effective September 24, 1999. Upon termination of the All Star Cafe
Lease, all improvements, alterations and All Star's personal property with the
exception of specialty trade fixtures became the property of Taj Associates.
Taj Associates recorded the $17,200,000 estimated fair market value of these
assets in other revenue based on an independent appraisal.
Taj Associates intends to continue to operate the facility as a themed
restaurant and entertainment complex.
(8) Trump World's Fair Closing
On October 4, 1999, THCR closed Trump World's Fair. The estimated cost of
closing Trump World's Fair is $123,959,000, which includes $97,221,000 for the
writedown of the net book value of the assets and $26,738,000 of costs incurred
and to be incurred in connection with the closing and demolition of the
building.
(9) Fair Value of Financial Instruments
The carrying amount of the following financial instruments approximates
fair value, as follows: (a) cash and cash equivalents, receivables and payables
are based on the short term nature of these financial instruments and (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, 1999
-------------------------------------
Carrying Amount Fair Value
---------------- -------------
Trump AC Mortgage Notes $1,200,000,000 $960,000,000
Trump AC Funding II Mortgage Notes $ 73,068,000 $ 58,875,000
Trump AC Funding III Mortgage Notes $ 24,051,000 $ 19,250,000
The fair values of the Trump AC Mortgage Notes, Trump AC Funding II
Mortgage Notes and Trump AC Funding III Mortgages Notes are based on quoted
market prices as of December 31, 1999.
There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
F-15
(10) Combined Financial Information - Trump AC Funding, Trump AC Funding II and
Trump AC Funding III
Combined financial information relating to Trump AC Funding, Trump AC
Funding II and Trump AC Funding III as of December 31, 1999 is as follows:
Total Assets (including First Mortgage Notes receivable of $1,297,119,000
and related interest receivable)............................................ $1,321,494,000
==============
Total Liabilities and Capital (including First Mortgage Notes payable of
$1,297,119,000 and related interest payable)................................ $1,321,494,000
==============
Interest Income.............................................................. $ 146,249,000
==============
Interest Expense............................................................. $ 146,249,000
==============
Net Income................................................................... $ --
========================
F-16
To Trump Atlantic City Associates and Subsidiaries:
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of Trump Atlantic City
Associates and Subsidiaries included in this Form 10-K and have issued our
report thereon dated February 4, 2000. Our audit was made for the purpose of
forming an opinion on the basic consolidated financial statements taken as a
whole. The accompanying schedule is the responsibility of the management of
Trump Atlantic City Associates and Subsidiaries and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Roseland, New Jersey
February 4, 2000
S-1
SCHEDULE II
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Balance at Charged to Other Balance at
Beginning Costs and Changes End of
of Period Expenses (Deductions) Period
YEAR ENDED DECEMBER 31, 1999:
Allowance for doubtful accounts................. $25,701,000 $24,503,000 $(40,396,000) (A) $ 9,808,000
Valuation allowance for interest differential
on CRDA bonds.................................. $10,798,000 $ 4,270,000 $ (2,118,000) (B) $12,950,000
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful accounts................. $17,095,000 $14,349,000 $ (5,743,000) (A) $25,701,000
Valuation allowance for interest differential
on CRDA bonds.................................. $15,707,000 $ 3,758,000 $ (8,667,000) (C) $10,798,000
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts................. $17,355,000 $ 7,399,000 $ (7,659,000) (A) $17,095,000
Valuation allowance for interest differential
on CRDA bonds.................................. $12,461,000 $ 3,736,000 $ (490,000) (D) $15,707,000
___________
(A) Writeoff of uncollectible accounts.
(B) Includes the reclassification of approximately $5,792,000 of previous CRDA
deposits, the carrying value of which was $2,497,000 to property and
equipment.
(C) Includes the reclassification of approximately $14,330,000 of previous CRDA
deposits, the carrying value of which was $7,165,000 to property and
equipment and $1,505,000 representing the adjustment to the allowance to
give effect to the CRDA deposits to be refunded.
(D) Adjustment of allowance applicable to contribution of CRDA deposits.
S-2