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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NO.: 2-0219
TRUMP PLAZA FUNDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 13-3339198
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
TRUMP PLAZA ASSOCIATES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 22-3241643
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
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 Plaza Funding, Inc.
held by non-affiliates as of March 25, 1996 was approximately: $0
Indicate by check mark whether the Registrants have filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
As of March 25, 1996, there were 100 shares of Trump Plaza Funding, Inc.'s
Common Stock outstanding.
Documents Incorporated by Reference--Not applicable.
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FORM 10-K
TABLE OF CONTENTS
<TABLE>
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ITEM PAGE
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PART I................................................................. 1
ITEM 1. BUSINESS.................................................... 1
ITEM 2. PROPERTIES.................................................. 21
ITEM 3. LEGAL PROCEEDINGS........................................... 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 27
PART II................................................................ 28
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 28
ITEM 6. SELECTED FINANCIAL DATA..................................... 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 59
PART III............................................................... 59
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 59
ITEM 11. EXECUTIVE COMPENSATION...................................... 63
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 71
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 71
PART IV................................................................ 73
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.................................................... 73
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PART I
ITEM 1. BUSINESS.
RECENT EVENTS
Trump Plaza Funding, Inc., a New Jersey corporation ("Plaza Funding") and
Trump Plaza Associates, a New Jersey general partnership ("Plaza Associates"
and, together with Plaza Funding, the "Registrants") are each wholly owned
subsidiaries of Trump Hotels & Casino Resorts Holdings, L.P., a Delaware
limited partnership ("THCR Holdings") of which Trump Hotels & Casino Resorts,
Inc., a Delaware corporation ("THCR") is currently a general partner and
Donald J. Trump ("Trump") is currently a limited partner. Plaza Associates
owns and operates the Trump Plaza Hotel and Casino in Atlantic City, New
Jersey ("Trump Plaza"). Pursuant to the Agreement and Plan of Merger, dated as
of January 8, 1996, among THCR, Taj Mahal Holding Corp., a Delaware
corporation ("Taj Holding") and THCR Merger Corp., a Delaware corporation and
a wholly owned subsidiary of THCR ("Merger Sub"), as amended by Amendment to
Agreement and Plan of Merger, dated as of January 31, 1996 (the "Merger
Agreement"), Merger Sub will be merged with and into Taj Holding (the
"Merger"), with Taj Holding as the Surviving Corporation. As a result of the
Merger and the related transactions discussed below, THCR Holdings will
indirectly wholly own Trump Taj Mahal Associates, a New Jersey general
partnership ("Taj Associates"), the owner and operator of the Trump Taj Mahal
Casino Resort in Atlantic City, New Jersey (the "Taj Mahal"). If the Merger is
approved and consummated, each share of Class A Common Stock, par value $.01
per share, of Taj Holding ("Taj Holding Class A Common Stock") issued and
outstanding prior to the effective time of the Merger (other than treasury
stock held by Taj Holding, shares owned by any direct or indirect subsidiary
of Taj Holding and dissenting shares) will be converted into the right to
receive, at each holder's election, either (a) $30.00 in cash ("Cash
Consideration") or (b) that number of shares of Common Stock, par value $.01
per share, of THCR ("THCR Common Stock") as is determined by dividing $30.00
by the Market Value ("Stock Consideration" and, together with Cash
Consideration, "Merger Consideration"). Market Value is defined as the average
of the high and low per share sales prices on the New York Stock Exchange
("NYSE") of a share of THCR Common Stock on a random selection of ten trading
days within the fifteen trading day period ending five trading days
immediately preceding the effective time of the Merger. No fractional shares
of THCR Common Stock will be issued in the Merger.
The Merger Agreement also contemplates the following transactions occurring
in connection with the Merger:
(a) the consummation of the offering by THCR of up to 12,500,000 shares
of THCR Common Stock (and up to an additional 1,875,000 shares of THCR
Common Stock pursuant to the underwriters' over-allotment option) (the
"THCR Stock Offering") and the consummation of the offering by a wholly
owned subsidiary of THCR Holdings, Trump Atlantic City Associates, a New
Jersey general partnership formerly known as Trump Plaza Holding Associates
("Trump AC'), and its wholly owned finance subsidiary, Trump Atlantic City
Funding, Inc., a Delaware corporation ("Trump AC Funding"), of up to
$1,200,000,000 aggregate principal amount of first mortgage notes (the
"Mortgage Notes"), although it is currently contemplated to aggregate
$1,100,000,000 (the "Mortgage Note Offering," and together with the THCR
Stock Offering, the "Offerings"), the aggregate proceeds of which will be
used, together with available cash, to:
(i) pay cash to those holders of Taj Holding Class A Common Stock
electing to receive Cash Consideration in the Merger,
(ii) redeem the outstanding 11.35% Mortgage Bonds, Series A, due 1999
of Trump Taj Mahal Funding, Inc. (the "Taj Bonds") (the "Taj Bonds
Redemption"),
(iii) redeem, immediately prior to the Merger, the outstanding shares
of Class B Common Stock, par value $.01 per share, of Taj Holding (the
"Taj Holding Class B Common Stock") as required by the Amended and
Restated Certificate of Incorporation of Taj Holding in connection with
Taj Bond Redemption,
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(iv) retire (through repurchase, and if necessary, defeasance) the
outstanding 10 7/8% Mortgage Notes due 2001 of Plaza Funding (the
"Plaza Notes") (the "Plaza Note Purchase," and, together with the
Mortgage Note Offering and the Taj Bond Redemption, the "Debt
Refinancing"),
(v) satisfy the indebtedness of Taj Associates under its loan
agreement with National Westminster Bank USA (the "NatWest Loan"),
(vi) purchase certain real property used in the operation of the Taj
Mahal that is currently leased from Trump Taj Mahal Realty Corp.
("Realty Corp."), a corporation wholly owned by Trump,
(vii) purchase certain real property used in the operation of Trump
Plaza that is currently leased from an unaffiliated third party,
(viii) make a payment to Bankers Trust Company ("Bankers Trust") to
obtain releases of liens and guarantees that Bankers Trust has in
connection with certain outstanding indebtedness owned by Trump to
Bankers Trust, and
(ix) pay related fees and expenses and provide for working capital;
(b) the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of its direct and indirect ownership
interests in Taj Associates acquired in the Merger.
The Merger is contingent upon, among other things, the consummation of the
other transactions contemplated by the Merger Transaction. As a result of the
Merger Transaction, THCR's and Trump's beneficial equity interests in THCR
Holdings will be approximately 73% and 27%, respectively (assuming a price of
$24.00 per share of THCR Common Stock as the Market Value in connection with
the Merger and as the public offering price in the THCR Stock Offering). In
addition, as a part of the Merger Transaction, THCR will issue to Trump a
warrant to purchase an aggregate of 1.8 million shares of THCR Common Stock,
(i) 600,000 shares of which may be purchased on or before the third
anniversary of the warrant at $30.00 per share, (ii) 600,000 shares of which
may be purchased on or before the fourth anniversary of the warrant at $35.00
per share and (iii) 600,000 shares of which may be purchased on or before the
fifth anniversary of the warrant at $40.00 per share. To the extent that
holders of Taj Holding Class A Common Stock elect to receive shares of THCR
Common Stock in the Merger, THCR may reduce the size of the THCR Stock
Offering. In addition to the shares of THCR Common Stock that may be issued in
the THCR Stock Offering, THCR may issue, as part of the THCR Stock Offering,
up to an additional 20% of such number of shares to fund working capital and
for other general corporate purposes. The Merger and the related transaction
discussed above are collectively referred to as the "Merger Transaction." For
purposes of the proposal to be submitted to the stockholders of THCR for
approval at the special meeting scheduled to be held on April 11, 1996 to
approve the Merger Transaction (the "THCR Special Meeting"), the term "Merger
Transaction" shall exclude the Debt Refinancing.
In connection with the Merger, THCR has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-4
(Registration No. 333-153) which was declared effective on March 8, 1996, and
included the Joint Proxy Statement-Prospectus of THCR and Taj Holding relating
to the Merger Transaction (the "Proxy Statement Prospectus"). The Proxy
Statement Prospectus was mailed to stockholders of THCR and Taj Holding on
March 12, 1996. The Proxy Statement Prospectus relates, with respect to
stockholders of THCR, to the THCR Special Meeting and also relates, with
respect to stockholders of Taj Holding, to a special meeting of stockholders
to be held on April 11, 1996, at which meeting the stockholders of Taj Holding
will be asked to approve and adopt the Merger Agreement.
THCR has also filed with the Commission a Registration Statement on Form S-1
(Registration No. 333-639) relating to the registration of the THCR Common
Stock to be issued in connection with the Stock Offering. Additionally, Trump
AC, Trump AC Funding and Plaza Associates (as guarantor of the Mortgage Notes)
have filed with the Commission a Registration Statement on Form S-1
(Registration No. 333-643) relating to the registration of the Mortgage Notes.
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GENERAL
Plaza Funding was incorporated in March 1986 under the laws of the State of
New Jersey. Plaza Associates was organized under the laws of the State of New
Jersey in June 1982. Each of the Registrants are subsidiaries of THCR and
wholly owned subsidiaries of THCR Holdings. THCR, through THCR Holdings and,
its wholly owned subsidiary, Plaza Associates, owns and operates Trump Plaza,
a luxury casino hotel located on The Boardwalk in Atlantic City, New Jersey.
Management believes that the Registrants will benefit from the following
factors:
. TRUMP PLAZA EXPANSION. THCR is currently enhancing Trump Plaza's position
as an industry leader by increasing its gaming space and hotel capacity
while maintaining its commitment to first class customer service. This
strategy is designed to capitalize on Trump Plaza's reputation for
excellence, as well as to meet both existing demand and the anticipated
demand from the increased number of available rooms and infrastructure
improvements that are currently being implemented to enhance further the
"vacation destination appeal" of Atlantic City. The Trump Plaza Expansion
is expected to be completed in the second quarter of 1996. As part of the
Trump Plaza Expansion, THCR has renovated and integrated into Trump Plaza
a hotel adjacent to Trump Plaza's main tower ("Trump Plaza East") and is
in the process of renovating and integrating into Trump Plaza the former
Trump Regency Hotel, located on The Boardwalk adjacent to the existing
Atlantic City Convention Center, which is next to Trump Plaza ("Trump
World's Fair"). The casino and 249 of the 349 hotel rooms at Trump Plaza
East were opened by President's Day 1996. THCR intends to open 91 rooms
and suites at Trump Plaza East by the end of March 1996. Renovations are
ongoing at Trump World's Fair and THCR expects that the renovations at
Trump World's Fair will be completed in the second quarter of 1996. Upon
completion of the Trump Plaza Expansion, Trump Plaza's casino floor space
will increase from 75,395 square feet to an aggregate of approximately
139,553 square feet of gaming space (15,000 square feet of which has
already opened at Trump Plaza East), housing a total of approximately
4,266 slot machines and 141 table games, making Trump Plaza's casino the
largest in Atlantic City (in terms of square footage). Trump Plaza's
hotel capacity will increase to a total of 1,404 guest rooms, making
Trump Plaza's guest room inventory one of the largest in Atlantic City.
. THE "TRUMP" NAME. THCR capitalizes on the widespread recognition of the
"Trump" name and its association with high quality amenities and first
class service. To this end THCR provides Trump Plaza patrons with a
broadly diversified gaming and entertainment experience that is
consistent with the "Trump" name and reputation for quality, and is
tailored to the Trump Plaza gaming patron.
The Registrants operate in only one industry segment. See "Financial
Statements and Supplementary Data.
TRUMP PLAZA
Management believes that Trump Plaza's "Four Star" Mobil Travel Guide rating
and "Four Diamond" American Automobile Association rating reflect 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
and swimming and health spa facilities.
Trump Plaza Expansion. Management believes that as a result of the Trump
Plaza Expansion and Trump Plaza's strategic location, Trump Plaza is well
positioned to become one of the premier host properties in Atlantic City. The
Trump Plaza Expansion is currently scheduled to be completed in the second
quarter of 1996 and would increase Trump Plaza's prime central frontage on The
Boardwalk to nearly a quarter of a mile. Management also believes that the
construction of the new convention center and tourist corridor linking the new
convention center with The Boardwalk will enhance the desirability of Atlantic
City generally and, as a result of Trump Plaza's central location, will
benefit Trump Plaza in particular. In addition, management expects to be able
to take advantage of recent gaming regulatory changes that will allow casino
space to be directly visible and accessible from The Boardwalk. Trump Plaza's
location on The Boardwalk at the end of the highway into Atlantic City makes
it highly accessible for both "drive-in" and "walk-in" patrons.
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On February 16, 1996, Trump Plaza opened the Ocean View Casino and Bar and
249 rooms at Trump Plaza East. Management intends to open the remaining rooms
and suites at Trump Plaza East by the end of March 1996. Trump Plaza East has
approximately 15,000 square feet of casino space and, when fully opened, will
have 349 hotel rooms, including nine super suites scheduled to be opened early
in 1997. Trump Plaza East is currently leased, however, Plaza Associates
intends to exercise its option to acquire Trump Plaza East from an
unaffiliated entity in connection with the Merger Transaction. See
"Properties--Trump Plaza East" and "Executive Compensation--Compensation
Committee Interlocks and Insider Participation--Certain Related Party
Transactions of Trump." Trump Plaza has been reconfigured to provide a new
entranceway to Trump Plaza directly off the Atlantic City Expressway.
Management believes the increased hotel capacity as a result of the Trump
Plaza Expansion will enable Trump Plaza to better meet demand and accommodate
its casino guests, as well as to host additional and larger conventions and
corporate meetings.
Management is in the process of renovating and integrating into Trump Plaza,
Trump World's Fair, located on The Boardwalk adjacent to the existing Atlantic
City Convention Center, which is next to Trump Plaza, at a remaining cost, as
of December 31, 1995, of $42.5 million. Upon completion, Trump World's Fair
would add 49,272 square feet of casino floor space, approximately 16,000 of
which will be directly accessible from The Boardwalk and 500 hotel rooms,
connected to Trump Plaza's main tower by an enclosed walkway overlooking The
Boardwalk. Renovations are ongoing at Trump World's Fair and management
expects, although there can be no assurances, that the renovations at Trump
World's Fair will be completed in the second quarter of 1996.
The following table details Trump Plaza's casino and hotel capacity
following the Trump Plaza Expansion:
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TRUMP PLAZA TRUMP PLAZA TRUMP WORLD'S
FACILITY(a) EAST(b) FAIR(c) TOTAL
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Casino square footage............. 75,395 14,886 49,272 139,553
Slot machines..................... 2,368 405 1,493 4,266
Table games....................... 97 12 32 141
Hotel rooms....................... 555 349 500 1,404
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(a) Includes the 2,000 square foot area connecting the existing facility with
Trump Plaza East and the 75 slot machines included in this area.
(b) The casino and 249 hotel rooms have already opened. The remaining 91 hotel
rooms and suites are scheduled to be opened by the end of March 1996. Also
reflects the nine super suites are scheduled to be opened early in 1997
and not otherwise included in the "Trump Plaza Expansion."
(c) Scheduled to open in the second quarter of 1996.
Trump Plaza's management team commenced the Trump Plaza Expansion in 1995
and has recently launched a variety of new initiatives designed to increase
the level of casino gaming activity generally at its casino and, in
particular, to attract casino patrons who tend to wager more frequently and in
larger denominations than the typical Atlantic City patron. These initiatives
include targeted marketing and advertising campaigns directed to select groups
of customers in the Boston-New York-Washington, D.C. corridor, the
introduction of new slot machines and table games and the addition of bill
acceptors on slot machines.
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
will 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
will 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. Trump World's Fair, which will be part of Trump Plaza,
will seek to attract the "middle market" segment (primarily bus customers and
Boardwalk pedestrian traffic) by offering high value food and entertainment
attractions in a festive "World's Fair" atmosphere. The first floor of Trump's
World's Fair will feature a Boardwalk level casino offering walk-in customers
direct access from The Boardwalk to 581 slot machines. In addition, Trump
World's Fair is constructing a new bus terminal that will have a dedicated
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escalator leading directly to a separate casino entertainment area. The
separate casino entertainment area will contain a 500-seat buffet-style
restaurant, an Oriental Pavilion and a casino with 538 slot machines. The new
bus terminal and dedicated casino facilities will allow Trump World's Fair to
serve efficiently a high volume of bus customers. A smoke-free casino with
approximately 385 slot machines and 32 table games along with additional
restaurants will be located on the second floor of Trump World's Fair.
Moreover, with its prime location adjoining the current Atlantic City
Convention Center and near the new Atlantic City Convention Center, and with
its newly refurbished room base of 500 rooms and approximately 50,000 square
feet of total gaming space, management believes that Trump World's Fair is
ideally suited to attract convention visitor traffic.
BUSINESS STRATEGY
General. A primary element of Trump Plaza's business strategy is to seek to
attract patrons who tend to wager more frequently and in larger denominations
than the typical Atlantic City gaming customer. Such high-end players
typically wager $5 or more per play in slots and $25 or more per play in table
games. In order to attract more high-end gaming patrons to Trump Plaza in a
cost-effective manner, Plaza Associates has refocused its marketing efforts.
Commencing in 1991, Plaza Associates substantially curtailed costly "junket"
marketing operations which involved attracting groups of patrons to the
facility on an entirely complimentary basis (e.g., by providing free air fare,
gifts and room accommodations). In the fall of 1992, Plaza Associates decided
to de-emphasize marketing efforts directed at "high roller" patrons from the
Far East, who tend to wager $50,000 or more per play in table games. Plaza
Associates determined that the potential benefit derived from these patrons
did not outweigh the high costs associated with attracting such players and
the resultant volatility in the results of operations of Trump Plaza. Revenues
derived from high roller patrons have declined since 1992, although management
believes that such revenue loss has not had a significant impact on
profitability for the reasons discussed above. In addition, this shift in
marketing strategy has allowed Plaza Associates to focus its efforts on
attracting the high-end players.
"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 their patrons
("complimentaries"). Management monitors Trump Plaza's policy so as to provide
complimentaries primarily to patrons with a demonstrated propensity to wager
at Trump Plaza.
Entertainment. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end and other patrons. Trump Plaza offers headline
entertainment weekly during the summer and monthly during the off- season, and
also features other entertainment and revue shows.
Player Development/Casino Hosts. Plaza Associates currently employs gaming
representatives in New Jersey, New York and other states, as well as several
international representatives, to promote Trump Plaza to prospective gaming
patrons. Player development personnel host special events, offer incentives
and contact patrons directly in an effort to attract high-end table game
patrons from the United States, Canada and South America. Trump Plaza's casino
hosts assist patrons on the casino floor, make room and dinner reservations
and provide general assistance. They also solicit Trump Card (the frequent
player slot card) sign-ups in order to increase Plaza Associates' marketing
base.
Promotional Activities. The Trump Card constitutes a key element in Trump
Plaza's direct marketing program. Subject to regulatory constraints, the Trump
Card will be used in all of THCR's gaming facilities so as to build a national
database of gaming patrons. 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. THCR's 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
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mailing of vouchers for complimentary slot play. Trump Plaza also utilizes a
special events calendar (e.g., birthday parties, sweepstakes and special
competitions) to promote its gaming operations.
Bus Program. Trump Plaza has a bus program, which transports approximately
2,400 gaming patrons per day during the week and 3,500 per day on the
weekends. 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 to certain
qualified patrons. For the years ended December 31, 1993, 1994 and 1995 credit
play as a percentage of total dollars wagered was approximately 18%, 17%, and
18%, respectively. As part of Trump Plaza's new business strategy and in
response to the general economic downturn in the Northeast, Trump Plaza has
imposed stricter standards on applications for new or additional credit.
FACILITIES AND AMENITIES
Trump Plaza and Trump Plaza East. The casino in the existing facility of
Trump Plaza currently offers 97 table games and 2,368 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, two
gift shops, a deli, a coffee shop, an ice cream parlor and a buffet. The
casino level houses the casino, a fast food restaurant, an exclusive slot
lounge for high-end patrons and a new oceanfront baccarat gaming area. Upon
completion, an enclosed walkway will connect Trump Plaza at the casino level
with the Atlantic City Convention Center and with Trump World's Fair.
On February 16, 1996, Trump Plaza opened the 15,000 square foot Ocean View
Casino and Bar and 249 of its 349 hotel rooms at Trump Plaza East. The Ocean
View Casino and Bar is the first gaming room in Atlantic City to combine a
casino, bar and entertainment area and features a 70-foot long bar with 27
bar-top slot machines, live entertainment and a 58 square foot video wall.
With its high ceilings and windows overlooking the Atlantic Ocean and The
Boardwalk, Trump Plaza provides a new and exciting entertainment environment
for its casino patrons.
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
ten-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino and is located directly off the Atlantic City
Expressway, the main highway into Atlantic City.
In July 1994, Time Warner opened its second largest Warner Brothers Studio
Store pursuant to a sublease of the entire first floor of retail space on The
Boardwalk at Trump Plaza East (approximately 17,000 square feet). THCR
management believes that the commitment of Time Warner at Trump Plaza East,
together with other
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retail, restaurant and entertainment establishments expected to participate in
the Trump Plaza Expansion, evidences the continued growth of, and highlights
Trump Plaza's favored place within, the Atlantic City casino market.
Trump World's Fair. Upon completion of the renovation in the second quarter
of 1996, Trump World's Fair will be connected to Trump Plaza's main tower by
an enclosed walkway overlooking The Boardwalk and will add an additional 500
hotel rooms to Trump Plaza. In addition, Trump World's Fair will be outfitted
with approximately 50,000 square feet of casino floor space housing 1,493 slot
machines and 32 table games. In addition to the casino, Trump World's Fair
will feature three restaurants, including a state-of-the-art buffet, a
cocktail lounge, convention, ballroom and meeting room space, a swimming pool
and a health spa. The enclosed walkway will run through a portion of the
Atlantic City Convention Center, which is located between Trump World's Fair
and Trump Plaza's main tower. In this connection, Plaza Associates has
acquired an easement with regard to portions of the Atlantic City Convention
Center. See "--Gaming and Other Laws and Regulations--New Jersey Gaming
Regulations--Approved Hotel Facilities" and "Properties--Trump Plaza--Trump
World's Fair."
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza occurring during the period from May through September.
Consequently, Plaza Associates' 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.
EMPLOYEES AND LABOR RELATIONS
Plaza Associates has approximately 3,700 employees of whom approximately
1,100 are covered by collective bargaining agreements. Management believes
that its relationships with its employees are satisfactory. Certain of Plaza
Associates' employees must be licensed under the Casino Control Act. See
"Gaming and Other Laws and Regulations--New Jersey Gaming Regulations--
Qualification of Employees." Plaza Funding has no employees.
In April 1993, the National Labor Relations Board (the "NLRB") found that
Plaza Associates had violated the National Labor Relations Act (the "NLRA") in
the context of a union organizing campaign by table game dealers of Plaza
Associates in association with the Sports Arena and Casino Employees Union
Local 137, a/w Laborers' International Union of North America, AFL-CIO ("Local
137"). In connection with such finding, Plaza Associates was ordered to
refrain from interfering with, restraining or coercing employees in the
exercise of the rights guaranteed them by Section 7 of the NLRA, to notify its
employees of such rights and to hold an election by secret ballot among its
employees regarding whether they desire to be represented for collective
bargaining by Local 137. The election was held on May 20 and 21, 1994 and the
vote, which has been certified by the NLRB, was in favor of management and
against representation by Local 137.
TRADEMARK/LICENSING
Subject to certain restrictions, THCR has the exclusive right (except with
respect to the Taj Mahal (during the period prior to the consummation of the
Merger Transaction) and Trump's Castle Casino Resort ("Trump's Castle")) to
use the "Trump" name and likeness in connection with gaming and related
activities pursuant to a trademark license agreement between Trump and THCR
(the "License Agreement"). Pursuant to the License Agreement, Trump granted to
THCR (on behalf of itself and its subsidiaries, including Plaza Associates)
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 is exclusive, subject to existing licenses of the Marks to the Taj
Mahal (prior to the Merger Transaction) and Trump's Castle. 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.
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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 the Trademark 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.
THE 1992 PLAZA RESTRUCTURING
In 1991, Trump Plaza experienced liquidity problems. Management believes
that those liquidity problems were attributable, in part, to an overall
deterioration in the Atlantic City gaming market, as indicated by reduced
rates of casino revenue growth for the industry for the two prior years,
aggravated by an economic recession in the Northeast. In addition, increased
casino gaming capacity in Atlantic City, due in part to the opening of the Taj
Mahal in April 1990, may also have contributed to Trump Plaza's liquidity
problems.
In order to alleviate its liquidity problem, pursuant to the 1992 Plaza
Restructuring, Plaza Associates and Plaza Funding restructured their
indebtedness through a prepackaged plan of reorganization under Chapter 11 of
the Bankruptcy Code.
The purpose of the 1992 Plaza Restructuring was to improve the amortization
schedule and extend the maturity of Plaza Associates' indebtedness by (i)
eliminating the sinking fund requirement on Plaza Funding's 12 7/8% Mortgage
Bonds, due 1998 (the "Original Plaza Bonds"), (ii) extending the maturity of
such indebtedness from 1998 to 2002, (iii) lowering the interest rate from 12
7/8% per annum to 12% per annum, (iv) reducing the aggregate principal amount
of the indebtedness under the Original Plaza Bonds and certain other
indebtedness from $250 million to $225 million and (v) eliminating certain
other indebtedness by reconstituting such debt in part as new bonds (the
"Successor Plaza Bonds") and in part as Stock Units (as defined). The 1992
Plaza Restructuring was necessitated by the inability to either generate cash
flow or obtain additional financing sufficient to make the scheduled sinking
fund payment on the Original Plaza Bonds. In connection with the 1992 Plaza
Restructuring, each holder of $1,000 principal amount of Original Plaza Bonds
and such other indebtedness received (i) $900 principal amount of Successor
Plaza Bonds, (ii) 12 Stock Units, each representing one share of Common Stock
and one share of Preferred Stock of Plaza Funding (the "Stock Units") and
(iii) cash payments of approximately $58.65, reflecting accrued interest.
On May 29, 1992, Plaza Funding, which theretofore had no interest in Plaza
Associates, received a 50% beneficial interest in TP/GP, Inc. ("Trump Plaza
GP"), and Plaza Funding and Trump Plaza GP were admitted as partners of Plaza
Associates. Plaza Funding also issued approximately three million Stock Units
to holders of the Original Plaza Bonds and certain other indebtedness.
Pursuant to the terms of the Plaza Associates partnership agreement, Plaza
Funding was issued a preferred partnership interest, which provided Plaza
Funding with partnership distributions designed to pay dividends on, and the
redemption price of, the Stock Units. Trump Plaza GP became the managing
general partner of Plaza Associates, and, through its Board of Directors,
managed the affairs of Plaza Associates. Trump Plaza GP was subsequently
merged with and into Plaza Funding, which became the managing general partner
of Plaza Associates.
The Successor Plaza Bonds and the Stock Units were redeemed in 1993 out of
the proceeds of a refinancing designed to enhance Trump Plaza's liquidity and
to position the Trump Plaza for a subsequent deleveraging transaction. The
1993 refinancing included (i) the sale by Plaza Funding of $330 million in
aggregate principal amount of Plaza Notes and (ii) the sale by Trump AC of $60
million aggregate principal amount of 12 1/2% Pay-In-Kind Notes due 2003 (the
"PIK Notes") and warrants to acquire an aggregate of $12 million in principal
amount of additional PIK Notes (the "PIK Note Warrants). Upon consummation of
the refinancing, Plaza Funding held a 1% equity interest in Plaza Associates
and Trump AC held a 99% equity interest. In connection with the initial public
offering (the "June 1995 Stock Offering") of 10 million shares of THCR Common
Stock, THCR Holdings repurchased and redeemed the PIK Notes and the PIK Note
Warrants. In addition, in connection
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with the June 1995 Stock Offering and the offering by THCR Holdings and its
wholly owned finance subsidiary, Trump Hotels & Casino Resorts Funding, Inc.,
a Delaware corporation ("THCR Funding") of $155 million Senior Secured Notes
due 2005 (the "Senior Notes") (the "June 1995 Note Offering" and, together
with the June 1995 Stock Offering, the "June 1995 Offerings"), Trump
transferred, to pursuant to the 1995 Contribution Agreement (as defined), to
THCR Holdings his ownership interests in Plaza Funding and Trump AC. Upon the
consummation of the June 1995 Offerings, THCR Holdings indirectly wholly owned
Plaza Associates. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--
General."
CERTAIN INDEBTEDNESS
Plaza Notes. The Plaza Notes, $330 million of which are outstanding, were
issued by Plaza Funding, with Plaza Associates providing a full and
unconditional guaranty thereof. The Plaza Notes mature in 2001 and bear
interest semiannually in arrears. The Plaza Notes are subject to redemption at
any time on or after June 15, 1998, at the option of Plaza Funding or Plaza
Associates, in whole or in part, at the redemption prices set forth in the
Plaza Note Indenture. In addition, upon the occurrence of a Plaza Note Change
of Control (as defined in the Plaza Note Indenture), each holder of Plaza
Notes may require Plaza Funding or Plaza Associates to repurchase such
holder's Plaza Notes at 101% of the principal amount thereof, together with
accrued and unpaid interest to the date of repurchase.
Pursuant to the Plaza Note Purchase and as a part of the Merger Transaction,
the Plaza Notes will be retired, through repurchase and, if necessary,
defeasance. To the extent that Plaza Notes are defeased, Plaza Funding and
Plaza Associates will be released from their obligations under all financial
and negative covenants and certain other provisions contained in the Plaza
Note Indenture, and the Plaza Note Security (as defined) will be 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,
in the event of such a defeasance, Plaza Funding will, concurrently therewith,
irrevocably instruct the Plaza Note Trustee (as defined) to provide notice of
such redemption not less than 30 nor more than 60 days prior to June 15, 1998.
Until the Plaza Note Purchase, Plaza Funding and Plaza Associates'
obligations under the Plaza Note Indenture are secured principally by (i) the
Mortgage encumbering substantially all of Plaza Associates' assets (the "Plaza
Note Mortgage") (see "Properties") and (ii) the pledge by Plaza Funding of its
1% general partnership interest in Plaza Associates and, equally and ratably
with the Senior Notes to the extent required by the Plaza Note Indenture, by a
pledge of (x) 100% of the general partnership interests in Trump AC, (y) Trump
AC's 99% general partnership interest in Plaza Associates and (z) 100% of the
capital stock of Plaza Funding and Plaza Holding Inc. (collectively, the
"Plaza Note Security"). Following the Plaza Note Purchase in connection with
the Merger Transaction, the Plaza Note Security will be released and Plaza
Associates' assets, together with other assets, will secure the Mortgage
Notes.
The Mortgage Notes. As a part of the Merger Transaction, Trump AC intends to
issue in an underwritten offering approximately $1,100,000,000 aggregate
principal amount of Mortgage Notes with an expected maturity of ten years.
Plaza Associates will be a guarantor of the Mortgage Notes, along with all
other existing and future subsidiaries of Trump AC other than Trump AC
Funding. The actual amounts raised will depend upon a number of factors,
including market conditions, and other factors beyond the control of THCR's
and Trump AC's management. The Mortgage Notes are likely to 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.
Other Indebtedness. In addition to the foregoing, Plaza Associates' long-
term indebtedness includes approximately $9.0 million of indebtedness,
including, as of December 31, 1995, approximately $3.0 million due under
outstanding mortgage notes described under "--Properties." Approximately $2.9
million of such indebtedness will mature through December 31, 1996.
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ATLANTIC CITY MARKET
The Atlantic City gaming 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 $3.75 billion in gaming
revenues in 1995, an approximately 9.5% increase over 1994 gaming revenues of
approximately $3.42 billion. From 1990 to 1995, total gaming revenues in
Atlantic City have increased approximately 27%, while hotel rooms increased
only slightly during that period. Although total visitor volume to Atlantic
City remained relatively constant in 1995, the volume of bus customers dropped
to 9.6 million in 1995, continuing a decline from 11.7 million in 1990. The
volume of customers traveling by other means to Atlantic City has grown from
20.1 million in 1990 to 23.7 million in 1995.
Total Atlantic City slot revenues increased 12.2% in 1995, continuing a
solid trend of increases over the past five years. From 1990 through 1995,
slot revenue growth in Atlantic City has averaged 8.3% per year. Total table
revenue increased 4.4% in 1995, while table game revenue from 1990 to 1995 has
decreased on average 0.7% per year. Management believes the slow growth in
table revenue is primarily attributable to two factors. First, the slot
product has been significantly improved over the last five years. Dollar bill
acceptors, new slot machines, video poker and blackjack and other improvements
have increased the popularity of slot play among a wider universe of casino
patrons. 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 1990, the number of slot machines in Atlantic City has
increased 37.2%, while the number of table games has decreased by 4.0%. Slot
revenues increased from 58% of total casino revenues in 1990 to 69% in 1995.
The second reason for historic slow growth in table 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.
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 have been no significant
additions to hotel capacity in Atlantic City since 1990. Las Vegas visitor
volumes have increased, in part, due to the continued addition of new hotel
capacity. Both markets have exhibited a strong historical 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. 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.
Despite lower overall growth rates than the Las Vegas market, management
believes that Atlantic City possesses similar revenue and cash flow generation
capabilities. The approximately $3.75 billion of gaming revenue produced by
the 12 casino hotels in Atlantic City in 1995 exceeded the approximately $3.12
billion of gaming revenues produced by the 18 largest casino hotels on the Las
Vegas Strip (based on net revenues in excess of $77 million), even though the
Atlantic City casino hotels have less than one-quarter the number of hotel
rooms of the Las Vegas Strip casino hotels. Win per unit figures in Atlantic
City are at a significant premium to Las Vegas win-per-unit performance,
primarily due to the constrained supply of gaming positions in Atlantic City
compared to Las Vegas.
The regulatory environment in Atlantic City has improved recently. Most
significantly, 24-hour gaming has been approved, poker and keno have been
added and regulatory burdens have been reduced. In particular, Bill A61 was
passed in January of 1995, which has eliminated duplicative regulatory
oversight and channeled operator's funds from regulatory support into CRDA
uses. Administrative costs of regulation will be reduced while increasing
funds available for new development.
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In addition to the planned casino expansions, major infrastructure
improvements have begun. The CRDA is currently overseeing the development of
the "tourist corridor" that will link the new convention center with The
Boardwalk and will, when completed, feature an entertainment and retail
complex. The tourist corridor is scheduled to be completed in conjunction with
the completion of the new convention center.
Trump Plaza is adjacent to the existing Atlantic City Convention Center and
will also be one of the closest casino hotels to the new convention center,
which, as currently planned, would hold 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. When completed, the new, approximately
$250 million convention center would be the largest exhibition space between
New York City and Washington, D.C. It will be located at the base of the
Atlantic City Expressway and is currently planned to open in January 1997. The
State of New Jersey is also implementing an approximately $125 million capital
plan to upgrade and expand the Atlantic City International Airport.
Management believes that recent 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 in 1993 and 1994 and high occupancy
rates, significant investment in the Atlantic City market has been initiated
and/or announced. Bally recently bought a Boardwalk lot for $7.5 million, the
Sands just completed a major renovation, and in December of 1994, approval by
the CRDA was given to TropWorld to add 626 hotel rooms, the Grand to add 295
rooms (both of which are under construction) and to the Taj Mahal to add
approximately 800 rooms and a 1,500 space parking garage (with an application
pending to increase the size to 2,000 spaces). Overall, various casinos in the
market have applied to the CRDA for funding to construct 3,400 new hotel
rooms. 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
Competition in the Atlantic City casino hotel market is intense. Trump Plaza
competes with the other casino hotels located in Atlantic City, including the
other casino hotels owned by Trump, Trump's Castle and, prior to the Merger
Transaction, the Taj Mahal. See "--Conflicts of Interest." At present, there
are 12 casino hotels located in Atlantic City, including Trump Plaza, all of
which compete for patrons. Trump Plaza primarily competes with other Atlantic
City casinos by, among other things, providing superior products and
facilities, premier locations, name recognition and targeted marketing
strategies. See "--Atlantic City Marketing Strategy," "--Business Strategy,"
and "--Facilities and Amenities." In addition, there are several sites on The
Boardwalk and in the Atlantic City Marina area on which casino hotels could be
built in the future and various applications for casino licenses have been
filed and announcements with respect thereto made from time to time (including
a proposal by Mirage Resorts, Inc.), although management is not aware of any
current construction on such sites by third parties. No new casino hotels have
commenced operations in Atlantic City since 1990, although several existing
casino hotels have recently expanded or are in the process of expanding their
operations. 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 Trump
Plaza. There also can be no assurance that the Atlantic City development
projects which are planned or underway will be completed.
Trump Plaza also competes, or will compete, with facilities in the
northeastern and mid-Atlantic regions of the United States at which casino
gaming or other forms of wagering are currently, or in the future may be,
authorized. To a lesser extent, Trump Plaza faces competition from gaming
facilities nationwide, including land-based, cruise line, riverboat and
dockside casinos located in Colorado, Illinois, Indiana, Iowa, Louisiana,
Mississippi, Missouri, Nevada, South Dakota, Ontario (Windsor), 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
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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. 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, Trump Plaza competes directly with the Taj Mahal and Trump's Castle. See
"--Conflicts of Interest."
In addition, Trump Plaza 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 contracts 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 Trump Plaza.
In 1991, the Mashantucket Pequot Nation opened Foxwoods Casino Resort
("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 over 3,800 slot machines. The
Mashantucket Pequot Nation has announced various expansion plans, including
its intention to build another casino in Ledyard together with hotels,
restaurants and a theme park. In addition, the Mohegan Nation has commenced
construction of a casino resort to be located ten miles from Foxwoods. The
Mohegan Nation resort which will be built and managed by a joint venture
managed by Sun International Hotels Ltd., is scheduled to have 80% of the
gaming capacity of Foxwoods and is scheduled to open in October 1996. There
can be no assurance that any continued expansion of gaming operations by the
Mashantucket Pequot Nation or that any commencement of gaming operations by
the Mohegan Nation would not have a materially adverse impact on Trump Plaza's
operations.
A group in New Jersey calling itself the "Ramapough Indians" has applied to
the U.S. Department of the Interior to be federally recognized as a Native
American tribe, which recognition would permit it to require the State of New
Jersey to negotiate a gaming compact under IGRA. In 1993, the Bureau of Indian
Affairs denied the Ramapough Indians federal recognition. The Ramapough
Indians' appeal of this decision has been denied. Similarly, 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. Also, it has been
reported that a Sussex County, New Jersey businessman has offered to donate
land he owns there to the Oklahoma-based Lenape/Delaware Indian Nation which
originated in New Jersey and already has federal recognition but does not have
a reservation in New Jersey. The Lenape/Delaware Indian Nation has signed an
agreement with the town of Wildwood, New Jersey to open a casino; however, the
plan requires federal and state approval in order to proceed. 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,
and has announced an intention to open expanded gaming facilities.
Representatives of the St. Regis Mohawk Nation signed a gaming compact with
New York State officials for the opening of a casino, without slot machines,
in the northern portion of the state close to the Canadian border. The St.
Regis Mohawks have also announced their intent to open a casino at the
Monticello Race Track in the Catskill Mountains region of New York; however,
any Indian gaming operation in the Catskills is subject to the approval of the
Governor of New York. The Narragansett Nation of Rhode Island, which has
federal recognition, is negotiating a casino gaming compact with Rhode Island.
The Gay Head Wampanoag tribe is seeking to open a casino in New Bedford,
Massachusetts. Other Native American nations are seeking federal recognition,
land and negotiation of gaming compacts in New York, Pennsylvania, Connecticut
and other states near Atlantic City.
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans
to begin operating slot machines at race tracks in the State of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval,
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including New York and Pennsylvania, and New York City is considering a plan
under which it would be the embarking point for gambling cruises into
international waters three miles offshore. 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 Trump Plaza 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. A New York State Assembly plan has the potential of legalizing non-
Native American gaming in portions of upstate New York. Essential to this plan
is a proposed New York State constitutional amendment that would legalize
gambling. To amend the New York Constitution, the next elected New York State
Legislature must repass a proposal legalizing gaming and a statewide
referendum, held no sooner than November 1997, must approve the constitutional
amendment. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, a proposal has been introduced to legalize gaming in other
locations, including Philadelphia, Pennsylvania. In addition, legislation has
from time to time been introduced in the New Jersey State Legislature relating
to types of statewide legalized gaming, such as video games with small wagers.
To date, no such legislation, which may require a state constitutional
amendment, has been enacted. Management is unable to predict whether any such
legislation, in New Jersey or elsewhere, will be enacted or whether, if
passed, it would have a material adverse impact on Plaza Associates.
CONFLICTS OF INTEREST
Conflicts Relating to Trump's Ownership of the Taj Mahal. Trump is currently
the beneficial owner of 50% of Taj Associates, the partnership which owns and
operates the Taj Mahal. The Taj Mahal competes directly with Trump Plaza, and
Trump could, under certain circumstances prior to the Merger Transaction, have
an incentive to operate the Taj Mahal to the competitive detriment of Trump
Plaza. In connection with the Merger Transaction, THCR Holdings, which wholly
owns Plaza Associates, will acquire Taj Associates and any potential conflict
relating to Trump's ownership of the Taj Mahal will cease to exist.
Conflicts Relating to Trump's Ownership of Trump's Castle. Trump is
currently the beneficial owner of 100% of Trump's Castle, which competes
directly with Trump Plaza, and Trump could, under certain circumstances, have
an incentive to operate Trump's Castle to the competitive detriment of Trump
Plaza.
Trump and TC/GP, Inc. ("TC/GP"), a corporation beneficially owned by Trump,
have entered into a services agreement (the "Trump's Castle Services
Agreement") with Trump's Castle Associates ("TCA"), the partnership that owns
and operates Trump's Castle, pursuant to which TC/GP has agreed to provide
marketing, advertising and promotional and other similar and related services
to Trump's Castle. Pursuant to the Trump's Castle Services Agreement, in
respect of any matter or matters involving employees, contractors,
entertainers, celebrities, vendors, patrons, marketing programs, promotions,
special events, or otherwise, Trump will, and will cause his affiliates to the
best of his ability and consistent with his fiduciary obligations to TCA,
Trump Plaza and the Taj Mahal to, act fairly and in a commercially reasonable
manner so that on an annual overall basis (x) neither Trump Plaza nor the Taj
Mahal shall realize a competitive advantage over Trump's Castle, by reason of
any activity, transaction or action engaged in by Trump or his affiliates and
(y) Trump's Castle shall not be discriminated against.
Conflicts Relating to Common Officers. Nicholas L. Ribis, the Chief
Executive Officer of THCR, is also the Chief Executive Officer of Taj
Associates and TCA. Messrs. Robert M. Pickus and John P. Burke, officers of
THCR, are each officers of TCA and Taj Associates. In addition, Messrs. Trump,
Ribis, Pickus and Burke serve on one or more of the governing bodies of THCR,
Taj Holding, TCA and their affiliated entities. As a result of Trump's
interests in three competing Atlantic City casino hotels, the common chief
executive officer
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and other common officers, a conflict of interest may be deemed to exist,
including by reason of such persons' access to information and business
opportunities possibly useful to any or all of such casino hotels.
Furthermore, Trump has agreed that he will pursue, develop, control and
conduct all new gaming activities through THCR. Although no specific
procedures have been devised for resolving conflicts of interest confronting,
or which may confront, Trump, such persons and all the casinos affiliated with
Trump, Messrs. Trump, Ribis, Pickus and Burke have informed THCR that they
will not engage in any activity which they reasonably expect will harm THCR or
its affiliates or is otherwise inconsistent with their obligations as officers
and directors of THCR or its affiliates. See "Executive Compensation--
Compensation Committee Interlocks and Insider Participation--Certain Related
Party Transactions of Trump."
GAMING AND OTHER LAWS AND REGULATIONS
The following is only a summary of the applicable provisions of the Casino
Control Act of the State of New Jersey 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 New Jersey Casino Control Act and such other laws
and regulations. Unless otherwise indicated, all references to "Trump Plaza"
include (a) Trump Plaza's main tower, including Trump Plaza East (which
operates pursuant to a casino license held by Plaza Associates) and (b) Trump
World's Fair (which will operate pursuant to a separate casino license that is
expected to be issued to Plaza Associates).
Management believes that it and its respective affiliates are in material
compliance with all applicable laws, rules and regulations discussed below.
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; rules of
the games; the selling and redeeming of gaming chips; the granting and
duration of credit and the enforceability of gaming debts; management control
procedures, accounting and cash control methods and reports to gaming
agencies; security standards; the manufacture and distribution of gaming
equipment; 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 Casino Control Commission of the State of New
Jersey (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. Plaza Associates was issued its initial casino license
on May 14, 1984. On June 22, 1995, the CCC renewed Plaza Associates' casino
license through June 30, 1999. Management believes that a casino license will
ultimately be issued for Trump World's Fair, although there can be no
assurance that the CCC will issue this casino license or what conditions may
be imposed, if any, with respect thereto.
Casino Licensee. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion
with regard to the issuance, renewal, revocation and suspension of such
licenses and approvals, which are non-transferable. The qualification criteria
with respect to the holder of a casino license include its financial
stability, integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. The casino license currently held by Plaza Associates is
renewable for a period of up
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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").
Each casino license entitles the holder to operate one casino, which must
consist of a "single room." Further, no person may be the holder of a casino
license if the holding of such license will result in undue economic
concentration in Atlantic City casino operations by that person. On May 17,
1995, the CCC adopted a regulation defining the criteria for determining undue
economic concentration which codifies the content of existing CCC precedent
with respect to the subject. In April 1995, Plaza Associates petitioned the
CCC for certain approvals. In its May 18, 1995 declaratory rulings with
respect to such petition, the CCC, among other things, (i) determined that
Trump World's Fair is an approved hotel permitted to contain a maximum of
60,000 square feet of casino space, that the 40,000 square feet of casino
space therein is a "single room" and that its operation by Plaza Associates
would not result in undue economic concentration in Atlantic City casino
operations; (ii) approved the operation of Trump World's Fair by Plaza
Associates under a separate casino license subject to an application for and
the issuance of such license and approved the proposed easement agreements
with respect to the proposed enclosed Atlantic City Convention Center walkway;
(iii) approved in concept the proposed physical connection and integrated
operation by Plaza Associates of Trump Plaza's main tower, Trump Plaza East
and Trump World's Fair; and (iv) determined that the approved hotel comprised
of the main tower and Trump Plaza East is permitted to contain a maximum of
100,000 square feet of casino space. In addition, on December 13, 1995, Plaza
Associates received CCC authorization for 49,340 square feet of casino space
at Trump World's Fair. A separate Plaza Associates casino license with respect
to Trump World's Fair would have a renewable term of one year for each of its
first three years and thereafter be renewable for periods of up to four years.
Plaza Associates has made application for such separate casino license with
respect to Trump World's Fair but there can be no assurance that the CCC will
issue this casino license or what conditions may be imposed, if any, with
respect thereto.
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes and all taxes and
fees imposed by the Casino Control Act or the CCC when due; to make necessary
capital and maintenance expenditures to insure that it has a superior first-
class facility of exceptional quality; and to pay, exchange, refinance or
extend debts which will mature or become due and payable during the license
term or otherwise manage such debts or any defaults of such debts. The CCC is
required to review and approve a transaction such as the Merger Transaction
with regard to the financial stability standards.
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."
THCR believes that it has adequate financial resources to meet the financial
stability requirements of the CCC for the foreseeable future.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership
in the licensee, each person who in the opinion of the CCC has the ability to
control the licensee 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 to or for the benefit of any related
entity or partner, with certain exceptions, are subject to prior CCC approval;
and, if Plaza Associates' cash position falls below $5.0 million
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for three consecutive business days, Plaza Associates 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, Plaza Holding Inc., Plaza Funding, THCR Holdings, THCR
Funding or THCR 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 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 Division upon request, any document or information which bears
any relation to such debt or equity securities.
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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."
Declaratory Rulings. Taj Associates and Plaza Associates will petition the
CCC for declaratory rulings approving the Merger Transaction and determining,
among other things, that after consummation thereof, Taj Associates and Plaza
Associates will continue to satisfy the CCC's financial stability
requirements; Trump will continue to demonstrate his financial stability; the
Regulated Companies and natural person qualifiers are qualified; the
certificates of incorporation and partnership agreements of the Regulated
Companies contain required provisions with respect to the transfer of
securities and qualification of security holders under the Casino Control Act;
the Mortgage Notes are publicly-traded securities and CCC approval of the
issuance or subsequent transfer of the securities is not required; the
individual holders of the Mortgage Notes need not be qualified as financial
sources and security holders, and their qualification may be waived by the
CCC; and qualification of the holders of THCR Common Stock be waived by the
CCC.
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. Currently, each of Plaza Funding,
Trump AC, Plaza Holding Inc., Plaza Associates, THCR Holdings, THCR Funding
and THCR are each deemed to be a Regulated Company, 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.
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
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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
Plaza Associates, 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.
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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.
In its May 18, 1995 declaratory rulings with respect to the proposed
enclosed Atlantic City Convention Center walkway to Trump World's Fair, the
CCC, among other things, approved the proposed easement agreements with
respect to such walkway and determined, with the concurrence of the Attorney
General, that no CCC license is required to grant the easement and that the
easements satisfy the durational term requirement and need not concern 100% of
the entire approved hotel building or include such a buy-out provision. See
"Properties--Trump Plaza--Trump World's Fair."
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 or any eligible applicant for a casino
license. 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, 1993,
1994 and 1995, Plaza Associates' gross revenue tax was approximately $21.3
million, $21.0 million and $24.0 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $4.0
million, $4.2 million and $4.4 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 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 bonds issued to the licensee by the CRDA.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such bonds or twice the amount of
its investments authorized in lieu of such bond 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 $100 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 35% of the cost to casino licensees of expanding their hotel facilities
to provide additional hotel rooms, a portion of which will be required to be
available upon the opening of the new Atlantic City convention center and
dedicated to
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convention events. The CRDA has determined at this time that eligible casino
licensees will receive up to 27% of the cost of additional hotel rooms out of
these monies set aside and may, in the future, increase the percentage to no
greater than 35%.
Minimum Casino Parking Charges. As of July 1, 1993, each casino licensee was
required to pay the New Jersey State Treasurer a $1.50 charge for every use of
a parking space for the purpose of parking, garaging or storing motor vehicles
in a parking facility owned or leased by a casino licensee or by any person on
behalf of a casino licensee. This amount is paid into a special fund
established and held by the New Jersey State Treasurer for the exclusive use
of the CRDA. Plaza Associates currently charges its parking patrons $2.00 in
order to make its 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 Antitrust
Division are less than a certain fixed sum. Additionally, a 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,
Plaza Funding, Plaza Holding Inc., Trump AC, THCR, THCR Holdings, THCR Funding
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 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' casino games are conducted on a credit as
well as cash basis. Gaming debts arising in Atlantic City in accordance with
applicable regulations are enforceable in the courts of the State of New
Jersey. The extension of gaming credit is subject to regulations that detail
procedures which casinos must follow when granting gaming credit and recording
counter checks which have been exchanged, redeemed or consolidated.
Control Procedures. Gaming at Trump Plaza is conducted by trained and
supervised personnel. Plaza Associates employs extensive security and internal
controls. Security checks are made to determine, among other matters, that job
applicants for key positions have had no criminal history or associations.
Security controls
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utilized by the surveillance department include closed circuit video camera to
monitor the casino floor and money counting areas. The count of moneys from
gaming also is observed daily by representatives of the CCC.
OTHER LAWS AND REGULATIONS
The U.S. Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit, withdrawal,
exchange of currency, gambling tokens or chips, or other payments or transfers
by, through or to such casino which involve a transaction in currency of more
than $10,000 per patron, per gaming day. Such reports are required to be made
on forms prescribed by the Secretary of the Treasury and are filed with the
Commissioner of the Internal Revenue Service (the "Service"). In addition,
Plaza Associates is 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.
As the result of an audit conducted by the U.S. Department of the Treasury,
Office of Financial Enforcement, Plaza Associates was alleged to have failed
to timely file the "Currency Transaction Report by Casino" in connection with
65 individual currency transactions in excess of $10,000 during the period
from October 31, 1986 to December 10, 1988. Plaza Associates paid a fine of
$292,500 in connection with these violations. Plaza Associates has revised its
internal control procedures to ensure continued compliance with these
regulations.
On April 5, 1994, the Occupational Safety and Health Administration ("OSHA")
proposed a regulation that would require, inter alia, that employers who
permit smoking in workplaces establish designated smoking areas, permit
smoking only in such areas, and assure that designated smoking areas be
enclosed, exhausted directly to the outside, and maintained under negative
pressure sufficient to contain tobacco smoke within the designated area. Plaza
Associates has estimated construction costs to build enclosed, exhausted,
negative-pressure smoking rooms in Trump Plaza to be $1.5 million for its
casino and $2.5 million for its restaurants. Plaza Associates has also
estimated construction costs to provide negative-pressure exhaust systems for
Trump Plaza hotel rooms to be $1,500 per room; however, management believes
that it is highly unlikely that the regulation, if promulgated, would require
hotel rooms to be equipped with exhaust systems if smoking is prohibited in
the rooms during housekeeping and maintenance activities. If the regulation is
promulgated and is applicable to Trump Plaza hotel rooms, the number of rooms
that would be affected is not known at this time.
Plaza Associates 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.
Management believes all required licenses and permits necessary to conduct
business of Plaza Associates has been obtained for operations in the State of
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 currently subject to the liens
of the mortgages associated with the Plaza Notes (collectively, the "Plaza
Mortgages") and certain other liens.
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Plaza Casino Parcel. Trump Plaza's main tower is located on The Boardwalk in
Atlantic City, New Jersey, next to the existing 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, one of which is
owned by Plaza Associates and three of which are leased to Plaza Associates
pursuant to three non-renewable ground leases, each of which expires on
December 31, 2078 (each, a "Plaza Ground Lease"). Trump Seashore Associates
("Trump Seashore"), Seashore Four Associates ("Seashore Four") and Plaza Hotel
Management Company (each, a "Plaza Ground Lessor") are the owners/lessors
under such respective Plaza Ground Leases (respectively, the "TSA Lease," "SFA
Lease" and "PHMC Lease"; the land which is subject to the Plaza Ground Leases
(which includes Additional Parcel 1, as defined) is referred to collectively
as the "Plaza Leasehold Tracts" and individually as a "Plaza Leasehold
Tract"). Trump Seashore and Seashore Four are 100% beneficially owned by Trump
and are, therefore, affiliates of Plaza Associates.
The Plaza Ground Leases provide that each Plaza Ground Lessor may encumber
its fee estate with mortgage liens, but any such fee mortgage will not
increase the rent under the applicable Plaza Ground Lease and must be
subordinate to such Plaza Ground Lease. Accordingly, any default by a Plaza
Ground Lessor under any such fee mortgage will not result in a termination of
the applicable Plaza Ground Lease but would permit the fee mortgagee to bring
a foreclosure action and succeed to the interests of the Plaza Ground Lessor
in the fee estate, subject to Plaza Associates' leasehold estate under such
Plaza Ground Lease. Each Plaza Ground Lease also specifically provides that
the Plaza Ground Lessor may sell its interest in the applicable Plaza
Leasehold Tract, but any such sale would be made subject to Plaza Associates'
interest in the applicable Plaza Ground Lease.
On August 1, 1991, as security for indebtedness owed to a third party, Trump
Seashore transferred its interest in the TSA Lease to United States Trust
Company of New York ("UST"), as trustee for the benefit of such third party
creditor. The trust agreement among UST, Trump Seashore and such creditor
provides that the trust shall terminate on the earlier of (i) August 1, 2012
or (ii) the date on which such third party creditor certifies to UST that all
principal, interest and other sums due and owing from Trump Seashore to such
third party creditor have been paid.
On September 20, 1995, Trump Seashore and its third party lender entered
into a mortgage note modification and extension agreement, pursuant to which
Trump Seashore and such third party lender extended the term of the
indebtedness described above, which matured in October 1993, to September 30,
1996, and increased the interest rate to be paid on such indebtedness to one
and one-half percent in excess of the interest rate stated by such third party
lender to be its prime rate.
The SFA Lease and the PHMC Lease each contain options pursuant to which
Plaza Associates may purchase the Plaza Leasehold Tract covered by such Plaza
Ground Lease at certain times during the term of such Plaza Ground Lease under
certain circumstances. The purchase price pursuant to each option is specified
in the SFA Lease and the PHMC Lease, respectively.
The Plaza Ground Leases are "net leases" 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 Tracts and the improvements now, or which may in the future be,
located thereon, including, but not limited to, all maintenance and repair
costs, insurance premiums, real estate taxes, assessments and utility charges.
The improvements located on the Plaza Leasehold Tracts are owned by Plaza
Associates during the terms of the respective Plaza Ground Leases and upon the
expiration of the term of each Plaza Ground Lease (for whatever reason),
ownership of such improvements will vest in the Plaza Ground Lessor.
If a bankruptcy case is filed by or commenced against a Plaza Ground Lessor
under applicable bankruptcy law, the trustee in bankruptcy in a liquidation or
reorganization case under the applicable bankruptcy law, or a
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debtor-in-possession in a reorganization case under the applicable bankruptcy
law, has the right, at its option, to assume or reject the Plaza Ground Lease
of the debtor-lessor (subject, in each case, to court approval). If the Plaza
Ground Lease is assumed, the rights and obligations of Plaza Associates
thereunder, and the rights of the trustee with respect to the Plaza Notes (the
"Plaza Note Trustee") as leasehold mortgagee under the agreements relating to
the issuance of the Plaza Notes (the "Plaza Note Agreements"), would continue
in full force and effect. If the Plaza Ground Lease is rejected, Plaza
Associates would have the right, at its election, either (i) to treat the
Plaza Ground Lease as terminated or (ii) to continue in possession of the land
and improvements under the Plaza Ground Lease for the balance of the term
thereof and at the rental set forth therein (with a right to offset against
such rent any damages caused by the Plaza Ground Lessor's failure to
thereafter perform its obligations under such Plaza Ground Lease). Under the
Plaza Note Agreements, Plaza Associates assigned to the Plaza Note Trustee its
rights to elect whether to treat the Plaza Ground Lease as terminated or to
remain in possession of the leased premises if the Plaza Ground Leases are
rejected.
In the case of the Plaza Ground Leases, the rejection of a Plaza Ground
Lease by a trustee in bankruptcy or debtor-lessor (as debtor-in-possession)
may result in termination of any options to purchase the fee estate of the
debtor-lessor and the Plaza Note Trustee's option (as leasehold mortgagee as
described above), if the Plaza Ground Lease is terminated, to enter into a new
lease directly with the lessor. In addition, under an interpretation of New
Jersey law, it is possible that a court would regard such options as separate
contracts and, therefore, severable from the Plaza Ground Lease. In such
event, the trustee in bankruptcy or debtor-lessor (as debtor-in-possession)
could assume the Plaza Ground Lease, while rejecting some or all of such
options under the Plaza Ground Lease.
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 bounded 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. One of the tracts comprising a
portion of the Plaza Garage Parcel is subject to a first mortgage on Plaza
Associates' fee interest in such tract. As of December 31, 1995, such mortgage
secured indebtedness had an approximate outstanding principal balance of $0.1
million.
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 (the "Bordonaro Parcel").
Additional Parcel 1 and the Bordonaro Parcel are presently paved and used for
surface parking.
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 those 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, 1995, of approximately $1.5 million and is encumbered by the
Plaza Mortgage.
Trump Plaza East. In connection with the Merger Transaction, Plaza
Associates intends to exercise the five-year option to purchase the fee and
leasehold interests comprising Trump Plaza East (the "Trump Plaza East
Purchase Option"). In October 1993, Plaza Associates assumed the leases
associated with Trump Plaza East. Until such time as the Trump Plaza East
Purchase Option is exercised or expires, Plaza Associates is obligated to pay
the net expenses associated with Trump Plaza East. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Executive
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Compensation--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump." During the years ended December
31, 1995 and 1994, Plaza Associates incurred approximately $3.8 million and
$4.9 million, respectively, of such expenses. Under the Trump Plaza East
Purchase Option, Plaza Associates has the right to acquire the fee interest in
Trump Plaza East for a purchase price of $28.0 million through December 31,
1996 increasing by $1.0 million annually thereafter until expiration on June
30, 1998.
Plaza Associates currently intends to exercise the Trump Plaza East Purchase
Option in connection with the Merger Transaction. However, if Plaza Associates
does not exercise the Trump Plaza East Purchase Option in connection with the
Merger Transaction, up to $30.0 million of internally generated funds and/or
additional financing would be required to fund the acquisition pursuant to the
existing purchase option. There can be no assurance that such financing would
be available on attractive terms, if at all. In addition, the exercise of the
Trump Plaza East Purchase Option may require the consent of certain of Trump's
personal creditors, and there can be no assurance that such consent will be
obtained at the time Plaza Associates desires to exercise the Trump Plaza East
Purchase Option. The CCC has required that Plaza Associates exercise the Trump
Plaza East Purchase Option no later than July 1, 1996. Plaza Associates
intends to request that the CCC extend the July 1, 1996 deadline for
exercising the Trump Plaza East Purchase Option if it is not exercised in
connection with the Merger Transaction, although there can be no assurance
that such extension would be granted. Failure to acquire Trump Plaza East, to
obtain an extension of the July 1, 1996 deadline or to obtain an extension of
the existing lease of the premises beyond its current June 30, 1998 expiration
date would have a material adverse effect on Plaza Associates. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump."
Plaza Associates has substantially completed its renovation and integration
of Trump Plaza East. If Plaza Associates is unable to finance the purchase
price of Trump Plaza East pursuant to the Trump Plaza East Purchase Option,
any amounts expended with respect to Trump Plaza East, including payments
under the Trump Plaza East Purchase Option and the lease pursuant to which
Plaza Associates leases Trump Plaza East, and any improvements thereon, would
inure to the benefit of the owner of Trump Plaza East and not to Plaza
Associates and would increase the cost of demolition of any improvements for
which Plaza Associates would be liable. As of December 31, 1995, Plaza
Associates had capitalized approximately $36.4 million in construction costs
related to Trump Plaza East. If the development of Trump Plaza East is not
successful, Trump AC would be required to write off the capitalized
construction costs associated with the project.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into the Time Warner Sublease
with Time Warner 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. The Time Warner Sublease provides for a ten-year term which expires
on the last day of the month immediately preceding the tenth anniversary of
the commencement date and contains two five-year renewal options exercisable
by Time Warner. Time Warner renovated the premises in connection with opening
the studio store. Rent under the Time Warner Sublease is currently accruing
and will not become due and payable to Plaza Associates until the satisfaction
of certain conditions designed to protect Time Warner from the termination of
the Time Warner Sublease by reason of the termination of Plaza Associates'
leasehold estate in Trump Plaza East or the foreclosure of a certain mortgage
(prior to the exercise of the Trump Plaza East Purchase Option) and until Time
Warner's unamortized construction costs are less than accrued rent. No
assurances can be made that such conditions will be satisfied. In addition,
Time Warner may terminate the Time Warner Sublease at any time after July 1996
in the event that gross sales for the store do not meet certain threshold
amounts or at any time if Plaza Associates fails to operate a first-class
hotel on Trump Plaza East. See "Executive Compensation--Compensation Committee
Interlocks and Insider Participation--Certain Related Party Transactions of
Trump."
Trump World's Fair. Pursuant to the option to purchase Trump World's Fair
(the "Trump World's Fair Purchase Option"), on June 12, 1995, using proceeds
from the June 1995 Offerings, Plaza Associates acquired title to Trump World's
Fair. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." Further, pursuant to
an easement agreement with The New
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Jersey Sports and Exposition Authority ("NJSEA"), Plaza Associates has an
exclusive easement over, in and through the portions of the Atlantic City
Convention Center to be used as the pedestrian walkway connecting Trump
Plaza's main tower and Trump World's Fair. The easement is for a 25-year term
and may be renewed at the option of Plaza Associates for one additional 25-
year period. In consideration of the granting of the easement, Plaza
Associates must pay to NJSEA the sum of $2,000,000 annually, such annual
payment to be adjusted every five years to reflect changes in the consumer
price index. Plaza Associates will have the right to terminate the easement
agreement at any time upon six months' notice to NJSEA in consideration of a
termination payment of $1,000,000. See also "Executive Compensation--
Compensation Committee Interlocks and Insider Participation--Certain Related
Party Transactions of Trump" and "Business--Gaming and Other Laws and
Regulations--New Jersey Gaming Regulations--Approved Hotel Facilities."
Superior Mortgages. The liens securing the indebtedness on the Plaza Garage
Parcel and the Egg Harbor Parcel (all of such liens are collectively called
the "Existing Senior Plaza Mortgages") are all senior to the liens of the
Plaza Mortgages. The principal amount currently secured by such Existing
Senior Plaza Mortgages as of December 31, 1995 was, in the aggregate,
approximately $3.0 million.
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.
ITEM 3. LEGAL PROCEEDINGS.
General. Plaza 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 has agreed to
indemnify such persons and entities against any and all losses, claims,
damages, expenses (including reasonable costs, disbursements and counsel fees)
and liabilities (including amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties) incurred by them in said legal
proceedings. Such persons and entities are vigorously defending the
allegations against them and intend to vigorously contest any future
proceedings.
Trump Plaza East. From monies made available to it, the CRDA is required to
set aside $100 million for investment in hotel development projects in
Atlantic City undertaken by casino licensees which result in the construction
or rehabilitation of at least 200 hotel rooms by December 31, 1996. These
investments are to fund up to 35% of the cost to casino licensees of such
projects. See "Business--Gaming and Other Laws and Regulations--New Jersey
Gaming Regulations--Investment Alternative Tax Obligations." Plaza Associates
made application for such funding to the CRDA with respect to its proposed
construction and rehabilitation of the Trump Plaza East hotel rooms and
related Boardwalk and second level facilities, proposed demolition of an
existing hotel expansion structure attached thereto and development of an
appurtenant public park, roadway and parking area on the site thereof and
proposed acquisition of the entire project site.
The CRDA, in rulings through January 10, 1995, approved the hotel
development project and, with respect to same, reserved to Plaza Associates
the right to take investment tax credits in an amount equal to 27% ($14.1
million) of $52.4 million of eligible estimated project development costs. In
October 1994, following a September 1994 CCC ruling authorizing same, Plaza
Associates advised the CRDA of its intention to, without affecting either the
project development costs or the tax credits, locate approximately 15,000
square feet of casino space on the second floor of Trump Plaza East and was
advised by the CRDA that its proposed use of such space would not affect the
approval of the hotel development project.
As part of its approval and on the basis of its powers of eminent domain,
the CRDA, during 1994, initiated five condemnation proceedings in the Superior
Court of New Jersey, Atlantic County, to acquire certain small parcels of land
within the project site. The defendants in three of those matters, with
respect to parcels which impact only the public park and parking areas, Casino
Reinvestment Development Authority v. Banin, et al., Docket No. ATL-L-2676-94,
Casino Reinvestment Development Authority v. Sabatini, et al., Docket No.
ATL-L-2976-94, and Casino Reinvestment Development Authority v. Coking, et
al., Docket No. ATL-L-2974-94,
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asserted numerous defenses to the condemnation complaints and filed
counterclaims against CRDA and third-party complaints against Plaza Associates
alleging, inter alia, an improper exercise of CRDA power for private purposes
and conspiracy between the CRDA and Plaza Associates. After the filing of
briefs and a hearing, a New Jersey Superior Court judge issued an opinion that
the Trump Plaza East acquisition and renovation was not eligible for CRDA
funding and, as a result, the CRDA could not exercise its power of eminent
domain because the project included casino floor space. The court, by order
dated April 18, 1995, dismissed the condemnation complaints with prejudice. On
April 17, the same judge dismissed the counter claims and third-party
complaints without prejudice. Notices of appeal were filed with the New Jersey
Superior Court, Appellate Division, on April 21, 1995 by the CRDA and on April
24, 1995 by Plaza Associates. On May 1, 1995, the Casino Association of New
Jersey on behalf of its members, 11 of the 12 Atlantic City casino hotels,
filed a motion to intervene or, in the alternative, for leave to appear as an
amicus curiae. Briefs have been filed by all parties and the matter has been
scheduled for oral argument during the week beginning April 15, 1996.
The completion of the planned renovations of Trump Plaza East is not
dependent upon the utilization of CRDA funding or upon the CRDA's acquisition
of the real estate subject to the condemnation proceedings. Plaza Associates
intends to pursue this appeal vigorously and believes it will be successful,
based in part on the March 29, 1995 opinion of the New Jersey Office of
Legislative Services ("OLS"), which serves as legal counsel to the New Jersey
State Legislature, that N.J.S.A. 5:12-173.8 empowered the CRDA to approve and
fund projects such as Trump Plaza East and, in part, on the fact that Section
173.8 expressly exempts hotel development projects from the statutory
limitation with respect to any CRDA investment or project which directly and
exclusively benefits the casino hotel or related facility.
In a related matter, Vera Coking, et al. v. Atlantic City Planning Board and
Trump Plaza Associates, Docket No. ATL-L-339-94, the Atlantic City Planning
Board's approval of the Trump Plaza East renovation was challenged on various
grounds. In July 1994, a New Jersey Superior Court judge upheld the Atlantic
City Planning Board approvals with respect to the hotel renovation component
of Trump Plaza East and the new roadway but invalidated the approval of the
valet parking lot and the public park because Plaza Associates lacked site
control with respect to the small parcels of land CRDA sought to condemn.
Plaintiff appealed the court's decision upholding the approval of the hotel
renovation and new roadway and Plaza Associates cross-appealed the court's
decision invalidating the approval of the public park and valet parking area.
Plaza Associates withdrew its cross-appeal and plaintiff's appeal is pending
in the Superior Court of New Jersey, Appellate Division, Docket No. A-1511-94-
T1. Plaza Associates received land-use approval for and has constructed the
valet parking area after deletion of the small parcels.
In another related matter, Josef Banin and Vera Coking v. Atlantic City
Planning Board and Trump Plaza Associates, Docket No. L-2188-95, the land-use
approval for this area has been challenged on various grounds. Plaza
Associates filed its answer to the complaint denying the allegations of the
complaint. The land-use approval involves certain minor amendments to the
previously granted site plan approvals for the hotel renovation component of
Trump Plaza East and the new roadway. The amendments included certain design
changes with respect to the Trump Plaza East and certain design changes to the
roadway. The amendments did not require any variance relief and the amendments
fully complied with the Land Use Ordinance of the City of Atlantic City. The
plaintiffs allege the Atlantic City Planning Board acted in an arbitrary and
capricious manner in approving the amendments and further argue that the
chairperson of the Atlantic City Planning Board had a conflict of interest in
hearing the matter because of her status as an employee of the CRDA, the
entity that had approved certain funding for the project. On January 26, 1996,
the New Jersey Superior Court upheld the approval of the amendment by the
Atlantic City Planning Board and rejected the plaintiffs' claim with respect
to the chairwoman's conflict of interest. The plaintiffs may appeal the
decision of the New Jersey Superior Court.
Penthouse Litigation. On April 3, 1989, BPHC Acquisition, Inc. and BPHC
Parking Corp. (collectively, "BPHC") filed a third-party complaint (the
"Complaint") against Plaza Associates and Trump. The Complaint arose in
connection with the action entitled Boardwalk Properties, Inc. and Penthouse
International Ltd. v. BPHC Acquisition, Inc. and BPHC Parking Corp., which was
instituted on March 20, 1989 in the New Jersey Superior Court, Chancery
Division, Atlantic County.
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The suit arose in connection with the conditional sale by Boardwalk
Properties, Inc. ("BPI") (or, with respect to certain of the property, BPI's
agreement to sell) to Trump of BPI's fee and leasehold interests in (i) Trump
Plaza East, (ii) an approximately 4.2-acre parcel of land located on Atlantic
Avenue, diagonally across from Trump Plaza's parking garage (the "Columbus
Plaza Site") which was then owned by an entity in which 50% of the interests
were each owned by BPHC and BPI and (iii) an additional 1,462 square foot
parcel of land located within the area of Trump Plaza East (the "Bongiovanni
Site"). Prior to BPI entering into its agreement with Trump, BPI had entered
into agreements with BPHC which provided, among other things, for the sale to
BPHC of Trump Plaza East, as well as BPI's interest in the Columbus Plaza
Site, assuming that certain contingencies were satisfied by a certain date.
Additionally, by agreement between BPHC and BPI, in the event BPHC failed to
close on Trump Plaza East, BPHC would convey to BPI the Bongiovanni Site. Upon
BPHC's failure to close on Trump Plaza East, BPI entered into its agreement
with Trump pursuant to which it sold Trump Plaza East to Trump and instituted
a lawsuit against BPHC for specific performance to compel BPHC to transfer to
BPI, BPHC's interest in the Columbus Plaza Site and Bongiovanni Site, as
provided for in the various agreements between BPHC and BPI and in the
agreement between BPI and Trump.
The Complaint alleged that Plaza Associates and/or Trump engaged in the
following activities: civil conspiracy, violations of the New Jersey Antitrust
Act, violations of the New Jersey RICO statute, malicious interference with
contractual relations, malicious interference with prospective economic
advantage, inducement to breach a fiduciary duty and malicious abuse of
process. The relief sought in the Complaint included, among other things,
compensatory damages, punitive damages, treble damages, injunctive relief, the
revocation of all of Plaza Associates' and Trump's casino licenses, the
revocation of Plaza Associates' current Certificate of Partnership, the
revocation of any other licenses or permits issued to Plaza Associates and
Trump by the State of New Jersey, and a declaration voiding the conveyance by
BPI to Trump of BPI's interest in Trump Plaza East, as well as BPI's and/or
Trump's rights to obtain title to the Columbus Plaza Site.
On October 13, 1993, a final judgment as to Trump and Plaza Associates was
filed. That judgment dismissed each and every claim against Trump and Plaza
Associates. The case remained open as to final resolution of all claims
between BPI and BPHC. Following the entry of a subsequent judgment as to those
claims, BPHC and BPI have settled all claims between them. BPHC is pursuing
its appeal as to Trump and Plaza Associates but only as to its money damages
claims of interference with contract and prospective economic advantage and of
inducing BPI to breach its fiduciary duty to BPHC. All other claims raised in
BPHC's complaint as to Trump and Plaza Associates and dismissed by the October
13, 1993 judgment have been finally determined in favor of Trump and Plaza
Associates. All briefs due in connection with BPHC's appeal are being filed.
No argument date has been set.
Other Litigation. Various legal proceedings are now pending against Plaza
Associates. Plaza Associates considers all such proceedings to be ordinary
litigation incident to the character of its business and not material to its
business or financial condition. The majority of such claims are covered by
liability insurance (subject to applicable deductibles), and Plaza Associates
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 Plaza
Associates.
From time to time, Plaza Associates may be involved in routine
administrative proceedings involving allegations that it has violated 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 on its
ability to otherwise retain or renew any casino or other licenses required
under the Casino Control Act for the operation of Trump Plaza.
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 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Plaza Funding. THCR Holdings has owned 100% of the common stock of Plaza
Funding (the "Plaza Funding Stock") since June 12, 1995. There is no
established trading market for the Plaza Funding Stock. Prior to June 12,
1995, Trump owned 100% of the Plaza Funding Stock. Pursuant to a contribution
agreement, dated as of June 12, 1995, by and among Trump and THCR Holdings
(the "1995 Contribution Agreement"), Trump transferred to THCR Holdings, among
other things, 100% of the Plaza Funding Stock. The indenture pursuant to which
the Plaza Notes were issued (the "Plaza Note Indenture") restricts the ability
of Plaza Associates and Plaza Funding to declare or pay dividends and make
other distributions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Plaza Associates. Through its ownership of 100% of Plaza Funding, Plaza
Holding Inc. and Trump AC, THCR Holdings has beneficially owned 100% of Plaza
Associates since June 12, 1995.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical consolidated financial
information of Plaza Associates and Trump AC for each of the five years ended
December 31, 1991 through 1995.
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.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gaming...................... $233,265 $265,448 $264,081 $261,451 298,073
Other....................... 66,411 73,270 69,203 66,869 74,182
Trump World's Fair (formerly
Trump Regency Hotel)....... 11,547 9,465 -- -- --
-------- -------- -------- -------- -------
Gross revenues............. 311,223 348,183 333,284 328,320 372,255
Promotional allowances...... 31,539 34,865 32,793 33,257 38,934
-------- -------- -------- -------- -------
Net revenues............... 279,684 313,318 300,491 295,063 333,321
-------- -------- -------- -------- -------
Costs and expenses:
Gaming...................... 133,547 146,328 136,895 139,540 164,839
Other....................... 23,404 23,670 24,778 23,380 23,932
General and administrative.. 69,631 75,459 71,624 73,075 68,550
Depreciation and
amortization............... 16,193 15,842 17,554 15,653 16,213
Restructuring charges....... 943 5,177 -- -- --
Trump World's Fair (formerly
Trump Regency Hotel)....... 19,879 11,839 -- -- --
-------- -------- -------- -------- -------
Total costs and expenses... 263,597 278,315 250,851 251,648 273,534
-------- -------- -------- -------- -------
Income from operations...... 16,087 35,003 49,640 43,415 59,787
-------- -------- -------- -------- -------
Interest expense, net....... 33,363 31,356 39,889 48,219 43,261
Other non-operating (income)
expense(a)................. 14,818 1,462 3,873 4,931 5,743
Extraordinary (loss)
gain(b).................... -- (38,205) 4,120 -- (9,250)
Provision (benefit) for
income taxes............... (2,864) (233) 660 (865) --
-------- -------- -------- -------- -------
Net income (loss)........... $(29,230) $(35,787) $ 9,338 $ (8,870) $ 1,533
======== ======== ======== ======== =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents... $ 10,474 $ 18,802 $ 14,393 $ 11,144 $15,937
Property and equipment,
net........................ 306,834 300,266 293,141 298,354 395,942
Total assets................ 378,398 370,349 374,498 375,643 480,024
Total long-term debt, net of
current maturities(c)...... 33,326 249,723 395,948 403,214 332,721
Preferred partnership
interest................... -- 58,092 -- -- --
Total capital (deficit)..... 54,043 11,362 (54,710) (63,580) 110,812
</TABLE>
- --------
(a) Other non-operating (income) expense for the year ended December 31, 1991
includes a $10.9 million charge associated with the rejection of the lease
associated with the former Trump Regency Hotel and $4.0 million of costs
associated with certain litigation. Other non-operating (income) expense
for 1992 includes $1.5 million of costs associated with certain
litigation. Other non-operating (income) expense for the years ended
December 31, 1993, 1994 and 1995 includes $3.9, $4.9, and 3.7 million,
respectively, of real estate taxes and leasing costs associated with Trump
Plaza East.
(b) The extraordinary loss for the year ended December 31, 1992 consists of
the effect of stating Plaza Funding's Preferred Stock issued at fair value
as compared to the carrying value of these securities and the write off of
certain deferred financing charges and costs. The excess of the carrying
value of a note obligation over the amount of the settlement payment net
of related prepaid expenses in the amount of $4,120,000 has been reported
as an extraordinary gain for the year ended December 31, 1993. The
extraordinary loss of $9,250,000 for the period from January 1, 1995
through June 12, 1995 relates to the redemption of the PIK Notes and PIK
Note Warrants and the write off of related unamortized deferred financing
costs.
(c) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Set forth below is a discussion and analysis of the financial condition and
results of operations of Plaza Associates. Plaza Funding has no business
operations other than its interest in Plaza Associates; accordingly, its
results of operations are not discussed below.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Gaming revenues were $298.1 million for the year ended December 31, 1995, an
increase of $36.6 million or 14.0% from gaming revenues of $261.5 million in
1994. This increase in gaming revenues consisted of an increase in both table
games and slot revenues. While 1994 was adversely affected by unfavorable
winter weather, construction and management turnover, management believes that
the increase in gaming revenues in 1995 is also due to an increased level of
demand evident in the Atlantic City market generally, as well as to
management's marketing and other initiatives, including the introduction of
new slot machines and table games, the addition of bill acceptors on slot
machines, an increase in casino floor square footage and an increase in
promotional allowances.
Slot revenues were $201.7 million for the year ended December 31, 1995, an
increase of $33.0 million or 19.5% from $168.7 million in 1994. This increase
was primarily due to certain factors mentioned in the foregoing paragraph
including the implementation of an aggressive slot marketing program.
Table games revenues were $96.4 million for the year ended December 31,
1995, an increase of $3.6 million or 3.9% from table games revenues of $92.8
million in 1994. This was primarily due to an increase in table games drop
(i.e., the dollar value of chips purchased) by $27.0 million or 4.5% for the
year ended December 31, 1995 from 1994.
During the year ended December 31, 1995, gaming credit extended to customers
was approximately 17.7% of overall table play, an increase of approximately
0.7% from 1994. At December 31, 1995, gaming receivables amounted to
approximately $13.8 million, an increase of approximately $0.1 million from
1994, with allowances for doubtful gaming receivables of approximately $7.9
million, a decrease of approximately $0.6 million from 1994.
Other revenues were $74.2 million for the year ended December 31, 1995, an
increase of $7.3 million or 10.9% from other revenues of $66.9 million in
1994. Other revenues include revenues from rooms, food and beverage and
miscellaneous items. This increase primarily reflects increases in food and
beverage revenues attendant to higher levels of gaming activity and
promotional allowances and expenses.
Promotional allowances were $38.9 million for the year ended December 31,
1995, an increase of $5.6 million or 16.8% from $33.3 million in 1994. This
increase is primarily attributable to an increase in gaming activity.
Gaming costs and expenses were $164.8 million for the year ended December
31, 1995, an increase of $25.3 million or 18.1% from gaming costs and expenses
of $139.5 million in 1994. This increase is primarily due to increased
promotional and operating expense and taxes associated with increased levels
of gaming revenues from 1994.
General and administrative expenses were $68.6 million for the year ended
December 31, 1995, a decrease of $4.5 million or 6.2% from general and
administrative expenses of $73.1 million in 1994. This decrease is primarily
the result of cost containment measures.
Income from operations was $59.8 million for the year ended December 31,
1995, an increase of $16.4 million or 37.8% from income from operations of
$43.4 million in 1994.
30
<PAGE>
Net interest expense was $43.3 million for the year ended December 31, 1995,
a decrease of $4.9 million or 10.2% from net interest expense of $48.2 million
in 1994. This decrease is attributable to the retirement of the PIK Notes in
June 1995 partly offset by the increased interest expense associated with
equipment financing and capital leases incurred during 1995.
Other non-operating expense was $5.7 million for the year ended December 31,
1995, an increase of $0.8 million or 16.3% from non-operating expense of $4.9
million in 1994. This increase is primarily attributable to costs associated
with Trump World's Fair.
The extraordinary loss of $9,250,000 for the year ended December 31, 1995
relates to the redemption and write-off of unamortized deferred financing
costs relating to the repurchase and redemption on June 12, 1995 of all of the
PIK Notes and related PIK Note Warrants.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Gaming revenues were $261.5 million for the year ended December 31, 1994, a
decrease of $2.6 million or 1.0% from gaming revenues of $264.1 million in
1993, although gaming revenues increased for the industry generally in
Atlantic City for the year ended December 31, 1994 compared to the year ended
December 31, 1993. This decrease in gaming revenues consisted of a reduction
in both table games and slot revenues. These results were impacted by a number
of major ice and snow storms throughout the northeastern United States during
the three months ended March 31, 1994 which severely restricted travel in the
region. Bad weather also impacted the Atlantic City market's results for the
three months ended March 31, 1993; however, the weather during the comparable
period in 1994 was much more severe. The decrease in gaming revenues was also
due in part to disruptions caused by an expansion of the casino floor which
created operating inefficiencies by temporarily disrupting the normal flow of
patrons upon entrance to the casino, as well as detracting from the overall
appearance of the casino floor. Also, in 1994 Trump Plaza experienced turnover
of certain key management positions which had a negative impact on operations.
This negative impact was mitigated by the end of 1994 as new management was
hired and began implementing new policies and marketing programs. See
"Business--Business Strategy" and "Executive Compensation--Employment
Agreements."
Slot revenues were $168.7 million for the year ended December 31, 1994, a
decrease of $1.8 million or 1.1% from slot revenues of $170.5 million in 1993.
This decrease was due in part to the sensitivity of slot revenues to certain
of the factors specified in the foregoing paragraph. Plaza Associates elected
to discontinue certain progressive slot programs, thereby reversing certain
accruals into revenue which had the effect of improving slot revenue by $0.6
million for the year ended December 31, 1994.
Table games revenues were $92.8 million for the year ended December 31,
1994, a decrease of $0.8 million or 0.9% from table games revenues of $93.6
million in 1993. This decrease was primarily due to a reduction in table games
drop by $26.7 million or 4.3% for the year ended December 31, 1994 from 1993,
offset by an increase in the table game hold percentage (the percentage of
table drop retained by Plaza Associates) to 15.5% for the year ended December
31, 1994 from 14.9% in 1993.
During the year ended December 31, 1994, gaming credit extended to customers
was approximately 17% of overall table play, a decrease of 1% from 1993. At
December 31, 1994, gaming receivables amounted to approximately $13.7 million,
a decrease of approximately $2.3 million from 1993, with allowances for
doubtful gaming receivables of approximately $8.5 million, a decrease of
approximately $1.9 million from 1993.
Other revenues were $66.9 million for the year ended December 31, 1994, a
decrease of $2.3 million or 3.3% from other revenues of $69.2 million in 1993.
This decrease in other revenues primarily reflects decreases in food and
beverage revenue resulting from changes in bus couponing.
Promotional allowances were $33.3 million for the year ended December 31,
1994, an increase of $0.5 million or 1.5% from $32.8 million in 1993. This
increase is attributable to increased marketing and promotional activities.
31
<PAGE>
Gaming costs and expenses were $139.5 million for the year ended December
31, 1994, an increase of $2.6 million or 1.9% from gaming costs and expenses
of $136.9 million in 1993. This increase was primarily due to increased
marketing costs instituted toward the end of 1994. These marketing programs
consisted of increased bus programs and direct marketing activities. The
increase in marketing costs was offset by decreased gaming taxes associated
with the decreased levels of gaming activity and revenues from 1993.
General and administrative expenses were $73.1 million for the year ended
December 31, 1994, an increase of $1.5 million or 2.1% from the general and
administrative expenses of $71.6 million in 1993. This increase resulted
primarily from $1.1 million in cash associated with donations to the CRDA for
the year ended December 31, 1994.
Income from operations was $43.4 million for the year ended December 31,
1994, a decrease of $6.2 million or 12.5% from income from operations of $49.6
million for 1993.
Net interest expense was $48.2 million for the year ended December 31, 1994,
an increase of $8.3 million or 20.8% from net interest expense of $39.9
million in 1993. This increase is primarily attributable to increased interest
expenses associated with the Plaza Notes and the PIK Notes which were
outstanding for all of 1994.
Other non-operating expense was $4.9 million (including $3.1 million of
leasing costs) for the year ended December 31, 1994, an increase of $1.0
million or 25.6% from other non-operating expense of $3.9 million in 1993.
This increase is directly attributable to twelve months of costs associated
with Trump Plaza East. See Note 6 to the accompanying Financial Statements of
Trump AC and Plaza Associates.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities is Plaza Associates' principal source of
liquidity. Cash flow from operating activities was $26.9 million for the year
ended 1995. The increase of $6.9 million in net cash provided by operating
activities as compared to 1994 principally reflects increased income from
operations.
Capital expenditures of $109.8 million for the year ended December 31, 1995
increased approximately $89.3 million from 1994. Capital expenditures
attributable to Trump Plaza East were approximately $8.7 million and $24.9
million for the years ended December 31, 1994 and 1995. Capital expenditures
attributable to Trump World's Fair were approximately $73.7 million for 1995.
Capital expenditures for improvements to existing facilities were $11.8
million and $11.2 million for the years ended December 31, 1994 and 1995. See
"Business--Facilities and Amenities--Trump Plaza."
As described in "Business--Certain Indebtedness--Other Indebtedness," Plaza
Associates has approximately $9.0 million in additional long-term
indebtedness, including, as of December 31, 1995, approximately $3.0 million
due under outstanding mortgage notes described under "Properties."
Approximately $2.9 million of such indebtedness will mature through December
31, 1996. Management expects that this debt will be repaid with cash from
operating activities.
At December 31, 1995, Plaza Associates had combined working capital of $6.6
million, which included a receivable from the CRDA for $6.0 million for
reimbursable improvements made to the Trump Plaza East, which receivable is
currently the subject of litigation. See "Legal Proceedings." At December 31,
1994, Plaza Associates had a combined working capital deficit totalling $7.1
million, which also included such receivable.
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. As part of the Trump Plaza Expansion, management commenced the expansion
and renovation of rooms at Trump Plaza East and as of February 16, 1996, the
casino and 249 (of 349) hotel rooms and suites had opened. Trump World's Fair
renovations are scheduled for completion during the second quarter of 1996.
As a result of the Trump Plaza Expansion, Plaza Associates will be
permitted, subject to certain conditions, to increase, and is in the process
of increasing, Trump Plaza's casino floor space to 90,000 square feet. Plaza
32
<PAGE>
Associates petitioned the CCC to permit it to increase such space to 100,000
square feet pursuant to a statutory amendment which became effective January
25, 1995. In its May 18, 1995 declaratory rulings with respect to this
petition, the CCC determined, among other things, that the approved hotel
comprised of Trump Plaza's main tower and Trump Plaza East is permitted to
contain a maximum of 100,000 square feet of casino space. Plaza Associates
added to Trump Plaza approximately 9,000 square feet in April 1994, 1,000
square feet in July 1994, and 3,000 square feet in December 1994. At December
31, 1995, the total casino square footage was approximately 73,600 square
feet. On February 15, 1996, an additional approximately 17,000 square feet of
casino space was opened at Trump Plaza and Trump Plaza East.
Pursuant to the Trump Plaza East Purchase Option, which expires on June 30,
1998, Plaza Associates may purchase both the fee and leasehold interest
comprising Trump Plaza East. See "Executive Compensation--Compensation
Committee Interlocks and Insider Participation--Certain Related Party
Transactions of Trump." Until such time as the Trump Plaza East Purchase
Option is exercised or expires, Plaza Associates is obligated to pay the net
expenses associated with Trump Plaza East, including, without limitation,
current real estate taxes (approximately $1.2 million per year based upon
current assessed valuation) and annual lease payments of $3.1 million per
year. Under the Trump Plaza East Purchase Option, Plaza Associates has the
right to acquire Trump Plaza East for a purchase price of $28.0 million
through December 31, 1996, increasing by $1.0 million annually thereafter
until expiration on June 30, 1998. In addition, Plaza Associates has the right
of first offer upon any proposed sale of all or any portion of the fee
interest in Trump Plaza East during the term of the Trump Plaza East Purchase
Option (the "Right of First Offer"). Under the terms of the Trump Plaza East
Purchase Option, if Plaza Associates defaults in making payments due under the
terms of the Trump Plaza East Purchase Option, Plaza Associates would be
liable to the grantor of the Trump Plaza East Purchase Option for the sum of
(a) the present value of all remaining payments to be made by Plaza Associates
pursuant to the Trump Plaza East Purchase Option during the term thereof and
(b) the cost of demolition of all improvements then located at Trump Plaza
East unless such improvements had been accepted in writing by the grantor.
Plaza Associates intends to exercise the Trump Plaza East Purchase Option in
connection with the Merger Transaction.
Management believes that the net proceeds of the June 1995 Offerings and
equipment financings allocated to Trump Plaza East and cash flow from
operations should be sufficient to complete the planned renovations of Trump
Plaza East at a remaining cost, at December 31, 1995, of approximately $8.7
million. Management anticipates incurring equipment financing for a portion of
the gaming equipment at Trump Plaza East. Commitments are currently in place
with respect to some of such financing, and management believes that it will
be able to obtain the remainder of such financing on customary terms
acceptable to Plaza Associates, although there can be no assurance given to
that effect. Pursuant to the Right of First Offer, Plaza Associates has ten
days after receiving written notice from the grantor of the proposed sale to
commit to exercise the right to acquire Trump Plaza East at the lesser of the
proposed sale price and the applicable exercise price under the Trump Plaza
East Purchase Option. If Plaza Associates commits to exercise the Right of
First Offer, it has ten days from the date of the commitment to deposit
$3,000,000 with the grantor, to be credited towards the purchase price or to
be retained by the grantor if the closing, through no fault of the grantor,
does not occur within 90 days (or, subject to certain conditions, 120 days) of
the date of the commitment. There can be no assurance that Plaza Associates
would have the liquidity necessary to exercise its Right of First Offer on a
timely basis should it be required; however, a portion of the proceeds from
the Offerings will be used to exercise the Trump Plaza East Purchase Option.
Approximately $58 million of the net proceeds of the June 1995 Offerings
were used to exercise the Trump World's Fair Purchase Option. Management
believes that the net proceeds of the June 1995 Offerings, together with
additional equipment financing, will be sufficient to fund the additional
approximately $42.5 million required to complete renovation of and open Trump
World's Fair in the second quarter of 1996, although there can be no assurance
given to that effect. Associated with the opening of Trump World's Fair,
management anticipates incurring approximately $5.3 million of pre-opening
costs, which will be expensed at the time of its opening.
33
<PAGE>
Pursuant to the terms of an agreement dated January 24, 1993 by and between
Plaza Associates and Trump Plaza Management Corp. ("TPM") (the "TPM Services
Agreement"), in consideration for services provided, Plaza Associates pays TPM
each year an annual fee of $1.0 million in equal monthly installments and
reimburses TPM on a monthly basis for all reasonable out-of-pocket expenses
incurred by TPM in performing its obligations under the TPM Services
Agreement, up to certain amounts. Approximately $1.3 million, $1.3 million and
$1.2 million of payments under the TPM Services Agreement were expensed for
the years ended December 31, 1995, 1994 and 1993, respectively. Payments
received under the TPM Services Agreement are currently pledged by TPM to
secure lease payments for a helicopter that TPM makes available to Plaza
Associates. Pending approval by the lessor of the helicopter, it is currently
contemplated that the stock of TPM will be transferred by Trump to THCR
Holdings, which will in turn assume the lease and related obligations. See
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation--Certain Related Party Transactions of Trump."
In addition, Plaza Associates may be obligated to comply with certain
proposed regulations of OSHA, if adopted. See "Business--Gaming and Other Laws
and Regulations--Other Laws and Regulations."
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza occurring during the period from May through September.
Consequently, THCR'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. THCR has no operating history in Indiana, and is unable to
predict seasonality with respect to the Indiana Riverboat.
INFLATION
There was no significant impact on Plaza Associates' operations as a result
of inflation during 1995, 1994 or 1993.
34
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
<S> <C>
Trump Plaza Funding, Inc.
Report of Independent Public Accountants................................ 36
Balance Sheets as of December 31, 1994 and 1995......................... 37
Statements of Income for the years ended December 31, 1993, 1994 and
1995................................................................... 38
Statements of Capital for the years ended December 31, 1993, 1994 and
1995................................................................... 39
Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995................................................................... 40
Trump Atlantic City Associates and Trump Plaza Associates
Report of Independent Public Accountants................................ 41
Consolidated Balance Sheets as of December 31, 1994 and 1995............ 42
Consolidated Statements of Operations for the years ended December 31,
1993, 1994
and 1995............................................................... 43
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1993, 1994
and 1995............................................................... 44
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994
and 1995............................................................... 45
Trump Plaza Funding, Inc. and Trump Atlantic City Associates and Trump
Plaza Associates
Notes to Financial Statements.......................................... 46
Financial Statement Schedule
Report of Independent Public Accountants................................ 57
Schedule II--Valuation and Qualifying Accounts for the Years Ended
December 31, 1995, 1994 and 1993....................................... 58
</TABLE>
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Funding, Inc.:
We have audited the accompanying balance sheets of Trump Plaza Funding, Inc.
(a New Jersey corporation) as of December 31, 1994 and 1995, and the related
statements of income, capital and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the management of Trump Plaza Funding, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Trump Plaza Funding, Inc.
as of December 31, 1994 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
February 21, 1996
36
<PAGE>
TRUMP PLAZA FUNDING, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash................................................ $ 2,000 $ 2,000
Mortgage Interest Receivable........................ 1,495,000 1,495,000
------------ ------------
Total Current Assets.............................. 1,497,000 1,497,000
Mortgage Note Receivable............................ 326,234,000 326,652,000
Receivable from Partnership......................... 3,822,000 3,822,000
------------ ------------
Total Assets...................................... $331,553,000 $331,971,000
============ ============
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Accrued Interest Payable............................ $ 1,495,000 $ 1,495,000
------------ ------------
Total Current Liabilities......................... 1,495,000 1,495,000
10 7/8% Mortgage Bonds, net of discount due 2001
(Notes 1, 2, and 3)................................ 326,234,000 326,652,000
Deferred Income Taxes Payable....................... 3,822,000 3,822,000
------------ ------------
Total Liabilities................................. 331,551,000 331,969,000
Commitments and Contingencies (Note 6).............. -- --
Common Stock, $.01 par value, 1,000 shares autho-
rized, 100 shares issued and outstanding........... -- --
Additional Paid in Capital.......................... 2,000 2,000
Retained Earnings................................... -- --
------------ ------------
Total Liabilities and Capital..................... $331,553,000 $331,971,000
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
37
<PAGE>
TRUMP PLAZA FUNDING, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Interest Income From Partnership.... $ 32,642,000 $ 36,262,000 $ 36,306,000
Preferred Partnership Investment In-
come............................... 3,993,000 -- --
Reimbursement for Income Taxes...... 1,802,000 101,000 --
Interest Expense.................... (32,642,000) (36,262,000) (36,306,000)
Directors' Fees and Other Expenses.. (497,000) (101,000) --
------------ ------------ ------------
Income Before Provision for Taxes... 5,298,000 -- --
Provision for Income Taxes.......... 1,802,000 -- --
------------ ------------ ------------
Net Income........................ $ 3,496,000 $ -- $ --
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
38
<PAGE>
TRUMP PLAZA FUNDING, INC.
STATEMENTS OF CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
------------------
NUMBER OF ADDITIONAL RETAINED
SHARES AMOUNT PAID IN CAPITAL EARNINGS TOTAL
---------- ------ --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1992...... 2,999,580 $ -- $ 2,000 $ -- $ 2,000
Net Income............. -- -- -- 3,496,000 3,496,000
Accrued dividends on
preferred stock....... -- -- -- (3,678,000) (3,678,000)
Preferred Stock
Accretion............. -- -- -- (315,000) (315,000)
Capital contribution
from Partnership...... -- -- 40,000,000 497,000 40,497,000
Capital contribution
from Donald J. Trump.. -- -- 35,000,000 -- 35,000,000
Redemption of Preferred
Stock................. -- -- (75,000,000) -- (75,000,000)
Redemption of stock
units upon consummation
of offering, effective
June 25, 1993.......... (2,999,580) -- -- -- --
Issuance of stock upon
consummation of offer-
ing, effective June 25,
1993 .................. 100 -- -- -- --
---------- ----- ------------ ----------- ------------
Balance,
December 31, 1993...... 100 -- 2,000 -- 2,000
Net Income............. -- -- -- -- --
---------- ----- ------------ ----------- ------------
Balance,
December 31, 1994...... 100 -- 2,000 -- 2,000
---------- ----- ------------ ----------- ------------
Net income............. -- -- -- -- --
---------- ----- ------------ ----------- ------------
Balance,
December 31, 1995...... 100 $ -- $ 2,000 $ -- $ 2,000
========== ===== ============ =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements
39
<PAGE>
TRUMP PLAZA FUNDING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................... $ 3,496,000 $ -- $ --
Adjustments to Reconcile Net Income To
Net Cash Flows Provided by Operating Ac-
tivities:
Accretion of Discount on Indebtedness.. 172,000 375,000 418,000
Preferred Stock Accretion.............. (315,000) -- --
Deferred Income Taxes Payable.......... 747,000 -- --
------------- --------- ---------
4,100,000 375,000
Decrease in receivable from Partnership.. 305,000 101,000 --
Decrease in interest receivable.......... 6,455,000 -- --
Decrease (increase) in income taxes pay-
able.................................... 974,000 (101,000) --
Decrease in accrued interest payable..... (6,455,000) -- --
------------- --------- ---------
Net Cash Flows Provided by Operating Ac-
tivities................................ 5,379,000 375,000 418,000
------------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Preferred Stock Dividends.............. (5,704,000) -- --
------------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution................... 35,000,000 -- --
Distribution from Partnership.......... 40,497,000 -- --
Increase in Mortgage Note receivable... (100,857,000) (375,000) (418,000)
Additional borrowings.................. 325,587,000 -- --
Payment of long term debt.............. (225,000,000) -- --
Redemption of Preferred Stock.......... (75,000,000) -- --
------------- --------- ---------
Net Cash Flows (used in) provided by Fi-
nancing Activities...................... 325,000 (375,000) (418,000)
------------- --------- ---------
Net Change in Cash....................... -- -- --
Cash at Beginning of Year................ 2,000 2,000 2,000
------------- --------- ---------
Cash at End of Year...................... $ 2,000 $ 2,000 $ 2,000
============= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Atlantic City Associates and
Trump Plaza Associates:
We have audited the accompanying consolidated balance sheets of Trump
Atlantic City Associates (a New Jersey general partnership) and Trump Plaza
Associates (a New Jersey general partnership) as of December 31, 1994 and
1995, and the related consolidated statements of operations, capital (deficit)
and cash flows for each of the three years in the period ended December 31,
1995. These consolidated financial statements are the responsibility of the
management of Trump Atlantic City Associates and Trump Plaza Associates. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Trump Atlantic City
Associates and Trump Plaza Associates as of December 31, 1994 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
February 21, 1996
41
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................... $ 11,144,000 $ 15,937,000
Trade receivables, net of allowances for
doubtful accounts of $8,493,000 and $8,077,000,
respectively................................... 6,685,000 7,576,000
Accounts receivable, other (Note 6)............. 112,000 6,482,000
Inventories..................................... 2,477,000 2,609,000
Prepaid expenses and other current assets....... 4,280,000 5,045,000
Due from affiliates, net (Note 8)............... -- 1,298,000
------------- -------------
Total current assets............................ 24,698,000 38,947,000
------------- -------------
PROPERTY AND EQUIPMENT (Notes 4, 6 and 8):
Land and land improvements...................... 36,463,000 48,308,000
Buildings and building improvements............. 297,573,000 350,366,000
Furniture, fixtures and equipment............... 84,709,000 90,965,000
Leasehold improvements.......................... 2,404,000 2,404,000
Construction in progress........................ 14,864,000 51,183,000
------------- -------------
436,013,000 543,226,000
Less--Accumulated depreciation and
amortization................................... (137,659,000) (147,284,000)
------------- -------------
Net property and equipment...................... 298,354,000 395,942,000
------------- -------------
LAND RIGHTS, net of accumulated amortization of
$3,780,000 and $4,149,000, respectively......... 29,688,000 29,320,000
------------- -------------
OTHER ASSETS:
Deferred bond issuance costs, net of accumulated
amortization of $3,270,000 and $7,525,000,
respectively (Note 3).......................... 14,125,000 9,866,000
Other Assets.................................... 8,778,000 5,949,000
------------- -------------
Total other assets.............................. 22,903,000 15,815,000
------------- -------------
Total assets.................................... $ 375,643,000 $ 480,024,000
============= =============
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3)... $ 2,969,000 $ 2,901,000
Accounts payable................................ 9,156,000 8,290,000
Accrued payroll................................. 4,026,000 6,815,000
Self insurance reserves (Note 6)................ 4,039,000 3,750,000
Accrued interest payable (Note 3)............... 1,871,000 1,497,000
Other accrued expenses.......................... 7,693,000 6,399,000
Other current liabilities....................... 1,868,000 2,658,000
Due to affiliates, net (Note 8)................. 206,000 --
------------- -------------
Total current liabilities....................... 31,828,000 32,310,000
------------- -------------
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note
3)............................................. 403,214,000 332,721,000
Distribution payable to Trump Plaza Funding,
Inc. .......................................... 3,822,000 3,822,000
Deferred state income taxes..................... 359,000 359,000
------------- -------------
Total non-current liabilities................... 407,395,000 336,902,000
------------- -------------
Total liabilities............................... 439,223,000 369,212,000
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 6).... -- --
CAPITAL (DEFICIT):
Partners' Equity (Deficit)...................... (78,772,000) 94,087,000
Retained Earnings............................... 15,192,000 16,725,000
------------- -------------
Total Capital (Deficit)......................... (63,580,000) 110,812,000
------------- -------------
Total liabilities and capital................... $ 375,643,000 $ 480,024,000
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
42
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Gaming............................ $264,081,000 $261,451,000 $298,073,000
Rooms............................. 18,324,000 18,312,000 19,986,000
Food and Beverage................. 41,941,000 40,149,000 44,602,000
Other............................. 8,938,000 8,408,000 9,594,000
------------ ------------ ------------
Gross Revenues.................. 333,284,000 328,320,000 372,255,000
Less-Promotional allowances....... 32,793,000 33,257,000 38,934,000
------------ ------------ ------------
Net Revenues.................... 300,491,000 295,063,000 333,321,000
------------ ------------ ------------
COSTS AND EXPENSES:
Gaming............................ 136,895,000 139,540,000 164,839,000
Rooms............................. 2,831,000 2,715,000 2,263,000
Food and Beverage................. 18,093,000 17,050,000 18,306,000
General and Administrative........ 71,624,000 73,075,000 68,550,000
Depreciation and Amortization..... 17,554,000 15,653,000 16,213,000
Other............................. 3,854,000 3,615,000 3,363,000
------------ ------------ ------------
250,851,000 251,648,000 273,534,000
------------ ------------ ------------
Income from operations.......... 49,640,000 43,415,000 59,787,000
------------ ------------ ------------
NON-OPERATING INCOME (EXPENSE):
Interest income................... 546,000 842,000 1,003,000
Interest expense (Note 3)......... (40,435,000) (49,061,000) (44,264,000)
Non-operating expense (Note 5).... (3,873,000) (4,931,000) (5,743,000)
------------ ------------ ------------
Non-operating expense, net...... (43,762,000) (53,150,000) (49,004,000)
------------ ------------ ------------
Income (loss) before state income
taxes and extraordinary items...... 5,878,000 (9,735,000) 10,783,000
PROVISION (BENEFIT) FOR STATE INCOME
TAXES.............................. 660,000 (865,000) --
------------ ------------ ------------
Income (loss) before extraordinary
items.............................. 5,218,000 (8,870,000) 10,783,000
Extraordinary gain (loss) (Note 5).. 4,120,000 -- (9,250,000)
------------ ------------ ------------
Net income (loss)................... $ 9,338,000 $ (8,870,000) $ 1,533,000
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
43
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
PARTNERS' RETAINED
CAPITAL EARNINGS TOTAL
------------ ----------- ------------
<S> <C> <C> <C>
Balance, December 31, 1992............ $ (3,362,000) $14,724,000 $ 11,362,000
Net Income............................ -- 9,338,000 9,338,000
Preferred Plaza Associates Interest
Distribution......................... (6,317,000) -- (6,317,000)
Distribution to Donald J. Trump to
repay certain personal indebtedness.. (52,500,000) -- (52,500,000)
Distribution to Donald J. Trump to
redeem Trump Plaza Funding, Inc.
Preferred Stock Units................ (35,000,000) -- (35,000,000)
Conversion of Preferred Plaza
Associates Interest into General
Plaza Associates Interest............ 18,407,000 -- 18,407,000
------------ ----------- ------------
Balance, December 31, 1993............ (78,772,000) 24,062,000 (54,710,000)
Net Loss.............................. -- (8,870,000) (8,870,000)
------------ ----------- ------------
Balance, December 31, 1994............ $(78,772,000) $15,192,000 $(63,580,000)
Contributed Capital Trump Hotels and
Casino Resorts Holdings, L.P......... 172,859,000 -- 172,859,000
Net Income............................ -- 1,533,000 1,533,000
------------ ----------- ------------
Balance, December 31, 1995............ $ 94,087,000 $16,725,000 $110,812,000
============ =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
44
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net income (loss)................. $ 9,338,000 $ (8,870,000) $ 1,533,000
Adjustments to reconcile net in-
come (loss) to net cash flows
provided by operating activities:
Noncash charges:
Extraordinary loss (gain)........ (4,120,000) -- 9,250,000
Depreciation and amortization.... 17,554,000 15,653,000 16,213,000
Accretion of discount on indebt-
edness.......................... 862,000 1,916,000 1,130,000
Provision for losses on receiv-
ables........................... 90,000 396,000 1,057,000
Deferred state income taxes...... 729,000 (865,000) --
Utilization of CRDA credits and
donations....................... -- 1,062,000 388,000
Valuation allowance of CRDA in-
vestments....................... 1,047,000 394,000 (1,098,000)
------------- ------------ -------------
25,500,000 9,686,000 28,473,000
Decrease (increase) in receiv-
ables........................... 823,000 (236,000) (8,318,000)
Decrease (increase) in invento-
ries............................ (498,000) (91,000) 371,000
Increase in prepaid expenses and
other current assets............ (199,000) (1,385,000) (765,000)
Decrease in other assets......... 2,530,000 1,504,000 8,074,000
Increase in amounts due to
(from) affiliates............... 188,000 109,000 (1,504,000)
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities....... (6,524,000) 10,464,000 592,000
Decrease in distribution payable
to Trump Plaza Funding, Inc. ... -- (101,000) --
------------- ------------ -------------
Net cash flows provided by oper-
ating activities............... $ 21,820,000 $ 19,950,000 $ 26,923,000
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Purchases of property and equip-
ment............................. $ (10,052,000) $(20,489,000) (109,756,000)
Purchases of CRDA investments..... (2,823,000) (2,525,000) (3,178,000)
Cash refund of CRDA deposits...... 196,000 1,323,000 --
------------- ------------ -------------
Net cash flows used in investing
activities..................... (12,679,000) (21,691,000) (112,934,000)
------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Deferred financing costs.......... (17,342,000) -- --
Distributions to Donald J. Trump.. (87,500,000) -- --
Distributions to Plaza Funding.... (40,000,000) -- --
Preferred Plaza Associates Inter-
est Distribution................. (6,282,000) -- --
Additional Borrowings............. 386,147,000 375,000 4,218,000
Payments and current maturities of
long-term debt................... (248,573,000) (1,883,000) (4,527,000)
Redemption of PIK Notes........... -- -- (81,746,000)
Contributed Capital--Trump Hotel
and Casino Resorts Hold-
ings, L.P. ...................... -- -- 172,859,000
------------- ------------ -------------
Net cash flows provided by (used
in) financing activities....... (13,550,000) (1,508,000) 90,804,000
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (4,409,000) (3,249,000) 4,793,000
CASH AND CASH EQUIVALENTS AT BEGIN-
NING OF YEAR...................... 18,802,000 14,393,000 11,144,000
------------- ------------ -------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR.............................. $ 14,393,000 $ 11,144,000 $ 15,937,000
============= ============ =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
45
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
The accompanying financial statements include those of Trump Atlantic City
Associates ("Trump AC"), a New Jersey general partnership (formerly Trump
Plaza Holding Associates), and its 99% owned subsidiary, Trump Plaza
Associates ("Plaza Associates"), a New Jersey general partnership which owns
and operates Trump Plaza Hotel and Casino ("Trump Plaza") located in Atlantic
City, New Jersey. Trump Plaza Funding, Inc. ("Plaza Funding"), a New Jersey
corporation, owns the remaining 1% interest in Plaza Associates. Trump AC's
sole source of liquidity is distributions in respect of its interest in Plaza
Associates. Trump AC and Plaza Funding are owned by Trump Hotels and Casino
Resorts Holdings, L.P. ("THCR Holdings").
All significant intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements. The minority interest
in Plaza Associates has not been separately reflected in the consolidated
financial statements of Trump AC since it is not material.
Plaza Funding was incorporated on March 14, 1986 and was originally formed
solely to raise funds through the issuance and sale of its debt securities for
the benefit of Plaza Associates. As part of a Prepackaged Plan or
Reorganization under Chapter 11 of the U.S. Bankruptcy Code consummated on
May 29, 1992, Plaza Funding became a partner of Plaza Associates and issued
approximately three million stock units, each comprised of one share of
Preferred Stock and one share of Common Stock of Plaza Funding. On June 25,
1993, the stock units were redeemed with a portion of the proceeds of Plaza
Funding's 10 7/8% First Mortgage Notes due 2001 (the "Plaza Notes") as well as
Trump AC's stock units.
Trump AC was formed in February, 1993 for the purpose of raising funds for
Plaza Associates. On June 25, 1993, Trump AC completed the sale of 12,000
Units (the "Units"), each Unit consisting of $5,000 principal amount of 12
1/2% Pay-In-Kind Notes, due 2003 (the "PIK Notes"), and one PIK Note Warrant
(the "PIK Note Warrants") to acquire $1,000 principal amount of PIK Notes. The
PIK Notes and the PIK Note Warrants are separately transferable. Trump AC has
no other assets or business other than its 99% equity interest in Plaza
Associates.
Plaza Associates was organized in June 1982. Prior to the date of the
consummation of the Offerings (as defined), Plaza Associates' three partners
were TP/GP Inc. ("Trump Plaza/GP"), the managing general partner of Plaza
Associates, Plaza Funding and Donald J. Trump ("Trump"). On June 25, 1993,
Trump contributed his interest in Trump Plaza/GP to Plaza Funding and Trump
Plaza/GP merged with and into Plaza Funding. Plaza Funding then became the
managing general partner of Plaza Associates. In addition, Trump contributed
his interest in Plaza Associates to Trump AC, and Plaza Funding and Trump AC,
each of which are wholly owned by Trump, became the sole partners of Plaza
Associates.
On June 12, 1995, Trump Hotels & Casino Resorts, Inc., ("THCR"), completed a
public offering of 10,000,000 shares of common stock at $14.00 per share (the
"Stock Offering") for gross proceeds of $140,000,000. Concurrently with the
Stock Offering, Trump Hotels & Casino Resorts Holdings, L.P. ("THCR
Holdings"), and 60% of THCR, together with its subsidiary, Trump Hotels &
Casino Resorts Funding, Inc. ("THCR Funding"), issued 15 1/2% Senior Secured
Notes (the "Senior Secured Notes") for gross proceeds of $155,000,000 (the
"Note Offering" and, together with the Stock Offerings, the "1995 Offerings").
From the proceeds from the Stock Offering, THCR contributed $126,848,000 to
THCR Holdings. THCR Holdings subsequently contributed $172,859,000 to Trump
AC.
Prior to the 1995 Offerings, Trump was the sole stockholder of THCR and sole
beneficial owner of THCR Holdings. Concurrent with the 1995 Offerings, Trump
contributed to THCR Holdings all of his
46
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
beneficial interest in Plaza Associates (consisting of all of the outstanding
capital stock of Plaza Funding, a 99% equity interest in Trump AC and all of
the outstanding capital stock of Trump Plaza Holding Inc. which owns the
remaining 1% equity interest in Trump AC). Trump also contributed to THCR
Holdings all of his existing interest and rights to new gaming activities in
both emerging and established gaming jurisdictions, including Trump Indiana
but excluding his interests in the Trump Taj Mahal Casino Resort (the "Taj
Mahal") and Trump's Castle Casino Resort.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Plaza Associates operates a luxury casino hotel, Trump Plaza, located on The
Boardwalk in Atlantic City which provides high quality amenities and services
to its casino patrons and hotel guests. A substantial portion of Trump Plaza's
revenues are derived from its gaming operations and in the past Trump Plaza
has targeted the higher-end drive-in slot customer. Competition in the
Atlantic City casino total 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.
Plaza Associates 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 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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Rooms.................................... $ 4,190,000 $ 4,311,000 $ 4,836,000
Food and Beverage........................ 14,726,000 15,373,000 17,167,000
Other.................................... 3,688,000 4,169,000 4,076,000
----------- ----------- -----------
$22,604,000 $23,853,000 $26,079,000
=========== =========== ===========
</TABLE>
47
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During 1994, certain Progressive Slot Jackpot Programs were discontinued
which resulted in $585,000 of related accruals being taken into income.
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
Property and Equipment
Property and equipment is carried at cost and is depreciated on the
straight-line method using rates based on the following estimated useful
lives:
<TABLE>
<S> <C>
Buildings and building improvements............................ 40 years
Furniture, fixtures and equipment.............................. 3-10 years
Leasehold improvements......................................... 10-40 years
</TABLE>
Interest associated with borrowings used to finance construction projects
has been capitalized and is being amortized over the estimated useful lives of
the assets.
Land Rights
Land rights represent the fair value of such rights at the time of
contribution to Plaza Associates by the Trump Plaza Corporation, an affiliate
of Plaza Associates. These rights are being amortized over the period of the
underlying operating leases which extend through 2078.
Long-Lived Assets
During 1995, Plaza Associates adopted the provisions of Statement of
Financial Accounting Standard No. 121 "Accounting for the Impairment of Long-
Lived Assets" ("SFAS No. 121"). SFAS 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. As a result of its review, Plaza Associates
does not believe that any impairment exists in the recoverability of its long-
lived assets.
Income Taxes
Plaza Funding, Trump AC and Plaza Associates adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
effective January 1, 1993. Adoption of this new standard did not have a
significant impact on the respective statements of financial condition or
results of operations. SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
The accompanying consolidated financial statements of Trump AC and Plaza
Associates do not include a provision for federal income taxes since any
income or losses allocated to its partners are reportable for federal income
tax purposes by the partners.
48
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Under the New Jersey Casino Control Act (the "Casino Control Act"), Plaza
Associates is required to file a New Jersey corporation business tax return.
Accordingly, a provision (benefit) for state income taxes has been reflected
in the accompanying consolidated financial statements of Trump AC and Plaza
Associates. For state income tax purposes, available net operating loss
carryforwards have been utilized to offset 1995 taxable income. As of December
31, 1995, Trump AC and Plaza Associates had state tax net operating loss
carryforwards of approximately $31,000,000 which are available to offset
future state taxable income. Such carryforwards expire from 1997 to 2001. The
net operating loss carryforwards result in a deferred tax asset of $2,790,000
which has been offset by a valuation allowance of $2,790,000 as utilization of
such carryforwards is not considered to be more likely than not.
Plaza Associates' deferred state income taxes result primarily from
differences in the timing of reporting depreciation for tax and financial
statement purposes.
Statements of Cash Flows
For purposes of the statements of cash flows, Trump AC and Plaza Associates
consider all highly liquid debt instruments purchased with a maturity of three
months or less at time of acquisition to be cash equivalents. The following
supplemental disclosures are made to the statements of cash flows.
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the year for
interest.............................. $41,118,000 $36,538,000 $41,288,000
=========== =========== ===========
Cash paid for state and Federal income
taxes................................. $ 81,000 $ -- $ --
=========== =========== ===========
Issuance of debt in exchange for
accrued interest...................... $ 3,562,000 $ 8,194,000 $ --
=========== =========== ===========
</TABLE>
Reclassifications
Certain reclassifications have been made to prior year financial statements
to conform to the current year presentation.
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Plaza Associates Note (10 7/8% Mortgage Notes, due
2001 net of unamortized discount of $3,766,000
and $3,348,000, respectively) (A)................ $326,234,000 $326,652,000
PIK Notes (12 1/2% Notes, due 2003 net of discount
of $11,310,000 and $9,769,000, respectively) (B)
................................................. 73,987,000 --
Mortgage notes payable (C)........................ 5,494,000 2,953,000
Other notes payable............................... 468,000 6,017,000
------------ ------------
406,183,000 335,622,000
Less--Current maturities.......................... 2,969,000 2,901,000
------------ ------------
$403,214,000 $332,721,000
============ ============
</TABLE>
(A) On June 25, 1993 Plaza Funding issued $330,000,000 principal amount of
10 7/8% Mortgage Notes, due 2001 (the "Plaza Notes"), net of discount
of $4,313,000. Net proceeds of the offering were used to redeem all of
Plaza Funding's outstanding $225,000,000 principal amount 12% Mortgage
Bonds, due 2002 and together with other funds (see (B) (re: PIK
Notes)), to redeem all of Plaza Funding's stock units, comprised of
$75,000,000 liquidation preference participating cumulative redeemable
Preferred Stock with associated shares of Common Stock, to repay
$17,500,000 principal amount
49
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9.14% Regency Note due 2003, to make a portion of a distribution to
Trump to pay certain personal indebtedness, and to pay transaction
expenses.
The Plaza Notes mature on June 15, 2001 and are redeemable at any time
on or after June 15, 1998, at the option of Plaza Funding or Plaza
Associates, in whole or in part, at the principal amount plus a premium
which declines ratably each year to zero in the year of maturity. The
Plaza Notes bear interest at the stated rate of 10 7/8% per annum from
the date of issuance, payable semi-annually on each June 15 and December
15, commencing December 15, 1993 and are secured by substantially all of
Plaza Associates' assets. The accompanying consolidated financial
statements reflect interest expense at the effective interest rate of
11.12% per annum.
The indenture governing the Plaza Notes (the "Plaza Note Indenture")
contains certain covenants limiting the ability of Plaza Associates to
incur indebtedness, including indebtedness secured by liens on Trump
Plaza. In addition, Plaza Associates may, under certain circumstances,
incur up to $25.0 million of indebtedness to finance the expansion of
its facilities, which indebtedness may be secured by a lien on the hotel
facilities of Plaza Associates ("Trump Plaza East") (see Note 6) senior
to the liens of one of the Plaza Mortgages (the "Plaza Note Mortgage")
and another of the Plaza Mortgages (the "Plaza Guarantee Mortgage")
thereon. The Plaza Notes represent the senior indebtedness of Plaza
Funding. The note from Plaza Associates to Plaza Funding in the same
principal amount of the Plaza Notes (the "Plaza Associates Note") and
the guarantee of the Plaza Notes rank pari passu in right of payment
with all existing and future senior indebtedness of Plaza Associates.
The Plaza Notes, the Plaza Associates Note, the Plaza Note Mortgage, the
Plaza Guarantee and the Plaza Guarantee Mortgage are non-recourse to the
partners of Plaza Associates, to the shareholders of Plaza Funding and
to all other persons and entities (other than Plaza Funding and Plaza
Associates), including Trump. Upon an event of default, holders of the
Plaza Notes would have recourse only to the assets of Plaza Funding and
Plaza Associates.
(B) On June 25, 1993, Trump AC issued $60,000,000 principal amount of 12
1/2% Pay-in-Kind Notes, due 2003 (the "PIK Notes"), together with PIK
Note Warrants to acquire an additional $12,000,000 of PIK Notes at no
additional cost. The PIK Note Warrants were exercised prior to June 12,
1995. The PIK Notes and the PIK Note Warrants were subsequently
redeemed with a portion of the proceeds contributed to Trump AC by THCR
Holdings (See Note 1). Such redemption resulted in the recognition of
an extraordinary loss of $9,250,000, including the write-off of related
unamortized deferred financing costs.
(C) Interest on these notes is payable with interest rates ranging from
10.0% to 11.0%. The notes are due at various dates between 1996 and
1998 and are secured by real property.
The aggregate maturities of long-term debt in each of the years
subsequent to 1995 are:
<TABLE>
<S> <C>
1996.................................................... $ 2,901,000
1997.................................................... 4,503,000
1998.................................................... 1,196,000
1999.................................................... 274,000
2000.................................................... 96,000
Thereafter.............................................. 330,000,000(1)
------------
$338,970,000
============
</TABLE>
- --------------------
(1) Includes accretion to maturity of $3,348,000. However, this does not
give effect to the proposed merger agreement (see Note 10).
50
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(D) Interest on these leases are payable with interest rate ranging from
9.9% to 13.5%. The leases are due at various dates between 1996 and
2000 and are secured by equipment.
The ability of Plaza Associates and Plaza Funding to repay their long-
term debt when due will depend on their ability to either generate cash
from operations sufficient for such purposes or to refinance such
indebtedness. Management does not currently anticipate that cash flow
will be sufficient and that repayment will likely depend upon the
ability to refinance such indebtedness. The future operating
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 Plaza Funding or Plaza Associates. There can
be no assurance that the future operating performance of Plaza
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) LEASES
Plaza Associates leases property (primarily land), certain parking space,
and various equipment under operating leases. Rent expense for the years ended
December 31, 1995, 1994, and 1993 was $3,609,000, $3,613,000 and $4,338,000,
respectively, of which $2,127,000, $1,900,000 and $2,513,000, respectively,
relates to affiliates of Plaza Associates.
Future minimum lease payments under the noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
AMOUNTS
RELATING TO
TOTAL AFFILIATES
------------ ------------
<S> <C> <C>
1996............................................. $ 6,770,000 $ 2,450,000
1997............................................. 6,814,000 2,494,000
1998............................................. 5,254,000 2,494,000
1999............................................. 3,533,000 2,450,000
2000............................................. 3,525,000 2,525,000
Thereafter....................................... 483,925,000 404,925,000
------------ ------------
$509,821,000 $417,338,000
============ ============
</TABLE>
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms.
In October 1993, Plaza Associates assumed the lease to Trump of Trump Plaza
East (the "Trump Plaza East Lease") and related expenses which are included in
the above lease commitment amounts. On June 25, 1993, Plaza Associates
acquired a five-year option to purchase Trump Plaza East. (See Note 6.)
(5) EXTRAORDINARY GAIN (LOSS) AND NON-OPERATING EXPENSE
The extraordinary loss of $9,250,000 for the year ended December 31, 1995
relates to the redemption and write-off of related unamortized deferred
financing costs on redemption of the PIK Notes and the PIK Note Warrants on
June 12, 1995. (See Note 3).
51
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The $4,120,000 excess of the carrying value of a note obligation over the
amount of the settlement payment, net of related prepaid expenses, has been
reported as an extraordinary gain for the year ended December 31, 1993.
Non-operating expense in 1995 and 1994 includes $3,939,000 and $4,931,000,
respectively, of costs associated with Trump Plaza East (see Note 6), net of
miscellaneous non-operating credits.
(6) COMMITMENTS AND CONTINGENCIES
Casino License Renewal
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the
Casino Control Act, Plaza Associates is required to maintain certain licenses.
In June 1995, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates license to operate Trump Plaza. This license must be renewed in
June 1999, is not transferable and will require a determination of the
financial stability of Plaza Associates. Upon revocation, suspension for more
than 120 days, or failure to renew the casino license, the Casino 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, 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 has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, judgements, fines and penalties)
incurred by them in said legal proceedings.
Various legal proceedings are now pending against Plaza Associates. Plaza
Associates considers all such proceedings to be ordinary litigation incident
to the character of its business. Plaza Associates believes that the
resolution of these claims will not, individually or in the aggregate, have a
material adverse effect on its financial condition or results of operations.
Plaza Associates is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. Plaza Associates believes that the final outcome of these
proceedings will not, either individually or in the aggregate, have a material
adverse effect on its financial condition, results of operations or on the
ability of Plaza Associates to otherwise retain or renew any casino or other
licenses required under the Casino Control Act for the operation of Trump
Plaza.
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 usual 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. Actual results may differ from these reserve amounts.
52
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Casino Control Act, Plaza Associates,
commencing twelve months after the date of opening of Trump Plaza in May 1984,
and continuing for a period of twenty-five years thereafter, must either
obtain investment tax credits (as defined in the Casino Control Act), in an
amount equivalent to 1.25% of its gross casino revenues, or pay an alternative
tax of 2.5% of its gross casino revenues (as defined in the Casino Control
Act). Investment tax credits may be obtained by making qualified investments
or by the purchase of bonds at below market interest rates from the Casino
Reinvestment Development Authority ("CRDA"). Plaza Associates is required to
make quarterly deposits with the CRDA based on 1.25% of its gross revenue. For
the years ended December 31, 1993, 1994 and 1995, Plaza Associates charged to
operations $1,047,000, $838,000 and $1,141,000, 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. Additionally,
for the year ended December 31, 1995, Plaza Associates credited operations for
$2,239,000, resulting from the recapture of the valuation allowance on CRDA
receivable. Bonds issued by the CRDA will be accounted for under SFAS No. 121.
In connection with Trump Plaza East (see below), the CRDA has approved the
use of up to $14,135,000 in deposits made by Plaza Associates for site
improvements. At December 31, 1995, Plaza Associates had recorded a receivable
from the CRDA of $6,022,000 which is included in Accounts Receivable, other. A
lawsuit has been filed to prevent the CRDA from returning to Plaza Associates
such deposits. Although the court has ruled that such deposits cannot be
returned, Plaza Associates has appealed their decision. Management believes
that their decision will be overturned. In the event that the decision is not
overturned, a charge to operations of approximately $2,000,000 would be
required to reestablish the valuation allowance.
Concentrations of Credit Risks
In accordance with casino industry practice, Plaza Associates extends credit
to a limited number of casino patrons, after extensive background checks and
investigations of credit worthiness. At December 31, 1995 approximately 27% of
Plaza Associates casino receivables (before allowances) were from customers
whose primary residence is outside the United States, with no significant
concentration in any one foreign country.
Trump Plaza East
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. On June 24, 1993, in connection with the 1993 refinancing of Trump
Plaza, (i) Trump transferred title to Trump Plaza East to Missouri Boardwalk,
Inc. ("Boardwalk"), a wholly owned subsidiary of Midlantic National Bank
("Midlantic"), in exchange for a reduction in indebtedness to Midlantic in an
amount equal to the sum of the fair market value of Trump Plaza East and all
rent payments made to Boardwalk by Trump under the Trump Plaza East Lease,
(ii) Boardwalk leased Trump Plaza East to Trump under the Trump Plaza East
Lease for a term of five years, which expires on June 30, 1998, during which
time Trump was obligated to pay Boardwalk $260,000 per month in lease
payments, and (iii) Plaza Associates acquired a five-year option to purchase
Trump Plaza East (the "Trump Plaza East Purchase Option"). In October 1993,
Plaza Associates assumed the Trump Plaza East Lease and related expenses. In
addition, Plaza Associates has a right of first refusal (the "Right of First
Offer") upon any proposed sale of all or any portion of the fee interest in
Trump Plaza East during the term of the Trump Plaza East Purchase Option.
Acquisition of Trump Plaza East by Plaza Associates would under certain
circumstances (provided there are no events of default under the Trump Plaza
East Lease or the Trump Plaza East Purchase Option and provided that certain
other events had not theretofore or do not thereafter occur) discharge Trump's
obligation to Midlantic in full.
53
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Until such time as the Trump Plaza East Purchase Option is exercised or
expires, Plaza Associates will be obligated, from and after the date it
entered into the Trump Plaza East Purchase Option, to pay the net expenses
associated with Trump Plaza East. During 1995, THCR incurred approximately
$2,340,000 of such expenses of which $2,045,000 are included in non-operating
expenses in the accompanying consolidated financial statements. Under the
Trump Plaza East Purchase Option, Plaza Associates has the right to acquire
Trump Plaza East for a purchase price of $28,000,000 through 1996, increasing
by $1,000,000 annually thereafter until expiration on June 30, 1998. The CCC
has required that Plaza Associates exercise the Trump Plaza East Purchase
Option or its right of first refusal no later than July 1, 1996.
If Plaza Associates defaults in making payments due under the Trump Plaza
East Purchase Option, Plaza Associates would be liable to the lender for the
sum of (a) the present value of all remaining payments to be made by Plaza
Associates pursuant to the Trump Plaza East Purchase Option during the term
thereof and (b) the cost of demolition of all improvements then located on
Trump Plaza East.
Plaza Associates has commenced construction at Trump Plaza East pursuant to
rights granted to Plaza Associates by its lessor. Plaza Associates has
received approximately $1,519,000 in CRDA credit as of December 31, 1995. As
of December 31, 1995, Plaza Associates had capitalized approximately
$35,700,000 in construction costs related to Trump Plaza East including a
$1,000,000 consulting fee paid to Trump (See Note 8). Plaza Associates'
ability to acquire Trump Plaza East pursuant to the Trump Plaza East Purchase
Option is dependent upon its ability to obtain financing to acquire the
property. The ability to incur such indebtedness is restricted by the Plaza
Note Indenture. Plaza Associates' ability to purchase Trump Plaza East is
dependent upon its ability to use existing cash on hand and generate cash flow
from operations sufficient to fund development costs. No assurance can be
given that such cash on hand will be available to Plaza Associates for such
purposes or that it will be able to generate sufficient cash flow from
operations. In connection with the Merger Transaction (as defined) (See Note
10), Plaza Associates expects to exercise the Trump Plaza East Purchase
Option.
The accompanying consolidated financial statements do not include any
adjustments that may be necessary should Plaza Associates be unable to
exercise the Trump Plaza East Purchase Option.
(7) EMPLOYEE BENEFIT PLANS
Plaza Associates has a retirement savings plan (the "Plan") for its nonunion
employees under Section 401(k) of the Internal Revenue Code. Employees are
eligible to contribute up to 15% of their earnings to the Plan and Plaza
Associates will match 50% of an eligible employee's contributions up to a
maximum of 4% of the employee's earnings. Plaza Associates recorded charges of
$765,000, $848,000 and $886,000 for matching contributions for the years ended
December 31, 1993, 1994 and 1995, respectively.
Plaza Associates provides no other material post-retirement or post-
employment benefits.
(8) TRANSACTIONS WITH AFFILIATES
Due to/from Affiliates
Plaza Associates leases warehouse facility space to Trump's Castle
Associates. Lease payments of $15,000, $6,000 and $6,000 were received from
Trump's Castle Associates in 1993, 1994 and 1995, respectively.
54
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Plaza Associates leased office space from Trump Taj Mahal Associates ("Taj
Associates") the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), which terminated on March 19, 1993. Lease payments of $30,000
were paid to Taj Associates in 1993.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1993, 1994 and
1995, Plaza Associates paid $900,000, $900,000 and $950,000, respectively, to
Seashore Four Associates, and paid $1,000,000, $1,000,000 and $1,195,000 in
1993, 1994 and 1995, respectively, to Trump Seashore Associates.
Services Agreement
Pursuant to the terms of a services agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Trump, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of
$1,000,000 in equal monthly installments, and reimburses TPM on a monthly
basis for all reasonable out-of-pocket expenses incurred by TPM in performing
its obligations under such services agreement, up to certain amounts. Under
such services agreement, approximately $1,300,000 was charged to expense for
the years ended December 31, 1994, and 1995.
Trump World's Fair
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements
and personal property used in the operation of the hotel) and (ii) certain
promissory notes made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate
assets located in New York, unrelated to Plaza Associates. In connection with
such Option Agreement, Trump assigned his rights to Plaza Associates.
On June 12, 1995, the option to purchase the Trump World's Fair was
exercised. The option price of $60,000,000 was funded with $58,150,000 from
the capital contributed by Trump Holdings (See Note 1), and $1,850,000 of
option payments made by Plaza Associates.
Other Payments to Donald J. Trump
During 1994, Plaza Associates paid to Trump $1,000,000 under a Construction
Management Service Agreement. The payment was made for construction management
services rendered by Trump with respect to Trump Plaza East. This payment was
approved prior to disbursement by the CCC and has been classified in
construction in process in the accompanying consolidated balance sheet as of
December 31, 1994 and 1995.
During 1994, Plaza Associates also paid Trump a commission of approximately
$572,000 for securing a retail lease at Trump Plaza. The commission has been
capitalized and is being amortized to expense over the 10-year term of the
lease.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments approximates fair
value, as follows: (a) cash and cash equivalents, accrued interest receivables
and payables are based on the short term nature of these financial instruments
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:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ------------
<S> <C> <C>
10 7/8% Mortgage Notes...................... $326,652,000 $341,550,000
</TABLE>
55
<PAGE>
TRUMP PLAZA FUNDING, INC.
AND TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The fair values of the Plaza Notes are based on quoted market prices
obtained by Plaza Associates from its investment advisor.
There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
(10) SUBSEQUENT EVENT
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by Amendment to Agreement and Plan of Merger, dated as of January 31,
1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with
and into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding ("Taj Holding Class A
Common Stock") will be converted into the right to receive, at each holder's
election, either (a) $30.00 in cash or (b) that number of shares of Common
Stock of THCR (the "THCR Common Stock") as shall have a market value equal to
$30.00. No fractional shares of THCR Common Stock will be issued in the
Merger. The Merger Agreement also contemplates the following transactions
occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to 12,500,000 shares of
THCR Common Stock (and an amount to be issued pursuant to the underwriters'
over-allotment option) (the "THCR Stock Offering") and the consummation of
the offering by Trump AC and its wholly owned finance subsidiary Trump AC
Funding, Inc. of up to $1,200,000,000 aggregate principal amount of first
mortgage notes, although it is currently contemplated to aggregate
$1,100,000,000, the aggregate proceeds of which will be used, together with
available cash, to (i) pay cash to those holders of Taj Holding Class A
Common Stock electing to receive cash in the Merger, (ii) redeem the
outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Taj Bonds"), of
Trump Taj Mahal Funding, Inc. ("Taj Funding") (iii) redeem the outstanding
shares of Class B Common Stock of Taj Holding as required in connection with
the redemption of the Taj Bonds, (iv) retire the outstanding Plaza Notes,
(v) satisfy the indebtedness of Taj Associates under its loan agreement with
National Westminster Bank USA, (vi) purchase certain real property used in
the operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust Company ("Bankers Trust") to
obtain releases of liens and guarantees that Bankers Trust has in connection
with certain outstanding indebtedness owed by Trump to Bankers Trust, (ix)
pay related fees and expenses and provide working capital;
(b) the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to Trump AC (on behalf, and at the direction,
of THCR Holdings) of all of its indirect ownership interests in Taj
Associates acquired in the Merger.
To the extent that holders of Taj Holding Class A Common Stock elect to
receive shares of THCR Common Stock in the Merger, THCR may reduce the size of
the THCR Stock Offering. In addition to the shares of THCR Common Stock that
may be issued in the THCR Stock Offering, THCR may issue, as part of the THCR
Stock Offering, up to an additional 20% of such number of shares, to fund
working capital and other general corporate purposes. The prospective
transaction is subject to a number of conditions, including stockholder
approval.
56
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Atlantic City Associates and Trump Plaza Associates:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Atlantic City Associates and Trump Plaza
Associates (Partnerships) included in this Form 10K and have issued our report
thereon dated February 21, 1996. Our audit was made for the purposes of
forming an opinion on the basic financial statements taken as a whole. The
accompanying schedule is the responsibility of the Partnerships' management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic 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 financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 21, 1996
57
<PAGE>
SCHEDULE II
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND CHANGES END OF
OF PERIOD EXPENSES (DEDUCTIONS) PERIOD
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995:
Allowance for doubtful ac-
counts................... $ 8,493,000 $1,057,000 $(1,473,000)(A) $ 8,077,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 2,174,000 $1,141,000 $(2,238,000)(B) $ 1,077,000
=========== ========== =========== ===========
YEAR ENDED DECEMBER 31,
1994:
Allowance for doubtful ac-
counts................... $10,616,000 $ 323,000 $(2,446,000)(A) $ 8,493,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 2,981,000 $ 838,000 $(1,645,000)(B) $ 2,174,000
=========== ========== =========== ===========
YEAR ENDED DECEMBER 31,
1993:
Allowance for doubtful ac-
counts................... $14,402,000 $ 90,000 $(3,876,000)(A) $10,616,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 1,934,000 $1,047,000 $ -- $ 2,981,000
=========== ========== =========== ===========
</TABLE>
- ---------------------
(A) Write-off of uncollectible accounts.
(B) Adjustment of allowance applicable to contribution of CRDA deposits.
58
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
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 Plaza Funding and Plaza Associates. Plaza Funding and Trump AC are the
general partners of Plaza Associates. Plaza Funding is the managing general
partner of Plaza Associates. The Board of Directors of Plaza Funding consists
of Messrs. Trump, Nicholas L. Ribis, Wallace B. Askins and Don M. Thomas. The
Plaza Note Indenture requires that two directors of Plaza Funding 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 Plaza
Funding and Plaza Associates and a brief account of the business experience
during the past five years of each member of the board of directors of Plaza
Funding and of the executive officers of Plaza Funding and Plaza Associates.
Donald J. Trump--Mr. Trump, 49 years old, is Chairman of the Board of
Directors, President and Treasurer of Plaza Funding. Trump was a 50%
shareholder, Chairman of the Board of Directors, President and Treasurer of
Trump Plaza GP, the managing general partner of Plaza Associates prior to its
merger into Plaza Funding in 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 and President of Plaza Holding Inc. since February 1993 and 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. Trump has been Chairman of the Board of THCR and THCR Funding
since their formation in 1995. Trump has been the sole director of Trump
Indiana since its formation. Trump has been Chairman of the Board of Directors
and a Class C Director of Taj Holding and TM/GP since October 1991; President
and Treasurer of Taj Holding since March 4, 1991; Chairman of the Board of
Directors, President and Treasurer of Taj Funding and TTMI since June 1988;
sole director, President and Treasurer of TTMC since March 1991; 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
Chairman of the Board of Partner Representatives of TCA, the partnership that
owns Trump's Castle, since May 1992; and was Chairman of the Executive
Committee of TCA from June 1985 to May 1992. In addition, Trump is the
managing general partner of TCA. Trump 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, 51 years old, has been the Chief Executive
Officer of Plaza Associates since February 1991, was President from April 1994
to February 1995, and 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 its merger into Plaza Funding
in June 1993. Mr. Ribis has been Vice President of Plaza Funding since
February 1995 and Vice President of Plaza Holding Inc. since February 1995.
Mr. Ribis has served as a director of Plaza Holding Inc. since June 1993 and
of Plaza Funding since July 1993. Mr. Ribis has been Chief Executive Officer,
President and director of Trump AC Funding since its formation in January
1996. Mr. Ribis has been President, Chief Executive Officer, Chief Financial
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
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<PAGE>
President and Chief Executive Officer of Trump Indiana since its formation.
Mr. Ribis has been a Class C Director of TM/GP and Taj Holding since October
1991 and was Vice President of TM/GP and Taj Holding until June 1995; Chief
Executive Officer of Taj Associates since February 1991; Vice President of Taj
Funding since September 1991; Vice President of TTMI since February 1991 and
Secretary of TTMI 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. He has also been Chief Executive Officer of TCA since
March 1991; member of the Executive Committee of TCA from April 1991 to May
1992; member of the Board of Partner Representatives of TCA since May 1992;
and has served as the Vice President and Assistant Secretary of Trump's Castle
Hotel & Casino, Inc. an entity beneficially owned by Trump, since December
1993 and January 1991, respectively. Mr. Ribis has served as Vice President of
TC/GP, Inc. since December 1993 and had served as Secretary of TC/GP, Inc.
from November 1991 to May 1992. Mr. Ribis has been Vice President of Trump
Corp. since September 1991. 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.
Wallace B. Askins--Mr. Askins, 65 years old, has been a director of Plaza
Funding and Plaza Holding Inc. since April 11, 1994, and was a partner
representative of the Board of Partner Representatives of TCA from May 1992 to
June 1995. Mr. Askins has been a director of THCR and THCR Funding since June
1995. Mr. Askins served as a director of TC/GP 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, 65 years old, was a director of Trump Plaza GP
until its merger into Plaza Funding in June 1993 and has been a director of
Plaza Funding and Plaza Holding Inc. since June 1993 and has been a director
of THCR and THCR Funding since June 1995. 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. Mr. Thomas is an attorney licensed to practice law in the State
of New York.
Robert M. Pickus--Mr. Pickus, 41 years old, has 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 and, since April 1994, he
has been the Vice President and Assistant Secretary of Plaza Funding and
Assistant Secretary of Plaza Holding Inc. Mr. Pickus has been Secretary and a
director of Trump AC Funding since its formation in January 1996. Mr. Pickus
has been Executive Vice President and Secretary of THCR since its formation in
1995. Mr. Pickus has been the Executive Vice President and Secretary of Trump
Indiana since its formation. Mr. Pickus has been the Executive Vice President
of Corporate and Legal Affairs of Taj Associates since February 1995, and a
Class C Director of Taj Holding and TM/GP since November 1995. He was the
Senior Vice President and Secretary of Trump's Castle Funding, Inc. from June
1988 to December 1993 and General Counsel of TCA from June 1985 to December
1993. Mr. Pickus was also Secretary of Trump's Castle Hotel & Casino, Inc., an
entity beneficially owned by Trump, from October 1991 until December 1993. Mr.
Pickus has been the Executive Vice President of Corporate and Legal Affairs of
TCA since February 1995 and a member of the Board of Partner Representatives
of TCA since October 1995.
John P. Burke--Mr. Burke, 48 years old, has been Corporate Treasurer of
Plaza Associates and Taj Associates since October 1991. Mr. Burke has been
Treasurer of Trump AC Funding since its formation in January 1996. Mr. Burke
has been Senior Vice President of Corporate Finance of THCR, THCR Holdings and
THCR Funding since January 1996, and has been the Corporate Treasurer of THCR,
THCR Holdings and THCR Funding since their formation in 1995. Mr. Burke has
been the Treasurer of Trump Indiana since its formation. Mr. Burke has been a
Class C Director of TM/GP and Taj Holding since October 1991 and was Vice
President
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<PAGE>
of TM/GP until June 1995. Mr. Burke has been the Corporate Treasurer of TCA
since October 1991, the Vice President of TCA, Trump's Castle Funding, Inc.,
TC/GP and Trump's Castle Hotel & Casino, Inc. since December 1993, 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.
Barry J. Cregan--Mr. Cregan, 41 years old, has been Chief Operating Officer
of Plaza Associates since September 19, 1994 and President since March 1995.
Since February 21, 1995, Mr. Cregan has been Vice President of Plaza Funding
and Plaza Holding Inc. Prior to accepting these positions at Trump Plaza, Mr.
Cregan was President of The Plaza Hotel in New York for approximately three
years. Prior to joining The Plaza Hotel, he was Vice President of Hotel
Operations at Trump's Castle in Atlantic City. In addition, Mr. Cregan has
worked for Hilton and Hyatt in executive capacities as well as working in Las
Vegas and Atlantic City in executive capacities.
Francis X. McCarthy, Jr.--Mr. McCarthy, 43 years old, was Vice President of
Finance and Accounting of Trump Plaza GP from October 1992 until June 1993,
the date of Trump Plaza GP's merger into Plaza Funding, was Senior Vice
President of Finance and Administration of Plaza Associates from August 1990
to June 1994 and has been Executive Vice President of Finance and
Administration since June 1994; Chief Accounting Officer of Plaza Funding
since May 1992; Vice President and Chief Financial Officer of Plaza Funding
since July 1992 and Assistant Treasurer of Plaza Funding since March 1991. Mr.
McCarthy previously served in a variety of financial positions for Greate Bay
Hotel and Casino, Inc. from June 1980 through August 1990.
Fred A. Buro--Mr. Buro, 39 years old, has been the Senior Vice President of
Marketing of Plaza Associates since May 1994. Mr. Buro previously served as
the President of Casino Resources, Inc., a casino marketing, management and
development organization from 1991 through 1994. Prior to that, Mr. Buro
served from 1984 through 1991 as the President of a professional services
consulting firm.
James A. Rigot--Mr. Rigot, 44 years old, has been Executive Vice President
of Casino Operations of Plaza Associates since November 1994. Mr. Rigot served
as Vice President of Casino Operations of TropWorld Casino and Entertainment
Resort from July 1989 through November 1994. From January 1989 through July
1989, Mr. Rigot was Assistant Casino Manager of Resorts Casino Hotel.
Kevin S. Smith--Mr. Smith, 39 years old, has been the Vice President,
General Counsel of Plaza Associates since February 1995. 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.
Patrick J. O'Malley--Mr. O'Malley, 41 years old, has been the Executive Vice
President of Hotel Operations of Plaza Associates since September 1995. 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. Prior to joining the Plaza Hotel in New York City,
from 1986 to 1989, Mr. O'Malley was a Regional Financial Controller for the
Four Seasons Hotel and Resorts, Ltd. From 1979 to 1986, Mr. O'Malley worked in
the Middle East and Europe as Hotel Controller for Marriot International
Hotels.
Steven C. Hann--Mr. Hann, 39 years old, has been the Executive Vice
President of Casino Sales and Marketing of Plaza Associates since May 1995.
Prior to joining Trump Plaza, Mr. Hann served in various marketing positions
at the Sands Hotel and Casino since 1989, most recently Vice President of
Casino Marketing and previously as Director of Casino Credit for Greate Bay
Hotel and Casino.
All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
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<PAGE>
Trump and Nicholas L. Ribis served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties
filed their petition for reorganization under Chapter 11 of the Bankruptcy
Code on July 17, 1991. The Second Amended Joint Plan of Reorganization of such
parties was confirmed on August 28, 1991, and was declared effective on
October 4, 1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus
also served as Executive Committee members, officers and/or directors of TCA
and its affiliated entities at the time such parties filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on March 9, 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
May 5, 1992, and was declared effective on May 29, 1992. Trump, Nicholas L.
Ribis and John P. Burke served as either executive officers and/or directors
of Plaza Associates and its affiliated entities when such parties filed their
petition for reorganization under Chapter 11 of the Bankruptcy Code in March
1992. The First Amended Joint Plan of Reorganization of such parties was
confirmed on April 30, 1992, and was declared effective on May 29, 1992. Trump
was a partner of Plaza Operating Partners Ltd. when it filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on November 2, 1992.
The plan of reorganization for Plaza Operating Partners Ltd. was confirmed on
December 11, 1992 and declared effective in January 1993.
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ITEM 11. EXECUTIVE COMPENSATION.
Plaza Funding and Plaza 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, 1995, 1994 and 1993 to the Chief Executive Officer and each
of the four most highly compensated executive officers of Plaza Associates
whose salary and bonuses exceeded $100,000 for the year ended December 31,
1995. The following table also sets forth compensation paid to Trump, who is
the Chairman of the Board of Directors, President and Treasurer of Plaza
Funding. Executive Officers of Plaza Funding do not receive any additional
compensation for serving in such capacity. Compensation accrued during one
year and paid in another is recorded under the year of accrual. Information
relating to long-term compensation is inapplicable and has therefore been
omitted from the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(/1/) COMPENSATION(/2/)
------------------ ---- -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Donald J. Trump......... 1995 $ -- $ -- $ -- $1,321,000(/3/)
1994 -- -- -- 1,288,000(/3/)(/4/)
1993 -- -- -- 1,247,000(/3/)
Nicholas L. Ribis(/5/).. 1995 $532,800 $ 0 $ -- $ --
Chief Executive Officer 1994 572,917 250,000 280,407 --
1993 225,000 250,000 380,500 --
Barry J. Cregan(/6/).... 1995 $637,000 $284,800 $ -- $ 4,576
President and Chief 1994 153,945 -- -- --
Operating Officer
Francis X. McCarthy, 1995 $232,788 $100,000 $ -- $ 4,577
Jr. .................... 1994 201,894 42,500 -- 3,139
Executive Vice President 1993 189,069 90,000 -- 3,781
of
Finance and
Administration
James A. Rigot(/7/)..... 1995 $250,000 $100,000 $ -- $5,864
Executive Vice President 1994 13,461 100,000 -- --
of Casino Operations
Fred A. Buro(/8/)....... 1995 $155,769 $70,000 $ -- $3,028
Senior Vice President 1994 76,923 10,500 -- 642
of Marketing
</TABLE>
- ---------------------
(1) Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for income
taxes. Following Commission rules, perquisites and other personal benefits
are not included in this table if the aggregate amount of that
compensation is the lesser of either $50,000 or 10% of the total of salary
and bonus for that officer.
(2) Represents vested and unvested contributions made by Plaza Associates
under the Trump Plaza Hotel and Casino Retirement Savings Plan. Funds
accumulated for an employee, which consist of a certain percentage of the
employee's compensation plus Plaza Associates' contributions equalling 50%
of the participant's contributions, are retained until termination
of employment, attainment of age 59 1/2 or financial hardship, at which
time the employee may withdraw his or her vested funds.
(3) The amounts listed represent amounts paid by Plaza Associates to TPM, a
corporation beneficially owned by Trump, for services provided under the
TPM Services Agreement (as defined). Payments received by TPM under the
TPM Services Agreement are currently pledged by TPM to secure lease
payments for a helicopter that TPM makes available to Plaza Associates.
See "--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump." Trump is Chairman of the
Board of Directors, President and Treasurer of Plaza Funding, and receives
no additional compensation for his service in such capacities. Trump is
not an employee of Plaza Associates.
(4) In addition to the amount listed as payment under the TPM Services
Agreement, during 1994, Plaza Associates paid to Trump an aggregate of
$1,572,000 under a construction service agreement and as a commission to
secure a retail lease at Trump Plaza. See Note 8 to Financial Statements
of Plaza Funding and Trump AC and Plaza Associates.
(5) Mr. Ribis devotes a majority of his time to the affairs of THCR and its
subsidiaries. See "--Employment Agreements."
(6) Mr. Cregan commenced employment with Plaza Associates in September 1994.
(7) Mr. Rigot commenced employment with Plaza Associates in November 1994.
(8) Mr. Buro commenced employment with Plaza Associates in May 1994.
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<PAGE>
EMPLOYMENT AGREEMENTS
Plaza Associates had an employment agreement with Nicholas L. Ribis (the
"Ribis Plaza Agreement") pursuant to which Mr. Ribis acted as Chief Executive
Officer of Plaza Associates. The Ribis Plaza Agreement provided for an annual
salary of $550,000 with annual increases of 10% on each anniversary. Mr. Ribis
received a $250,000 signing bonus. Pursuant to the terms of the Ribis Plaza
Agreement, in the event Plaza Associates engaged in an offering of common
shares to the public, Plaza Associates and Mr. Ribis would agree to negotiate
new compensation arrangements to include equity participation for Mr. Ribis.
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") to
replace the Ribis Plaza 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 and Mr.
Ribis is required to devote not less than 50% of his professional time to the
affairs of THCR, as measured on a quarterly basis, based on a 40-hour work
week. Under the Ribis THCR Agreement, Mr. Ribis's annual salary is $998,250,
which is 50% of the aggregate current annual base salary ($1,996,500) that Mr.
Ribis receives as Chief Executive Officer of THCR ($998,250), Taj Mahal
($499,125) and Trump's Castle ($499,125). In 1995, the Stock Incentive Plan
Committee granted to Mr. Ribis, under the 1995 Stock Plan: (a) a stock bonus
award of 66,667 shares of THCR Common Stock, which was fully vested when
issued, (b) a phantom stock unit award of 66,666 units, entitling him to
receive 66,666 shares of THCR Common Stock on June 12, 1997, subject to
certain conditions and (c) an award of NQSOs entitling Mr. Ribis to purchase
133,333 shares of the THCR Common Stock at an exercise price of $14.00 per
share (and associated registration rights). The options will vest at the rate
of 20% per year over a five-year period and be subject to certain other
conditions. 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." 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.
Plaza Funding and Plaza Associates have an employment agreement with Barry
J. Cregan (the "Cregan Agreement") pursuant to which Mr. Cregan acts as
President and Chief Operating Officer of Plaza Associates. The Cregan
Agreement, which will expire on September 18, 1996, provides for an annual
base salary of $600,000 during the first year and an annual base salary of
$700,000 during the second year, and can be extended at Mr. Cregan's option to
extend the Cregan Agreement for one additional year at an annual base salary
of
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<PAGE>
$750,000 during his third year of employment. Pursuant to the Cregan
Agreement, Mr. Cregan devotes all of his professional time to Plaza
Associates. In the event that Plaza Funding or Plaza Associates terminates Mr.
Cregan's employment for Cause (defined as the revocation of Mr. Cregan's
casino key employee license, his conviction of certain crimes, death,
disability or the breach of his duty of trust to Plaza Associates), Plaza
Associates shall pay Mr. Cregan all compensation earned to the date of such
termination. In the event Mr. Cregan terminates the Cregan Agreement for Good
Cause, Plaza Associates is required to pay Mr. Cregan all compensation,
reimbursements and benefits provided for under the Cregan Agreement (a) due as
of the date of such termination and (b) payable from such date of termination
through the expiration date of the Cregan Agreement. "Good Cause" is defined
in the Cregan Agreement as (i) the assignment to Mr. Cregan, without his
consent, of any duties inconsistent with the position of Chief Operating
Officer, a demotion or change in Mr. Cregan's title or office, any removal
from his position or a change in control of Plaza Associates, except in
connection with the termination of Mr. Cregan's employment upon revocation of
his casino key employee license, death or disability, (ii) the filing of a
bankruptcy petition under Chapter 7 of the Bankruptcy Code by Plaza
Associates, Plaza Funding or its respective creditors, (iii) revocation by the
CCC or its refusal to renew Plaza Associates' casino license or the
appointment of a conservator in connection with Trump Plaza, (iv) the failure
by Plaza Associates to pay Mr. Cregan the compensation due under the Cregan
Agreement on the dates and at such times such compensation is due, (v) a sale
or long term lease of Trump Plaza or substantially all of its assets except to
an entity wholly owned by Plaza Associates or Trump or (vi) Nicholas L. Ribis
no longer acting as the Chief Executive Officer of THCR; provided that, Mr.
Cregan shall not be entitled to compensation described in (b) of the prior
sentence following the occurrence of an event described in (v) or (vi) of this
sentence. Until the Expiration Date or the earlier termination of the Cregan
Agreement as provided therein and provided Mr. Cregan is being paid the
compensation, reimbursement and benefits set forth in the Cregan Agreement on
the dates and at the times such compensation, reimbursement and benefits are
due to be paid, Mr. Cregan shall not accept employment, either as an employee,
consultant or independent contractor, for or on behalf of any other casino
hotel located within a 300 mile radius of Atlantic City, New Jersey.
Plaza Associates has an employment agreement with James A. Rigot (the "Rigot
Agreement") pursuant to which Mr. Rigot acts as Executive Vice President of
Casino Operations of Plaza Associates. The Rigot Agreement, which expires on
November 30, 1997, provides for a bonus of $100,000 upon commencement of
employment, an annual base salary of $250,000, with any bonus and increases in
salary provided in Plaza Associates' sole and absolute discretion, however, at
no time shall such salary be less than $250,000. Pursuant to the Rigot
Agreement, Mr. Rigot devotes all of his professional time to Plaza Associates.
In the event that Plaza Associates terminates the Rigot Agreement (i) because
Mr. Rigot's CCC license is terminated or (ii) because Mr. Rigot has committed
an act constituting Cause (defined as a breach by Mr. Rigot of any provision
of the Rigot Agreement or any employee conduct rules, an act of dishonesty,
the deliberate and intentional refusal by Mr. Rigot to perform his duties
under the Rigot Agreement, certain disabilities or death), Plaza Associates
shall pay to Mr. Rigot all compensation earned to the date of such
termination. In the event that Plaza Associates terminates the Rigot Agreement
for any other reason, Plaza Associates shall offer to pay Mr. Rigot an amount
equal to twelve months of Mr. Rigot's then current salary, which offer, if
accepted, will constitute complete satisfaction of all obligations and
liabilities arising out of the Rigot Agreement. So long as Plaza Associates
continues to pay Mr. Rigot's salary pursuant to the Rigot Agreement, Mr. Rigot
shall not accept employment, either as an employee, consultant or independent
contractor, for or on behalf of any other casino hotel located in Atlantic
City, New Jersey.
Plaza Associates has an employment agreement with Kevin S. Smith, Esq. (the
"Smith Agreement") pursuant to which Mr. Smith acts as the Vice
President/General Counsel of Plaza Associates. The Smith Agreement, which
expires on February 9, 1998, provides for an annual base salary of $110,000,
with any bonus and increases in salary provided in Plaza Associates' sole and
absolute discretion. Pursuant to the Smith Agreement, Mr. Smith devotes all of
his professional time to Plaza Associates. In the event that Plaza Associates
terminates the Smith Agreement due to the fact that Mr. Smith no longer holds
his CCC license, Mr. Smith shall be entitled to no further compensation. In
the event that the Smith Agreement is terminated for any other reason, Mr.
Smith shall be entitled to compensation in the amount of one year's salary
(plus salary for the remainder of the month in which the Smith Agreement was
terminated), including benefits.
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<PAGE>
Plaza Associates has an agreement with Patrick O'Malley (the "O'Malley
Agreement"), pursuant to which Mr. O'Malley serves as Executive Vice President
of Hotel Operations of Plaza Associates. The O'Malley Agreement, which expires
on September 17, 1997, provides for a $50,000 signing bonus and an annual base
salary of $250,000 per year. In the event Plaza Associates terminates the
O'Malley Agreement because Mr. O'Malley's casino license is revoked,
terminated and/or suspended for more than 30 days or for Cause (defined as a
breach by Mr. O'Malley of the material provisions of the O'Malley Agreement or
an act of dishonesty), Plaza Associates is required to pay Mr. O'Malley an
amount equal to his salary earned to the date of such termination. In the
event Mr. O'Malley terminates the O'Malley Agreement for Good Cause (defined
as the assignment to Mr. O'Malley, without his consent, of any duties
inconsistent with the position of Executive Vice President of Hotel
Operations, a demotion or change in Mr. O'Malley's title or office, any
removal from his position or a change in control of Plaza Associates, except
in connection with the termination of Mr. O'Malley's employment upon
revocation of his casino key employee license, death or disability), or if
Plaza Associates terminates the O'Malley Agreement without Cause, Plaza
Associates shall pay Mr. O'Malley all compensation, reimbursements and
benefits provided for under the O'Malley Agreement (i) due on the date of such
termination and (ii) payable from such date of termination through the
expiration date of the O'Malley Agreement, which amount shall not be less than
one year annual base salary then payable, and any bonuses accrued to such date
of termination. Mr. O'Malley may renew the O'Malley Agreement for a period of
one year upon the same terms as the O'Malley Agreement except that Mr.
O'Malley's base salary will be negotiated upward in good faith by the parties
and will not be less than $250,000 per year. Upon termination of the O'Malley
Agreement, Mr. O'Malley will not accept employment, either as an employee,
consultant or independent contractor, for or on behalf of any other casino
hotel located within a 300-mile radius of Atlantic City, New Jersey.
The Cregan Agreement, Rigot Agreement, Smith Agreement and O'Malley
Agreement provide for discretionary bonuses. Factors considered by Plaza
Associates in the awarding of all discretionary bonuses generally are the
attainment by Plaza Associates of budgeted or forecasted goals and the
individual's perceived contribution to the attainment of such goals.
COMPENSATION OF DIRECTORS
All of the directors of Plaza Funding currently serve on the Board of
Directors of THCR and receive no additional compensation for their service
with Plaza Funding. 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 is
determined by the Board of Directors of Plaza Funding, which consists of
Messrs. Trump, Ribis, Askins and Thomas. No officer or employee of Plaza
Funding, other than Messrs. Trump and Ribis who serve on the Board of
Directors of Plaza Funding, participated in the deliberations of the Board of
Directors of Plaza Funding concerning executive compensation. Executive
officers of Plaza Funding do not receive any additional compensation for
serving in such capacity.
Certain Related Party Transactions of Trump. In connection with the Merger
Transaction, Trump is receiving certain consideration. See "Business--Recent
Events." In exchange for the contribution of his direct and indirect interests
in Taj Associates, Trump will receive additional limited partnership interests
in THCR Holdings (including limited partnership interests to be held
indirectly through a wholly owned corporation), which will be valued at
$40,500,000 upon consummation of the Merger Transaction. The holders of the
other 50% interest in Taj Associates will receive, at their election, cash or
shares of THCR Common Stock, aggregating $40,500,000.
Trump entered into the Executive Agreement (as defined), the 1995
Contribution Agreement and the License Agreement in June 1995, and is
currently the sole limited partner of THCR Holdings. See "Business--
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<PAGE>
Trademark/Licensing." Trump serves as the Chairman of the Board of Directors
of THCR pursuant to the Executive Agreement dated as of June 12, 1995, among
Trump, THCR and THCR Holdings (the "Executive Agreement"). In consideration
for Trump's services under the Executive Agreement, Trump receives a salary of
$1 million per year. Pursuant to the terms of the Executive Agreement, Trump
provides to THCR, from time to time, when reasonably requested, marketing,
advertising, professional and other similar and related services with respect
to the operation and business of THCR. The Executive Agreement continues in
effect (i) for an initial term of five years, and (ii) thereafter, for a
three-year rolling term until either Trump or THCR provides notice to the
other of its election not to continue extending the term, in which case the
term of the Trump Executive Agreement will end three years from the date such
notice is given. The Executive Agreement also provides that Trump may devote
time and effort to the Taj Mahal and Trump's Castle and, subject to the terms
of the Contribution Agreement, to other business matters, and that the
Executive Agreement will not be construed to restrict Trump from operating the
Taj Mahal and Trump's Castle in a commercially reasonable manner and/or having
an interest therein or conducting any other activity not prohibited under the
Contribution Agreement. See "Business--Conflicts of Interest."
Upon consummation of the June 1995 Offerings, Trump contributed to the
capital of Trump Indiana and other new jurisdiction subsidiaries payments made
by him relating to expenditures for the development of the Indiana Riverboat
and other gaming ventures. As of June 12, 1995 these advances totaled
approximately $4.4 million. Of these amounts, approximately $3.0 million were
used to fund expenses related to the development of Trump Indiana. In order to
fund such expenses, THCR Holdings lent to Trump $3.0 million and Trump issued
to THCR Holdings a five-year promissory note bearing interest at a fixed rate
of 10%, payable annually. The promissory note provides that it will be
automatically canceled in the event that at any time during the periods set
forth below, the THCR Common Stock trades on the NYSE, or any other applicable
national exchange or over-the-counter market, at a price per share equal to or
greater than the prices set forth below (subject to adjustment in certain
circumstances) for any ten trading days during any 15 consecutive trading day
period:
<TABLE>
<S> <C>
If on or prior to June 12, 1997 ...................................... $25.00
If on or prior to June 12, 1998 ...................................... $27.50
If on or prior to June 12, 1999 ...................................... $30.00
If on or prior to June 12, 2000 ...................................... $32.50
</TABLE>
On March 27, 1996, such $3.0 million promissory note was canceled in
accordance with its terms.
THCR has entered into a ten-year lease with The Trump-Equitable Fifth Avenue
Company, a corporation wholly owned by Trump, dated as of July 1, 1995, for
the lease of office space in The Trump Tower in New York City, which THCR may
use for its general executive and administrative offices. The fixed rent is
$115,500 per year, paid in equal monthly installments, for the period from
July 1, 1995 to June 30, 2000 and will be $129,250 per year, paid in equal
monthly installments, for the period from July 1, 2000 to June 30, 2005. In
addition, THCR will pay as additional rent, among other things, a portion of
the property taxes due each year. THCR has the option to terminate this lease
upon ninety days' written notice and payment of $32,312.50.
In connection with the Merger Transaction, Trump and THCR entered into an
agreement, dated January 8, 1996, pursuant to which Trump agreed to take the
actions contemplated to be taken by Trump in connection with the Merger
Transaction, including to vote, or cause to be voted, all shares of THCR
Common Stock and THCR Class B Common Stock beneficially owned by Trump in
favor of the approval of the Merger Transaction. THCR agreed to use reasonable
efforts to fulfill, and cause to be fulfilled, those obligations owed to Trump
in connection with the Merger Transaction.
Through February 1, 1993, Plaza Associates also leased from Trump
approximately 120 parking spaces at Trump Plaza East for approximately $5.50
per parking space per day, with payments under such arrangement for the years
ended December 31, 1993 and December 31, 1992 totaling $21,000 and $227,000,
respectively.
Seashore Four is the fee owner of a parcel of land constituting a portion of
the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to the
SFA Lease. Seashore Four was assigned the lessor's interest in the
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<PAGE>
existing SFA Lease in connection with its acquisition of fee title to such
parcel from a non-affiliated third party in November 1983. The SFA Lease was
entered into by Plaza Associates with such third party on an arm's-length
basis. Plaza Associates recorded rental expenses of approximately $950,000,
$900,000 and $900,000 in 1995, 1994 and 1993, respectively, concerning rent
owed to Seashore Four.
Trump Seashore is the fee owner of a parcel of land constituting a portion
of the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to
the TSA Lease. In July 1988, Trump Seashore exercised a $10 million option to
purchase the fee title to such parcel from a non-affiliated third party. In
connection therewith, Trump Seashore was assigned the lessors' interest in the
Trump Seashore Lease, which interest has, however, been transferred to UST.
See "Properties." Plaza Associates made rental payments to Trump Seashore of
approximately $1,175,000, $1.0 million and $1.0 million in 1995, 1994 and
1993, respectively.
In June 1989, Trump Crystal Tower Associates Limited Partnership ("Trump
Crystal"), a New Jersey limited partnership wholly owned by Trump, acquired
from Elsinore Shore Associates all of the assets constituting the former
Atlantis Casino Hotel ("Atlantis"), which is located on The Boardwalk adjacent
to the Atlantic City Convention Center on the opposite side from Trump Plaza
and is otherwise referred to herein as Trump World's Fair. Prior to such
acquisition, all of the Atlantis' gaming operations were discontinued. The
facility was renamed the Trump Regency Hotel and, in August 1990, pursuant to
a triple net lease with an affiliate of Plaza Associates, leased to Plaza
Associates, which operated it solely as a non-casino hotel. During such period
of operation, losses attributable to the former Trump Regency Hotel
aggregating approximately $14.1 million adversely affected the results of
operations of Plaza Associates. Pursuant to the 1992 Plaza Restructuring,
Plaza Associates ceased operating the former Trump Regency Hotel as of
September 30, 1992. As part of the 1992 Plaza Restructuring, the triple-net
lease was terminated and Plaza Associates issued to Manufacturers Hanover
Trust Company, which has since been acquired by Chemical Bank ("Chemical"),
the assignee of rents payable under such lease, a promissory note in the
original principal amount of $17.5 million (the "Regency Note"). At such time,
title to the former Trump Regency Hotel was transferred by Trump to ACFH Inc.
("ACFH"), a wholly owned subsidiary of Chemical. From that time until June 12,
1995, the former Trump Regency Hotel was operated on behalf of ACFH as a non-
casino hotel by Sovereign Management, a third party unaffiliated with THCR,
Trump or their respective affiliates. Pursuant to an agreement between Trump
Crystal and ACFH, Trump Crystal granted ACFH a non-exclusive license to use
the "Trump" name in connection with such property. Plaza Associates repaid the
Regency Note with a portion of the proceeds from the sale of the Plaza Notes
and PIK Notes.
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical and ACFH. The Original Chemical
Option Agreement granted to Trump an option to purchase (i) the former Trump
Regency Hotel (including the land, improvements and personal property used in
the operation of the hotel) and (ii) certain promissory notes (including a
personal promissory note of Trump payable to Chemical for $35.9 million (the
"Trump Note")) made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate
assets located in New York, unrelated to Plaza Associates, including the Trump
Note which was made by Trump on July 20, 1987. As of September 30, 1995, the
aggregate amount owed by Trump and his affiliates under the Chemical Notes
(none of which constitutes an obligation of Plaza Associates) was
approximately $65.8 million. In connection with exercise of the Trump World's
Fair Purchase Option, as discussed below, the Trump Note was canceled.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $80 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option
by January 5, 1994. In addition, the Original Chemical Option Agreement
provided for an expiration of the option on May 8, 1994, subject to an
extension until June 30, 1994 upon payment of an additional $250,000 on or
before May 8, 1994. The Original Chemical Option Agreement did not allocate
the purchase price among the assets subject to the option or permit the option
to be exercised for some, but not all, of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Plaza Associates was to make the initial $1 million payment, and, in
consideration of such payment to be made by Plaza Associates, Trump
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<PAGE>
agreed with Plaza Associates that, if Trump was able to acquire the former
Trump Regency Hotel pursuant to the exercise of the option, he would make it
available for the sole benefit of Plaza Associates on a basis consistent with
Plaza Associates' contractual obligations and requirements. Trump further
agreed that Plaza Associates would not be required to pay any additional
consideration to Trump in connection with any assignment to Plaza Associates
of the option to purchase the former Trump Regency Hotel. On January 5, 1994,
Plaza Associates obtained the approval of the CCC to make the $1 million
payment, and the payment was made on that date.
On June 16, 1994, Trump, Chemical and ACFH amended and restated the Original
Chemical Option Agreement (the "First Amended Chemical Option Agreement"). The
First Amended Chemical Option Agreement provided for an extension of the
expiration of the option through September 30, 1994, upon payment of $250,000.
Such payment was made on June 27, 1994. The First Amended Chemical Option
Agreement provided for a $60 million option price for the former Trump Regency
Hotel and the Trump Note, and a separate $20 million option price for the
other Chemical Notes. On August 30, 1994, Trump, Chemical and ACFH entered
into an amendment to the First Amended Chemical Option Agreement (the "Second
Amended Chemical Option Agreement"). The Second Amended Chemical Option
Agreement provided for an extension of the expiration of the option through
March 31, 1995 upon the payment of $50,000 a month for the period October
through December 1994, and $150,000 a month for the period January through
March 1995. Plaza Associates received the approval of the CCC and has made
such payments. On March 6, 1995, Trump, Chemical and ACFH entered into an
amendment to the Second Amended Chemical Option Agreement (the "Third Amended
Chemical Option Agreement") or the Trump World's Fair Purchase Option. On June
12, 1995, Trump exercised the Trump World's Fair Purchase Option for
$58,150,000 ($60 million less $1,850,000 in option payments which were
available as of that date to offset the original exercise price), and title to
Trump World's Fair was transferred via directed deed from ACFH to Plaza
Associates. In connection with the exercise of the Trump World's Fair Purchase
Option, the Trump Note was canceled. THCR is currently in the process of
renovating and integrating Trump World's Fair into Trump Plaza. See
"Business--Trump Plaza--The Trump Plaza Expansion."
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. On June 24, 1993, in connection with the 1993 refinancing of Trump
Plaza, (i) Trump transferred title to Trump Plaza East to Boardwalk, a wholly
owned subsidiary of Midlantic, in exchange for a reduction in indebtedness to
Midlantic in an amount equal to the sum of fair market value of Trump Plaza
East and all rent payments made to Boardwalk by Trump under the Trump Plaza
East Lease (as defined), (ii) Boardwalk leased Trump Plaza East to Trump (the
"Trump Plaza East Lease") for a term of five years, which expires on June 30,
1998, during which time Trump was obligated to pay Boardwalk $260,000 per
month in lease payments, and (iii) Plaza Associates acquired the Trump Plaza
East Purchase Option. In October 1993, Plaza Associates assumed the Trump
Plaza East Lease and related expenses. In addition, Plaza Associates has the
Right of First Offer upon any proposed sale of all or any portion of the fee
interest in Trump Plaza East during the term of the Trump Plaza East Purchase
Option. Pursuant to the Right of First Offer, Plaza Associates has ten days
after receiving written notice from the grantor of the proposed sale to commit
to exercise the Right of First Offer. If Plaza Associates commits to exercise
the Right of First Offer, it has ten days from the date of commitment to
deposit $3,000,000 with the grantor, to be credited towards the purchase price
or to be retained by the grantor if the closing, through no fault of the
grantor, does not occur within 90 days (or, subject to certain conditions, 120
days) of the date of the commitment. If Plaza Associates determines not to
timely exercise the Right of First Offer, the grantor thereof may sell Trump
Plaza East to a third party, subject, however, to the Trump Plaza East
Purchase Option and the lease associated with Trump Plaza East. Trump,
individually, also has been granted by such lender the Right of First Offer
upon a proposed sale of all or any portion of Trump Plaza East during the term
of the Trump Plaza East Purchase Option. Trump has agreed with Plaza
Associates that his Right of First Offer will be subject to Plaza Associates'
prior exercise of its Right of First Offer (with any decision of Plaza
Associates requiring the approval of the independent directors of Plaza
Funding, acting as the managing general partner of Plaza Associates).
Acquisition of Trump Plaza East by Plaza Associates would under certain
circumstances (provided there are no events of default under the Trump Plaza
East Lease or the Trump Plaza East Purchase Option and provided that certain
other events had not theretofore or do not thereafter occur) discharge Trump's
approximately $18 million obligation to Midlantic in full.
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On June 24, 1993, Plaza Associates and TPM entered into an agreement (the
"TPM Services Agreement") which amended and restated an earlier services
agreement. Pursuant to the TPM Services Agreement, TPM is required to provide
to Plaza Associates, from time to time when reasonably requested, consulting
services on a non-exclusive basis, relating to marketing, advertising,
promotional and other similar and related services (the "TPM Services") with
respect to the business and operations of Plaza Associates. In addition, the
TPM Services Agreement contains a non-exclusive "license" of the "Trump" name.
TPM is not required to devote any prescribed amount of time to the performance
of its duties. In consideration for the TPM Services, Plaza Associates pays
TPM an annual fee of $1.0 million in equal monthly installments. In addition
to such annual fee, Plaza Associates reimburses TPM on a monthly basis for all
reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under the TPM Services Agreement. Plaza Associates paid TPM
$1,321,000, $1,288,000 and $1,247,000 in 1995, 1994 and 1993, respectively,
for the TPM Services. Pursuant to the TPM Services Agreement, Plaza Associates
has agreed to hold TPM, its officers, directors and employees harmless from
and against any loss arising out of or in connection with the performance of
the TPM Services and to hold Trump harmless from and against any loss arising
out of the license of the "Trump" name. The TPM Services Agreement provides
that its term is coextensive with the period during which any Plaza Notes
remain outstanding.
Payments received under the TPM Services Agreement are currently pledged by
TPM to secure lease payments for a helicopter that TPM makes available to
Plaza Associates. Pending approval by the lessor of the helicopter, it is
currently contemplated that the stock of TPM will be transferred by Trump to
THCR Holdings, which will in turn assume the lease and related obligations, as
well as become entitled to all amounts payable under the TPM Services
Agreement.
John Barry, Trump's brother-in-law, is a partner of Barry & McMoran, a New
Jersey law firm which provides, from time to time, legal services to Plaza
Associates.
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.
Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
the managing general partner of Plaza Associates, and of which Messrs. Trump
and Ribis are executive officers. Messrs. Trump and Ribis also serve on the
Board of Directors of Plaza Holding Inc., of which Messrs. Trump, Ribis and
Burke are also executive officers. Trump is not compensated by such entities
for serving as an executive officer, however, he has entered into a personal
services agreement with Plaza Associates and THCR. Messrs. Ribis and Burke are
not compensated by the foregoing entities, however, they are compensated by
Plaza Associates for their service as executive officers.
Messrs. Ribis, Pickus and Burke serve on the Board of Directors of Taj
Holding, which holds an indirect equity interest in Taj Associates, the
partnership that owns the Taj Mahal, of which Trump is an executive officer.
Such persons also serve on the Board of Directors of TM/GP, the managing
general partner of Taj Associates, of which Messrs. Trump and Ribis are
executive officers. Mr. Ribis is compensated by Taj Associates for his
services as its Chief Executive Officer. Mr. Ribis also serves on the Board of
Directors of Realty Corp., which leases 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.
Mr. Ribis receives compensation from TCA for acting as its Chief Executive
Officer.
Prior to December 1995, Mr. Ribis was Counsel to the law firm of Ribis,
Graham and Curtin (now practicing as Graham, Curtin & Sheridan, A Professional
Association), which serves as New Jersey legal counsel to THCR, THCR Holdings,
Plaza Associates and certain of their affiliated entities.
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Mr. Ribis is also Chief Executive Officer of Taj Associates and TCA, the
partnerships that own the Taj Mahal and Trump's Castle, and receives
compensation from such entities for such services as set forth above. Pursuant
to the Ribis THCR Agreement, he is required to devote the majority of his time
to the affairs of THCR. All other executive officers of Plaza Associates,
except Messrs. Burke and Pickus, devote substantially all of their time to the
business of Plaza Associates.
THCR Holdings has an employment agreement with Robert M. Pickus (the "Pickus
Agreement") pursuant to which he serves as Executive Vice President and
General Counsel. The Pickus Agreement, the initial term of which expires on
July 9, 1998 if not extended, provides for annual compensation of $275,000
plus bonus. Employment may be terminated only for "cause," which is defined in
the Pickus Agreement as Mr. Pickus' (i) revocation of his casino key employee
license, (ii) conviction of certain crimes, (iii) disability or death or (iv)
breach of his duty to THCR Holdings. Upon termination for cause, Mr. Pickus
will receive only compensation earned to the date of termination. Pursuant to
the Pickus Agreement, Mr. Pickus has agreed not to accept employment for or on
behalf of any other casino hotel located in Atlantic City during the term of
the Pickus Agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP
Plaza Funding. THCR Holdings has owned 100% of the Plaza Funding Stock since
June 12, 1995. Prior to June 12, 1995, Trump owned 100% of the Plaza Funding
Stock. Pursuant to a contribution agreement, dated as of June 12, 1995, by and
among Trump and THCR Holdings (the "1995 Contribution Agreement"), Trump
transferred to THCR Holdings, among other things, 100% of the Plaza Funding
Stock.
Plaza Associates. Through its ownership of 100% of Plaza Funding, Plaza
Holding Inc. and Trump AC, THCR Holdings currently beneficially owns 100% of
Plaza Associates.
CHANGES IN CONTROL
On June 12, 1995, as a part of the June 1995 Offerings, THCR Holdings and
its wholly owned finance subsidiary, Trump Hotels & Casino Resorts Funding,
Inc. ("THCR Funding"), issued $155 million aggregate principal amount 15 1/2%
Senior Secured Notes due 2005 (the "Senior Notes"). Pursuant to the indenture
under which the Senior Notes were issued (the "Senior Note Indenture"), THCR
Holdings pledged the Plaza Funding Stock and caused its subsidiaries to pledge
99% of the equity of Plaza Associates, for the benefit of the holders of the
Senior Notes, which pledges are secured, until the Plaza Note Purchase,
equally and ratably with the Plaza Notes. The remaining 1% equity interest in
Plaza Associates, which is held by Plaza Funding, was pledged for the
exclusive benefit of the holders of the Plaza Notes in connection with the
issuance of the Plaza Notes. A foreclosure on all of the collateral discussed
herein would result in a change of control of Plaza Funding and Plaza
Associates.
In connection with the Merger Transaction, THCR Holdings will cause Plaza
Funding to transfer (by merger, contribution or otherwise) its 1% general
partnership interest in Plaza Associates to The Trump Taj Mahal Corporation
("TTMC"), an entity which will, following the Merger Transaction, be a wholly
owned subsidiary of THCR Holdings. At that time, TTMC will assume Plaza
Funding's remaining obligations under the Plaza Note Indenture. Additionally,
TTMC will pledge such 1% general partnership interest in Plaza Associates for
the benefit of the holders of the Senior Notes, who will then have an
exclusive security interest in all of THCR Holdings direct and indirect equity
interest in its subsidiaries. A foreclosure on all of the collateral discussed
herein would result in a change of control of Plaza Funding and Plaza
Associates.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Payments to affiliates in connection with any such transactions are governed
by the provisions of the Senior Note Indenture and the Plaza Note Indenture,
which provisions will generally require that such transactions be
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on terms as favorable as would be obtainable from an unaffiliated party, and
require the approval of a majority of the independent directors of THCR, in
the case of the Senior Note Indenture, and Plaza Funding, in the case of the
Plaza Note Indenture, for certain affiliated transactions.
Trump and certain affiliates have engaged in certain related party
transactions with respect to THCR and Plaza Associates. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump" and "--Other Relationships."
Plaza Associates has joint property insurance coverage with TCA, Taj
Associates and other entities affiliated with Trump for which the annual
premium paid by Plaza Associates was approximately $1.4 million for the 12
months ended May 1996.
Plaza Associates leased from Taj Associates certain office facilities
located in Pleasantville, New Jersey. In 1993 and 1992, lease payments by
Plaza Associates to Taj Associates totaled approximately $30,000 and $138,000,
respectively. Such lease terminated on March 19, 1993, and Plaza Associates
vacated the premises. Through February 1, 1993, Plaza Associates also leased
from Trump approximately 120 parking spaces at Trump Plaza East for
approximately $5.50 per parking space per day, with payments under such
arrangement for the years ended December 31, 1993 and December 31, 1992
totaling $21,000 and $227,000, respectively.
Plaza Associates also leased portions of its warehouse facility located in
Egg Harbor Township, New Jersey to TCA; lease payments by TCA to Plaza
Associates totaled $6,000, $6,000 and $15,000 in 1995, 1994 and 1993,
respectively.
Indemnification Agreements. In addition to the indemnification provisions
in THCR's and its subsidiaries' employment agreements (see "Management--
Employment Agreements"), certain former and current Directors of Plaza Funding
entered into separate indemnification agreements in May 1992 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 (the "Trust Agreement") 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 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 the Indemnification
Trust Fund equal to $500,000 for the benefit of such directors; provided,
however, that deposits relating 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.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS.
(1) See "Financial Statements and Supplementary Data--Index to
Financial Statements and Financial Statement Schedules" for a list
of the financial statements included in this Annual Report.
(2) See "Financial Statements and Supplementary Data--Index to
Financial Statement Schedules" for a list of the financial
statement schedule included in this Annual Report.
(B) REPORTS ON FORM 8-K.
The Registrants did not file any reports on Form 8-K during the quarter
ended December 31, 1995.
(C) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
3.1(6) Amended and Restated Certificate of Incorporation of Trump Plaza
Funding, Inc.
3.2(6) Amended and Restated By-Laws of Trump Plaza Funding, Inc.
3.3-3.4 Intentionally omitted
3.5(6) Certificate of Incorporation of Trump Plaza Holding Inc.
3.6(6) By-Laws of Trump Plaza Holding Inc.
3.7(7) Second Amended and Restated Partnership Agreement of Trump Plaza
Associates.
3.8 Intentionally omitted.
3.9(6) Agreement and Plan of Merger between TP/GP, Corp. and Trump
Plaza Funding, Inc.
4.1(7) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Trump Plaza Associates, as guarantor, and First Bank
National Association, as trustee.
4.2(7) Indenture of Mortgage, between Trump Plaza Associates, as
mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
4.3(7) Assignment Agreement between Trump Plaza Funding, Inc., and
First Bank National Association, as trustee.
4.4(7) Assignment of Operating Assets from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.5(7) Assignment of Leases and Rents from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.6(7) Indenture of Mortgage between Trump Plaza Associates and First
Bank National Association, as trustee.
4.7(7) Assignment of Leases and Rents from Trump Plaza Associates to
First Bank National Association, as trustee.
4.8(7) Assignment of Operating Assets from Trump Plaza Associates to
First Bank National Association, as trustee.
4.9(7) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
4.10(7) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(7) Pledge Agreement of Trump Plaza Funding, Inc., in favor and
for the benefit of First Bank National Association, as
trustee.
10.1-10.6 Intentionally omitted.
10.7(9) Employment Agreement between Trump Plaza Associates and Barry
Cregan.
10.8-10.9 Intentionally omitted.
10.10(3) Agreement of Lease, dated as of July 1, 1980, by and between
SSG Enterprises, as lessor and Atlantic City Seashore 2, Inc.,
as lessee, as SSG Enterprises' interest has been assigned to
Seashore Four Associates, and as Atlantic City Seashore 2,
Inc.'s interest has been, through various assignments,
assigned to Trump Plaza Associates (with schedules).
10.11(3) Agreement of Lease, dated July 11, 1980, by and between Plaza
Hotel Management Company, as lessor, and Atlantic City
Seashore 3, Inc., as lessee, as Atlantic City Seashore 3,
Inc.'s interest has been, through various assignments,
assigned to Trump Plaza Associates (with schedules).
10.12(3) Agreement of Lease, dated as of July 1, 1980, by and between
Magnum Associates and Magnum Associates II, as lessor and
Atlantic City Seashore 1, Inc., as lessee, as Atlantic City
Seashore 1, Inc.'s interest has been, through various
assignments, assigned to Trump Plaza Associates (with
schedules).
10.13-10.15 Intentionally omitted.
10.16(1) Trump Plaza Hotel and Casino Retirement Savings Plan effective
as of November 1, 1986.
10.17-10.20 Intentionally omitted.
10.21(4) Assignment of Lease, dated as of July 28, 1988, by and between
Magnum Associates and Magnum Associates II, as assignor, Trump
Seashore Associates, as assignee, and Trump Plaza Associates,
as lessee.
10.22-10.23 Intentionally omitted.
10.24(4) Employment Agreement, dated January 28, 1991, between Trump
Plaza Associates and Kevin DeSanctis.
10.24.1(19) Amendment to Employment Agreement, dated August 6, 1992,
between Trump Plaza Associates and Kevin DeSanctis.
10.25 Intentionally omitted.
10.26 Intentionally omitted.
10.27(2) Employment Agreement, dated as of March 13, 1991 between Trump
Plaza Associates and William Velardo.
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(5) Amended and Restated Services Agreement between Trump Plaza
Associates and Trump Plaza Management Corp.
10.31 Intentionally omitted.
10.32 Intentionally omitted.
10.33(6) Mortgage from Donald J. Trump, as nominee, to Albert
Rothenberg and Robert Rothenberg, dated October 3, 1983.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
10.34(6) Mortgage made by Harrah's Associates to Adeline Bordonaro, dated January 28, 1986.
10.35(6) Mortgage from Trump Plaza Associates to The Mutual Benefit Life Insurance Company, dated October 5,
1990.
10.35.1(6) 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(8) Employment Agreement between Trump Plaza Associates and Nicholas L. Ribis.
10.39(8) Severance Agreement between Trump Plaza Associates and Robert M. Pickus.
10.40(10) Employment Contract, dated as of February 7, 1995, between Trump Plaza Associates and Kevin S.
Smith.
10.41(10) Employment Agreement between Trump Plaza Associates and James A. Rigot.
10.42(10) Option and Right of First Offer Agreement between Trump Plaza Associates and Missouri Boardwalk
Inc., dated June 24, 1993.
10.43(10) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated June 24, 1993.
10.44(10) Sublease between Donald J. Trump and Missouri Boardwalk Inc., dated June 24, 1993.
10.45-10.49 Intentionally omitted.
10.50(11) Acquisition Agreement, dated April 27, 1995, between Trump Oceanview, Inc. and The New Jersey Sports
and Exposition Authority.
10.51-10.62 Intentionally omitted
10.63 Employment Agreement, dated as of August 18, 1995, between Trump Plaza Associates and Patrick J.
O'Malley.
27.1 Financial Data Schedule of Trump Plaza Funding, Inc.
27.2 Financial Data Schedule of Trump Plaza Associates.
</TABLE>
- ---------------------
(1) 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, 1986.
(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) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-4604, of Trump
Plaza Funding, Inc.
(4) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the fiscal
year ended December 31, 1990.
(5) Previously filed 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 Registration Statement on Form S-1, Registration No. 33-58602, of
Trump Plaza Funding, Inc. and Trump Plaza Associates.
(7) 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).
(8) 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.
(9) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 1O-Q of Trump Plaza Funding, Inc. for the
quarter ended September 30, 1994.
(10) 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.
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(11) Incorporated herein by reference to the identically numbered Exhibit to
the Registration Statement on Form S-1, Registration No. 33-90784, of
Trump Hotels & Casino Resorts, Inc.
(12) 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.
(13) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated January 10, 1996.
(14) 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 City Associates (formerly Trump Plaza
Holding Associates) for the quarter ended June 30, 1995.
(15) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated February 1, 1996.
(16) 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.
(17) Contained on the signature page of this Registration Statement.
(18) 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
March 30, 1995.
(19) 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.
(20) Incorporated herein by reference to the identically numbered Exhibit to
the Quarterly Report on form 10-Q of Trump Plaza Funding, Inc. for the
quarter ended June 30, 1992.
(D) Financial Statement Schedules.
See "Financial Statements and Supplementary Data--Index to Financial
Statements and Financial Statement Schedule" for a list of the financial
statement schedule included in this Annual Report.
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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 which
are identified as forward-looking, 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.
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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 Plaza Funding, Inc.
/s/ Donald J. Trump
-------------------------------------
BY:DONALD J. TRUMP
TITLE: PRESIDENT
DATE: MARCH 27, 1996
Trump Plaza Associates
BY: TRUMP PLAZA FUNDING, INC.
ITS MANAGING GENERAL PARTNER
/s/ Donald J. Trump
-------------------------------------
BY:DONALD J. TRUMP
TITLE: PRESIDENT
DATE: MARCH 27, 1996
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:
SIGNATURES TITLE DATE
Trump Plaza Funding, Inc.
By: /s/ Donald J. Trump President and March 27, 1996
- ------------------------------------- Chairman of the
DONALD J. TRUMP Board of Directors
(Principal
Executive Officer)
By: /s/ Francis X. McCarthy, Jr. Chief Financial March 27, 1996
- ------------------------------------- Officer (Principal
FRANCIS X. MCCARTHY, JR. Financial and
Accounting Officer)
By: /s/ Nicholas L. Ribis Director March 27, 1996
- -------------------------------------
NICHOLAS L. RIBIS
By: /s/ Wallace B. Askins Director March 27, 1996
- -------------------------------------
WALLACE B. ASKINS
By: /s/ Don M. Thomas Director March 27, 1996
- -------------------------------------
DON M. THOMAS
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<PAGE>
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 PLAZA ASSOCIATES
By: Trump Plaza Funding, Inc.
its Managing General Partner
SIGNATURES TITLE DATE
/s/ Donald J. Trump President and March 27, 1996
- ------------------------------------- Chairman of the
DONALD J. TRUMP Board of Directors
(Principal
Executive Officer)
/s/ Francis X. McCarthy, Jr. Chief Financial March 27, 1996
- ------------------------------------- Officer (Principal
FRANCIS X. MCCARTHY, JR. Financial and
Accounting Officer)
/s/ Nicholas L. Ribis Director March 27, 1996
- -------------------------------------
NICHOLAS L. RIBIS
/s/ Wallace B. Askins Director March 27, 1996
- -------------------------------------
WALLACE B. ASKINS
/s/ Don M. Thomas Director March 27, 1996
- -------------------------------------
DON M. THOMAS
79
<PAGE>
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.
80
<PAGE>
Exhibit 10.63
EMPLOYMENT AGREEMENT
--------------------
Agreement, made and entered into as of the 18th day of August, 1995 by and among
Trump Plaza Associates, a General Partnership (the "TPA"), with its successors
and assigns permitted under this Agreement), having offices at The Boardwalk at
Mississippi Avenue, Atlantic City, New Jersey, and Patrick J. O'Malley residing
at Apartment 8D, 400 East 71 Street, New York, New York 10021 (the "Executive").
This agreement will serve to confirm the understanding and agreement pursuant to
which TPA, has agreed with Executive as follows:
1. a. Executive shall be employed by TPA in the capacity of Executive Vice
President of Hotel Operations of Trump Plaza Hotel and Casino in Atlantic City,
New Jersey. The Executive shall have such duties and responsibilities as are
reasonably assigned to him by the TPA's Hotel President. The Executive shall
have such other general powers and duties of management which are usually vested
in an Executive Vice President of Hotel Operations. TPA has taken prior to the
execution hereof all appropriate legal action to authorize the execution and
performance of this Agreement in accordance with its terms, appoint the
Executive Vice President of Hotel Operations. The Executive, in carrying out his
duties under this Agreement, shall report to the Hotel President and follow the
lawful directions of the Hotel President consistent with this Agreement.
b. Prior to the receipt of the necessary licenses from the New Jersey
Casino Control Commission for an Executive to be employed by TPA as Executive
Vice President of Hotel Operations, Executive shall be employed as an
Administrative Assistant to the Hotel's President and perform only such duties
and responsibilities as are permitted by law and the regulations of the Casino
Control Commission.
2. The Term hereof shall commence effective September 18, 1995, and expire
September 17, 1997, ("Expiration Date"), unless terminated earlier pursuant to
Paragraphs 10 or 11 hereof. Executive shall have the option, exercisable by
written notice served not earlier than 90 days nor later than 60 days prior to
the Expiration Date, to renew this Agreement for an additional one (1) year
period upon the same terms as set forth herein except that Executive's annual
base salary shall be negotiated upward in good faith between the parties and
shall not be less than the salary payable hereunder. If the Executive exercises
this option, the Expiration Date shall become September 17, 1998.
<PAGE>
3. The Executive shall be entitled to compensation as follows:
a. $50,000 upon the execution hereof as a one time bonus to induce
Executive to enter into this Agreement.
b. Executive shall be paid an annual base salary of Two Hundred Fifty
Thousand, ($250,000) Dollars, payable periodically in accordance with TPA's
regular payroll practices.
c. For the year 1996 and thereafter, Executive shall be entitled, if
otherwise qualified under the terms thereof, to participate in any executive
benefit or bonus programs adopted by TPA in its sole and absolute discretion,
including but not limited to TPA's Incentive Compensation Plan, or similar or
comparable plan or arrangement, if any, on terms and with benefits no less
favorable than provided for Level 1 employees.
4. a. During the Term of Employment, the Executive shall be entitled to
participate, provided Executive is qualified under the terms thereof, in all
employee pension and welfare benefit plans and programs made available to the
TPA's senior level Executives or to their non-union employees generally, as such
plans or programs may be in effect from time to time, including, without
limitation, the granting of stock options, pension, profit sharing, savings,
401K (TPA shall match contributions by Executive thereto up to the first four
(4%) percent of Base Salary), and other retirement plans or programs, medical,
optical, dental, hospitalization, short-term and long-term disability and life
insurance plans, accidental death and dismemberment protection, travel accident
insurance, and any other pension or retirement plans or programs that may be
sponsored by TPA from time to time, including any plans that supplement the
above-listed types of plans or programs, whether funded or unfunded. The
Executive shall be entitled to post-retirement welfare benefits on the same
basis as other senior executives of TPA similarly situated. So long as
Executive's health does not prohibit his participation in or result in unusual
cost therefore and executive is otherwise qualified under the terms thereof, the
Executive shall be entitled during the Term of Employment to term life insurance
which, together with other life insurance under TPA's term life insurance
program, shall provide face amount coverage of no less than 3 times Base Salary,
not to exceed $1,000,000.
b. Executive shall also have free use of hotel services, health club, valet
and laundry services and executive comping privileges at such level, if any, as
TPA in its sole and absolute discretion, shall establish from time to time for
similarly situated executives, which privileges shall include, however, at the
very least, reasonable food and beverage courtesies and other amenities which
are normal for the successful completion of
<PAGE>
Executive's duties. Until Executive finds permanent housing in the Atlantic City
area, Executive shall be provided a reasonably satisfactory room in TPA's Hotel.
c. TPA shall also promptly pay or reimburse Executive for reasonable moving
and storage expenses actually incurred by Executive in relocating to the
Atlantic City area.
d. TPA shall also promptly reimburse Executive for other actual expenses
or losses incurred by Executive directly as a result of Executive's relocation
of his personal assets and household, specifically including but not limited to
any costs of terminating Executive's apartment lease in New York City or
transfer Executive's spouse's enrollment to a University in the Philadelphia, PA
area.
e. TPA shall pay or reimburse Executive the reasonable expenses incurred by
Executive for the services of an attorney in the negotiation, preparation,
consummation, performance and enforcement of this Agreement.
f. Executive shall be entitled to four (4) weeks paid vacation per year
during Executive's employment hereunder.
g. Executive shall have secretarial assistance and any and all other
facilities which are suitable and appropriate to his position and the
performance of his duties hereunder.
h. Executive shall be entitled to reimbursement in full for all reasonable
and necessary travel and other expenses incurred in connection with the services
of Executive hereunder against presentation of an itemized account therefore.
5. Executive agrees that until the earlier of Expiration Date or the earlier
termination of this Agreement as provided herein, Executive shall not accept
employment, either as an employee, consultant or independent contractor, for or
on behalf of any other casino hotel located within a 300 miles radius of
Atlantic City, New Jersey. Executive acknowledges and agrees that this
restrictive covenant is reasonable as to duration, terms and geographical area
and that the same is necessary to protect the legitimate interests of TPA,
imposes no undue hardship on Executive and is not injurious to the public.
6. Executive hereby agrees that throughout the term of this Agreement Executive
shall devote Executive's full time, attention and efforts to TPA's business and
shall not, directly or indirectly, work for, consult with or otherwise engage in
any other activities of a business nature for any other person or entity,
without TPA's prior written consent. Executive will promptly communicate to TPA,
in writing when requested, and marketing strategies, technical designs and
concepts, and other
<PAGE>
ideas pertaining to TPA's business which are conceived or developed by
Executive, alone or with others, at any time (during or after business hours)
while Executive is employed by TPA. Executive acknowledges that all of those
ideas will be TPA's exclusive property. Executive agrees to sign any document
which TPA deems necessary to confirm its ownership of those ideas, and Executive
agrees to otherwise cooperate with TPA in order to allow TPA to take full
advantage of those ideas.
7. Executive acknowledges that Executive will have access to information which
is proprietary and confidential to TPA. This information includes, but is not
limited to, (1) the identity of customers and prospects, (2) names, addresses
and phone numbers of individual contacts, (3) pricing policies, marketing
strategies, product strategies and methods of operation, and (4) expansion
plans, management policies and other business strategies and policies. Executive
acknowledges and understands that this information must be maintained in strict
confidence in order for TPA to protect its business and its competitive position
in the marketplace. Accordingly, both during and after termination of
Executive's employment, Executive agrees that Executive will not disclose any of
this information for any purpose or remove materials containing this information
from TPA's premises.
8. Executive hereby agrees to comply with all of the rules, regulations,
policies and/or procedures adopted by TPA during the term of this Agreement, as
well as all applicable state, federal and local laws, regulations and
ordinances.
9. Executive will apply for an appropriate casino employee license, as required
by the New Jersey Casino Control Commission to enable him to engage in his
employment hereunder. Upon receipt of such license, Executive will maintain this
license in good standing during his employment by TPA, provided that TPA shall
pay all fees as well as attorney's fees and other costs Executive may incur in
connection with the licenses, any investigation or proceeding against him or in
which he may be involved arising out of the TPA's operations conducted by the
Division of Gaming Enforcement of the Office of the New Jersey Attorney General,
by the Commission, or by any other governmental unit, including any judicial
appeals therefrom.
10. Executive hereby understands and acknowledges that TPA may terminate this
Agreement in the event Executive's Casino Control Commission license is
terminated and/or suspended for more than 30 days or revoked by the Commission
or if Executive shall commit an act constituting "Cause", which is defined to
mean the following: a breach by Executive of any of the material provisions of
this Agreement or an act of dishonesty. In the event of a termination pursuant
to this paragraph, TPA shall pay
<PAGE>
to Executive Executive's salary earned to the date of termination and shall have
no further liability or obligation to Executive under this Agreement.
11. Executive may terminate this Agreement upon written notice to TPA at any
time for Good Cause (as hereinafter defined) which termination shall become
effective on the 30th day after such notice (the "Executive's Termination
Date"). "Good Cause" for purposes hereof means, without Executive's express
written consent, the assignment to Executive of any duties inconsistent with the
position of Executive Vice President of Hotel Operations, or the customary
duties, responsibilities, and status of such office, or a demotion, or change in
Executive's title or office, or any removal from such positions or a Change in
Control (as hereinafter defined), except in connection with the termination of
Executive's employment under Paragraph 10 hereof, permanent disability resulting
in Executive being unable to perform all essential job functions of the position
of Executive Vice President with all reasonable accommodations or as a result of
Executive's death. If Executive terminates this Agreement for Good Cause or if
TPA shall terminate Executive's employment without Cause (as defined in
paragraph 10 above), TPA shall pay Executive on the Executive's Termination Date
all compensation, reimbursements, and benefits provided for in Paragraphs 3 and
4 hereof due or accrued to the Executive's Termination Date ("Accrued
Compensation Amounts") and in a lump sum the full amount of the remaining unpaid
compensation payable under Paragraph 3 hereof from the Executive's Termination
Date through the Expiration Date (the "Termination Payment") (it being
understood, however, that Executive shall receive no less than one (1) year of
annual base salary then payable and any bonuses accrued to the date of such
terminations). "Change in Control" for the purposes of this Agreement means,
with respect to TPA or the hotel:
1. a sale or long term lease of the hotel or other substantial assets; or
2. Both the Managing General Partner's Chief Executive Officer (Nicholas
L. Ribis) and the Hotel President, Barry Cregan, are no longer
employed by TPA; provided, however, that a Change in Control shall not
entitle Executive to the "Termination Payment" if Executive accepts an
offer of or otherwise continues employment with TPA following the
occurrence of an event described in either of clause (1) or (2) above.
12. TPA shall indemnify, defend and hold Executive harmless, including the
payment of reasonable attorney fees, if TPA does not directly provide
Executive's defense, from and against any and all claims made by anyone,
including, but not limited to, a corporate entity, company, other employee,
agent, patron or
<PAGE>
member of the general public with respect to any claim which asserts as a basis,
any acts, omissions or other circumstances involving the performance of
Executive's employment duties hereunder unless such claim is based upon
Executive's gross negligence or any willful and/or wanton act.
13. Executive represents that Executive is a citizen of the United States or
that Executive possesses the proper visa and/or work permits necessary to
perform Executive's functions hereunder.
14. Executive acknowledges that it would be extremely difficult to measure the
damages that might result from any breach by Executive of Executive's promises
in Paragraphs 5,6,7 and 8 of the Employment Contract and that a breach may cause
irreparable injury to TPA which could not be compensated by money damages.
Accordingly, TPA will be entitled to enforce this Employment Contract by
obtaining a court order prohibiting Executive (and any others involved) from
breaching this agreement. If a court decides that any part of this agreement is
too broad, the court may limit that part and enforce it as limited.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey and in any lawsuit involving this Agreement, I
consent to the jurisdiction and venue of any state or federal court located in
New Jersey. This Agreement represents the entire agreement between the parties
and may not be modified or amended without the written agreement of both
parties.
16. This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
TRUMP PLAZA ASSOCIATES, a General Partnership
by Trump Plaza Funding, Inc.
Managing General Partner Executive
BY: /s/ Barry Cregan By: /s/ Patrick J. O'Malley
___________________ ________________________
Barry Cregan Patrick J. O'Malley
Vice President
Witness
___________________ Date: August 18, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the balance
sheet, income statement, cashflow, and capital statement of Trump Plaza
Associates and Trump Plaza Funding Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000791445
<NAME> Trump Plaza Funding, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,497
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 331,971
<CURRENT-LIABILITIES> 1,495
<BONDS> 326,652
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 331,971
<SALES> 0
<TOTAL-REVENUES> 36,306
<CGS> 0
<TOTAL-COSTS> 0<F1>
<OTHER-EXPENSES> 0<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,306
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes gaming, lodging, food and beverage and other
<F2>Includes general & administration and depreciation and amortization
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the balance
sheet, income statement, cashflow, and capital statement of Trump Plaza
Associates and Trump Plaza Funding Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000791446
<NAME> Trump Plaza Associates
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,937
<SECURITIES> 0
<RECEIVABLES> 22,135
<ALLOWANCES> 8,077
<INVENTORY> 2,609
<CURRENT-ASSETS> 38,947
<PP&E> 543,226
<DEPRECIATION> 147,284
<TOTAL-ASSETS> 480,024
<CURRENT-LIABILITIES> 32,310
<BONDS> 326,652
0
0
<COMMON> 0
<OTHER-SE> 110,812
<TOTAL-LIABILITY-AND-EQUITY> 480,024
<SALES> 333,321
<TOTAL-REVENUES> 372,255
<CGS> 0
<TOTAL-COSTS> 188,771<F1>
<OTHER-EXPENSES> 84,763<F2>
<LOSS-PROVISION> 1,057
<INTEREST-EXPENSE> 44,264
<INCOME-PRETAX> 10,783
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,783
<DISCONTINUED> 0
<EXTRAORDINARY> (9,250)
<CHANGES> 0
<NET-INCOME> 1,533
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes gaming, lodging, food and beverage and other
<F2>Includes general & administration and depreciation and amortization
</FN>
</TABLE>
