<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1996
REGISTRATION NO. 333-
643
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO.1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TRUMP ATLANTIC CITY ASSOCIATES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 7011 22-3213714
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
NICHOLAS L. RIBIS
VICE PRESIDENT
TRUMP PLAZA HOLDING, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
TRUMP ATLANTIC CITY FUNDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 9999 22-3418939
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
NICHOLAS L. RIBIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRUMP ATLANTIC CITY FUNDING, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
(continued on next page)
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<PAGE>
(continued from previous page)
--------------
TRUMP PLAZA ASSOCIATES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 7011 22-3241643
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
NICHOLAS L. RIBIS
CHIEF EXECUTIVE OFFICER
TRUMP PLAZA ASSOCIATES
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
WITH COPIES TO:
DANIEL D. RUBINO, ESQ. ROBERT M. PICKUS, ESQ. NICHOLAS P. SAGGESE, ESQ.
WILLKIE FARR & GALLAGHER EXECUTIVE VICE PRESIDENT SKADDEN, ARPS, SLATE,
ONE CITICORP CENTER TRUMP HOTELS & MEAGHER & FLOM
153 EAST 53RD STREET CASINO RESORTS, INC. 300 SOUTH GRAND AVENUE
NEW YORK, NEW YORK MISSISSIPPI AVENUE AND SUITE 3400
10022 THE BOARDWALK LOS ANGELES, CALIFORNIA
(212) 821-8000 ATLANTIC CITY, NEW JERSEY 90071
08401 (213) 687-5000
(609) 441-6060
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
On February 1, 1996, a fee of $406,897 was paid in connection with the
registration of up to $1,180,000,000 principal amount of First Mortgage Notes.
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
TRUMP ATLANTIC CITY FUNDING, INC.
TRUMP PLAZA ASSOCIATES
CROSS-REFERENCE SHEET
Cross-reference sheet furnished pursuant to Item 501(b) of Regulation S-K
showing location in the Prospectus of information required by Items of Form S-
1.
<TABLE>
<CAPTION>
ITEM IN FORM S-1 LOCATION IN PROSPECTUS
---------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus........................... Facing Page; Cross-Reference
Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Inside Front and Outside Back
Cover Pages; Available
Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges... Prospectus Summary; Risk Factors
4. Use of Proceeds....................... Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price....... Not Applicable
6. Dilution.............................. Not Applicable
7. Selling Security Holders.............. Not Applicable
8. Plan of Distribution.................. Outside Front Cover Page;
Underwriting
9. Description of Securities to be
Registered........................... Prospectus Summary; Risk Factors;
Description of the First
Mortgage Notes; Certain Federal
Income Tax Considerations
10. Interests of Named Experts and Experts
Counsel..............................
11. Information with Respect to the
Registrant........................... Prospectus Summary; Risk Factors;
Use of Proceeds; Capitalization;
Selected Historical Financial
Information; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Unaudited Pro
Forma Financial Information;
Business; Regulatory Matters;
Management; Certain
Transactions; Security Ownership
of Certain Beneficial Owners and
Management; Description of the
Trump Atlantic City Partnership
Agreement; Legal Matters
12. Disclosure of Commission Position on
Indemnification of Securities Act Not Applicable
Liabilities..........................
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 5, 1996
APRIL , 1996 [LOGO]
$1,100,000,000
TRUMP ATLANTIC CITY ASSOCIATES
TRUMP ATLANTIC CITY FUNDING, INC.
% FIRST MORTGAGE NOTES DUE 2006
The % First Mortgage Notes due 2006 (the "First Mortgage Notes") are being
issued (the "First Mortgage Note Offering") by Trump Atlantic City Associates
("Trump Atlantic City") and its wholly owned subsidiary Trump Atlantic City
Funding, Inc. ("Trump Atlantic City Funding" and, together with Trump Atlantic
City, the "Issuers"). The First Mortgage Notes are joint and several
obligations of the Issuers.
The First Mortgage Note Offering is part of a comprehensive plan (the "Merger
Transaction") relating to the acquisition by Trump Hotels & Casino Resorts,
Inc. ("THCR") of Trump Taj Mahal Associates ("Taj Associates"), the partnership
that owns and operates the Trump Taj Mahal Casino Resort, and the refinancing
of the debt obligations of Taj Associates and Trump Plaza Associates ("Plaza
Associates"), the partnership that owns and operates Trump Plaza Hotel and
Casino. Upon consummation of the Merger Transaction, Taj Associates and Plaza
Associates will become wholly owned subsidiaries of Trump Atlantic City. Trump
Atlantic City is a wholly owned subsidiary of Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings"), which in turn is a subsidiary of THCR. The
Issuers' payment obligations under the First Mortgage Notes will be fully and
unconditionally guaranteed on a senior secured basis by Plaza Associates, Taj
Associates and all other existing and future Subsidiaries (as defined) of Trump
Atlantic City (collectively, the "Guarantors"), other than Trump Atlantic City
Funding, which is one of the Issuers. THCR is concurrently issuing up to
shares of its common stock (the "THCR Common Stock") in an underwritten public
offering (the "Stock Offering"). Consummation of the First Mortgage Note
Offering is conditioned upon the consummation of the other elements of the
Merger Transaction (including the Stock Offering).
Interest on the First Mortgage Notes is payable in cash, semiannually in
arrears on and of each year, commencing on , 1996. The First Mortgage
Notes will mature on , 2006. The First Mortgage Notes are not redeemable
prior to , 2001, other than pursuant to a Required Regulatory Redemption (as
defined). Thereafter, the First Mortgage Notes may be redeemed at the
redemption prices set forth herein, together with accrued and unpaid interest
to the date of redemption. Upon the occurrence of a Change of Control (as
defined), each holder of the First Mortgage Notes may require the Issuers to
repurchase such holder's First Mortgage Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest to the date of repurchase.
See "Description of the First Mortgage Notes." Trump Atlantic City's
consolidated outstanding indebtedness at December 31, 1995 would have been, on
a pro forma basis after giving effect to the transactions comprising the Merger
Transaction (including the First Mortgage Note Offering and the application of
the net proceeds thereof), approximately $1.1 billion, consisting of $1.1
billion of principal amount of First Mortgage Notes and approximately $3.0
million of senior indebtedness.
The Issuers' payment obligations under the First Mortgage Notes, and the
guarantees thereof, will be secured on a senior basis by substantially all of
the real and personal property owned or leased by Plaza Associates and Taj
Associates. The liens securing the First Mortgage Notes will be (i) subordinate
to the liens securing approximately $3.0 million of senior indebtedness, and
(ii) pari passu to the liens securing an up to $25 million working capital
facility. The First Mortgage Notes will not be secured by a pledge of the
equity of any subsidiary of THCR Holdings, which equity has been pledged for
the exclusive benefit of the Senior Notes (as defined).
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE FIRST
MORTGAGE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION NOR ANY OTHER REGULATORY
AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) ISSUERS(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per First Mortgage Note..................... % % %
Total....................................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1)Plus accrued interest, if any, from the date of issuance.
(2) Trump Atlantic City and its Subsidiaries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses estimated at $ , payable by Trump Atlantic
City.
The First Mortgage Notes are offered by the several Underwriters when, as and
if delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the First Mortgage Notes will be made in New York,
New York on or about April , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC BT SECURITIES CORPORATION
<PAGE>
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE FIRST
MORTGAGE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus and is qualified in its entirety by the more detailed information
and financial statements, and notes thereto, contained elsewhere in this
Prospectus. Unless otherwise indicated, (i) the term "Trump Atlantic City" as
used in this Prospectus includes Trump Atlantic City and its subsidiaries and
gives effect to the Merger Transaction, and (ii) the information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option in
connection with the Stock Offering. Certain capitalized terms used herein are
defined elsewhere in this Prospectus. Prospective investors are urged to read
this Prospectus carefully in its entirety.
TRUMP ATLANTIC CITY
Upon consummation of the Merger Transaction, Trump Atlantic City, an indirect
subsidiary of Trump Hotels & Casino Resorts, Inc., will own and operate two
"Four Star" Atlantic City casino hotels (the "Atlantic City Properties"): the
Trump Taj Mahal Casino Resort (the "Taj Mahal") and Trump Plaza Hotel and
Casino ("Trump Plaza"). The Taj Mahal is currently Atlantic City's largest
casino hotel, and Trump Plaza is expected to be the largest casino hotel in
Atlantic City upon completion of its expansion program scheduled to be
completed in the second quarter of 1996 (the "Trump Plaza Expansion"). Through
its ownership of two successful land-based casino hotels, Trump Atlantic City
will have a leading presence in the growing Atlantic City market, which, in
terms of gaming revenues, has demonstrated a ten-year compound annual growth
rate of 5.8% and a growth rate of 9.5% for calendar year 1995 versus calendar
year 1994. After giving effect to the Merger Transaction and Trump the Trump
Plaza Expansion, Trump Atlantic City will have approximately one-quarter of
Atlantic City's casino square footage, slot machines, table games and hotel
room inventory. The combination of the Taj Mahal with Trump Plaza's existing
operations will also provide opportunities for operational efficiencies,
economies of scale and other benefits from the expertise and experience of
management at the two operating entities. Trump Atlantic City also plans to
undertake an expansion program at the Taj Mahal designed to increase its hotel
room inventory and casino floor space and enlarge its entertainment area and
parking facilities.
Management believes Trump Atlantic City will benefit from the following
factors:
. LEADING ATLANTIC CITY FACILITIES. Upon consummation of the Trump Plaza
Expansion, Trump Atlantic City will own and operate the two largest
casino hotel properties in Atlantic City, both of which are strategically
located on The Boardwalk. Trump Atlantic City believes that the Atlantic
City Properties' prime locations, reputations for high quality amenities
and first-class customer service and targeted marketing strategies are
ideally suited to capitalize on the expected growth in the Atlantic City
gaming market. Management believes that its leading size and market share
in Atlantic City following the consummation of the Merger Transaction,
will provide it with a competitive advantage in marketing the Atlantic
City Properties, particularly to large convention groups and multi-day
stay destination resort visitors.
. ATLANTIC CITY PROPERTIES EXPANSION. Trump Atlantic City is in the process
of executing expansion projects at both of the Atlantic City Properties
to increase their gaming space and hotel room capacity, allowing Trump
Atlantic City to meet both existing demand and the anticipated demand
from the increased number of available rooms and infrastructure
improvements that are currently under development to enhance further the
"vacation destination appeal" of Atlantic City.
3
<PAGE>
The following table profiles Trump Atlantic City's casino and hotel
capacity following the planned expansion of the Atlantic City Properties:
<TABLE>
<CAPTION>
TRUMP TAJ TRUMP PLAZA TAJ MAHAL
PLAZA(A) MAHAL EXPANSION(B)(C) EXPANSION(D) TOTAL
-------- ------- --------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Casino square footage... 75,395 120,000(e) 64,158 60,000 319,553(e)
Slot machines........... 2,368 3,550 1,898 2,500 10,316
Table games............. 97 169 44 -- 310
Hotel rooms............. 555 1,250 849 800 3,454
</TABLE>
--------------------
(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) Scheduled to be completed in the second quarter of 1996.
(c) Includes the 15,000 square foot casino with 400 slot machines and 13
table games and 249 hotel rooms which have already opened at Trump
Plaza East. The remaining 91 hotel rooms and suites are scheduled to be
opened by the end of April 1996. Also reflects nine super suites
scheduled to be opened early in 1997 and not otherwise included in the
"Trump Plaza Expansion."
(d) Plans for the Taj Mahal Expansion, scheduled to be completed early in
1998, are subject to modification. There can be no assurance that the
Taj Mahal Expansion will be completed as indicated.
(e) Excludes a 12,000 square foot poker, keno and race simulcasting room
which contains 64 poker tables.
. OPERATING SYNERGIES. Trump Atlantic City intends to capitalize on the
opportunities for efficiencies which can be generated by integrating
certain operations of the Atlantic City Properties, which previously have
been operated separately, although there can be no assurance that any
cost savings will be realized. Management has identified cost savings
which management estimates, by the end of the second year following the
Merger Transaction, to be approximately $18-20 million on an annual
basis. Management believes that it will be able to consolidate certain
departments at the Atlantic City Properties, reduce general and
administrative expenses through possible personnel reductions and the
consolidation of certain marketing efforts, and reduce operating costs
through efficiencies that are expected to result from the combined
purchasing power of the Atlantic City Properties.
. THE "TRUMP" NAME. Trump Atlantic City capitalizes on the widespread
recognition of the "Trump" name and its association with high quality
amenities and first class service. To this end, Trump Atlantic City
provides a broadly diversified gaming and entertainment experience
consistent with the "Trump" name and reputation for quality, tailored to
the gaming patron in the Atlantic City market.
ATLANTIC CITY PROPERTIES
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 is seeking to enhance further Trump Plaza's
position as an industry leader through the Trump Plaza Expansion, scheduled to
be completed in the second quarter of 1996, which involves expanding and
renovating Trump Plaza's gaming space, increasing its hotel capacity and
constructing retail operations and entertainment venues. As part of the Trump
Plaza Expansion, management has renovated and integrated into Trump Plaza a
hotel located adjacent to Trump Plaza's main tower ("Trump Plaza East"), the
grand opening for which was held on February 15, 1996, and is in the process of
renovating the former Trump Regency Hotel ("Trump World's Fair"), located on
The Boardwalk adjacent to the existing Atlantic City Convention Center, which
is next to Trump Plaza.
Upon completion of the Trump Plaza Expansion, Trump Plaza's casino floor
space will be the largest in Atlantic City, increasing from approximately
75,000 square feet to an aggregate of approximately 140,000 square feet,
housing a total of approximately 4,300 slot machines and 140 table games. Trump
Plaza's hotel
4
<PAGE>
capacity will increase to a total of 1,404 guest rooms from 555 guest rooms,
making Trump Plaza's guest room inventory the largest in Atlantic City.
Management believes the increased hotel capacity as a result of the Trump Plaza
Expansion will better enable Trump Atlantic City to meet demand and accommodate
its casino guests, as well as to host additional and larger conventions and
corporate meetings. The following table details plans for the Trump Plaza
Expansion:
<TABLE>
<CAPTION>
TRUMP
TRUMP PLAZA TRUMP WORLD'S
FACILITY(A) PLAZA EAST(B) FAIR TOTAL
----------- ------------- ------- -------
<S> <C> <C> <C> <C>
Casino square footage................. 75,395 14,866 49,272 139,533
Slot machines......................... 2,368 405 1,493 4,266
Table games........................... 97 12 32 141
Hotel rooms........................... 555 349 500 1,404
</TABLE>
- --------------------
(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 April 1996. Also
reflects nine super suites scheduled to be opened early in 1997 and not
otherwise included in the "Trump Plaza Expansion."
The Trump Plaza Expansion will increase Trump Plaza's prime central frontage
on The Boardwalk to nearly a quarter of a mile. Furthermore, Trump World's Fair
will add 49,272 square feet of casino floor space, approximately 15,872 of
which is directly accessible from The Boardwalk, and Trump Plaza East will be
reconfigured to provide a new entranceway to Trump Plaza directly off the
Atlantic City Expressway. Management believes that the construction of a 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. Trump Plaza's location on The Boardwalk at the end of the main
highway into Atlantic City makes it highly accessible for both "drive-in" and
"walk-in" patrons.
The Taj Mahal. The Taj Mahal is currently the largest casino hotel in
Atlantic City and has ranked first among all Atlantic City casinos in terms of
total gaming revenues, table revenues and slot revenues since it commenced
operations in 1990. The Taj Mahal capitalizes on the widespread recognition and
marquee status of the "Trump" name and its association with high quality
amenities and first-class service as evidenced by its "Four Star" Mobil Travel
Guide rating. Management believes that the breadth and diversity of the Taj
Mahal's casino, entertainment and convention facilities and its status as a
"must see" attraction will enable the Taj Mahal to benefit from expected
continued growth in the Atlantic City market. In order to further enhance its
status as a "must see" attraction, the Taj Mahal has recently signed agreements
with Hard Rock Cafe, Rainforest Cafe and All Star Cafe to develop new themed
restaurants on the property. In addition, in order to attract high end players,
the Taj Mahal has recently opened the Dragon Room, a new Asian themed table
game area and plans to open in 1996 the Sultan's Palace, a new high-end "slots
only" lounge and private club.
The Taj Mahal Expansion. Taj Mahal Expansion is scheduled to be completed in
phases from the first quarter of 1997 through early 1998. The Taj Mahal
Expansion, the plans for which are subject to modification, is expected to
involve the construction of an approximately 2,000 space expansion of the Taj
Mahal's existing self-parking facilities and a new 10,000 seat arena adjacent
to the Taj Mahal, each scheduled to be completed in the first quarter of 1997;
the conversion of the current site of the Mark Etess Arena into a new 60,000
square-foot circus-themed casino with 2,500 slot machines, scheduled to be
completed in mid-1997; and the construction of an approximately 800 room hotel
tower adjacent to the Taj Mahal's existing hotel tower, which is scheduled to
be completed early in 1998.
5
<PAGE>
THE 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. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994.
The approximately $3.75 billion of gaming revenues produced by the 12
Atlantic City casino hotels in 1995 exceeded the approximately $3.12 billion of
gaming revenues produced by the 18 largest casino hotels of the Las Vegas Strip
for the same period, even though the Atlantic City casino hotels have less than
one-quarter the number of hotel rooms of such Las Vegas Strip casino hotels.
Management believes, however, that given current high occupancy levels, future
casino revenue growth in the Atlantic City market will be dependent in part
upon expansion in hotel capacity.
Due principally to an improved regulatory environment, the general
improvement of economic conditions in 1993 and 1994 and existing high occupancy
rates, significant investment in the Atlantic City market has been initiated
and/or announced. For example, Trump Plaza will be located at the end of the
planned "tourist corridor" featuring an entertainment and retail complex that
will link The Boardwalk with downtown Atlantic City. In addition, The New
Jersey Casino Redevelopment Authority ("CRDA") is currently overseeing the
development of the new convention center. When completed, the approximately
$250 million convention center will be the largest exhibition space between New
York City and Washington, D.C. The new convention center, currently scheduled
to open in January 1997, will be located at the base of the Atlantic City
Expressway. 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, various food-service
facilities and a 1,600-car underground parking garage. An additional planned
infrastructure improvement is the State of New Jersey's approximately $125
million capital plan to upgrade and expand the Atlantic City International
Airport. Trump Atlantic City believes that the Taj Mahal's and Trump Plaza's
positions as leading Atlantic City attractions will enable them to attract a
large portion of any increase in the number of potential casino hotel patrons.
6
<PAGE>
THE FIRST MORTGAGE NOTE OFFERING
ISSUERs.....................
Trump Atlantic City and Trump Atlantic City
Funding as joint and several obligors.
PRINCIPAL AMOUNT............
$1,100,000,000 aggregate principal amount of %
First Mortgage Notes due 2006.
MATURITY.................... , 2006.
INTEREST....................
% per annum, payable in cash, semi-annually in
arrears, calculated on the basis of a 360-day
year consisting of twelve 30-day months.
INTEREST PAYMENT DATES...... and , commencing , 1996.
GUARANTORS..................
The First Mortgage Notes will be fully and
unconditionally guaranteed on a joint and
several, senior secured basis by Plaza
Associates, Taj Associates, TTMC and each other
present and future majority owned or controled
subsidiary (a "Subsidiary") of Trump Atlantic
City, other than Trump Atlantic City Funding
(which is one of the Issuers).
OPTIONAL REDEMPTION.........
The First Mortgage Notes will be redeemable in
cash at the option of the Issuers, in whole or in
part, at any time on or after , 2001 at the
redemption prices set forth herein, together with
accrued and unpaid interest through the
redemption date. In addition, the First Mortgage
Notes are subject at any time to redemption in
accordance with an order of a governmental
authority having jurisdiction over Taj Associates
and Plaza Associates' casino licenses.
SINKING FUND........... None.
CHANGE OF CONTROL...........
Upon the occurrence of a Change in Control (as
defined in "Description of the First Mortgage
Notes--Certain Covenants--Repurchase of the First
Mortgage Notes at the Option of the Holder Upon a
Change in Control"), each holder of First
Mortgage Notes may require the Issuers to
repurchase such holder's First Mortgage Notes at
101% of the principal amount thereof, together
with accrued and unpaid interest to the date of
repurchase.
SECURITY....................
The First Mortgage Notes will be secured by a
mortgage (the "Mortgage") representing a first
lien and security interest (subject to
approximately $3.0 million of indebtedness
security mortgages) on substantially all of the
assets comprising Trump Plaza and the Taj Mahal,
including the Specified Parcels (as defined in
"--Use of Proceeds") and related facilities. The
security interest held by the Trustee also
includes assignments of leases and rents and
operating assets and encumbers furniture,
fixtures, machinery and equipment. However, THCR
Holdings' direct and indirect equity interests in
Trump Atlantic City and its subsidiaries,
including Plaza Associates and Taj Associates,
will be pledged exclusively for the benefit of
the holders of THCR Holdings and THCR Funding's
15 1/2% Senior Secured Notes due 2005 (the
"Senior Notes").
NON-RECOURSE................
No direct or indirect stockholder, partner,
employee, officer or director, as such, past,
present or future, of either the Issuers, any
7
<PAGE>
Guarantor or any successor entity shall have any
personal liability in respect of the obligations
of the Issuers or any Guarantor under the
indenture with respect to which the First
Mortgage Notes will be issued (the "First
Mortgage Note Indenture"), the First Mortgage
Notes or the guarantees thereof by reason of the
status as such stockholder, partner, employee,
officer or director except to the extent such
party is an Issuer or Guarantor.
CERTAIN COVENANTS...........
The First Mortgage Note Indenture will contain
certain covenants which, among other things, will
(i) limit Trump Atlantic City's and its
Subsidiaries' ability to incur certain
indebtedness unless, among other things, Trump
Atlantic City's Consolidated Coverage Ratio (as
defined) for the four fiscal quarters immediately
preceding such event, taken as one period, would
have been at least equal to the ratios set forth
in the First Mortgage Note Indenture, subject to
certain exceptions; (ii) limit the making of
certain dividends and distributions and other
restricted payments by Trump Atlantic City and
its Subsidiaries, (iii) limit the lines of
business in which Trump Atlantic City and its
Subsidiaries may engage to those relating to the
casino hotel business in Atlantic City; (iv)
limit the existence of certain liens on assets of
Trump Atlantic City and its Subsidiaries; (v)
restrict the use of proceeds from certain asset
sales by Trump Atlantic City and its
subsidiaries; (vi) limit transactions by Trump
Atlantic City and its subsidiaries with
affiliates of Trump Atlantic City (other than
wholly-owned subsidiaries); (vii) restrict Trump
Atlantic City and its Subsidiaries from engaging
in certain leasing activities; (viii) limit the
Issuers' ability to merge, sell or consolidate;
(ix) limit the obligations of Trump Atlantic City
Funding to those incident to its obligations
under the First Mortgage Note Indenture; (x)
prohibit Trump Atlantic City and its subsidiaries
from paying certain services fees under a
services agreement with a corporation wholly
owned by Trump, or any expenses relating thereto,
under certain circumstances, including if a
Default (as defined) or an Event of Default (as
defined) has occurred and is continuing; (xi)
prohibit Trump Atlantic City and its Subsidiaries
from paying any other amounts pursuant to other
management, services or similar agreements with
Trump; (xii) require the maintenance of
insurance; and (xiii) limit the issuing or
selling of equity interests by any of Trump
Atlantic City's Subsidiaries (except to Trump
Atlantic City or a wholly-owned Subsidiary
thereof).
EVENTS OF DEFAULT...........
Events of Default will include (i) default in
payment of interest when due for a period of 30
days; (ii) default in payment of principal or
premium, if any, when due; (iii) default in the
performance or breach of certain specified
covenants, including those relating to merger,
consolidation or sale of assets, failure to make
or consummate a Change of Control Offer (as
defined) or an Asset Sale Offer (as defined) as
required; (iv) default in the performance or
breach of certain other covenants of the Issuers
(other than those specifically covered elsewhere
in the First Mortgage Note Indenture) for 30 days
after notice; (v) certain events of bankruptcy,
insolvency
8
<PAGE>
or reorganization relating to the Issuers or
significant subsidiaries, which, if involuntary,
continue for 60 days, (vi) revocation, suspension
or loss of certain permits resulting in a
cessation of a substantial portion of the
operations of Trump Plaza or the Taj Mahal for
more than 90 consecutive days; (vii) acceleration
prior to the maturity of certain indebtedness or
the default in the payment when due of certain
indebtedness of Trump Atlantic City or its
subsidiaries; (viii) except as permitted by the
First Mortgage Note Indenture or the First
Mortgage Notes, the cessation of any guarantee in
any material respect or the finding by any
judicial proceeding that the guarantee is
unenforceable or invalid in any material respect
or the denial or disaffirmation by any Guarantor
of its obligations under its guarantee; and (ix)
certain events of default under the Mortgage
Documents. An Event of Default under the First
Mortgage Note Indenture could permit acceleration
of the First Mortgage Notes and acceleration of
certain other existing or future indebtedness of
the Issuers and their affiliates under other
instruments that may contain cross-acceleration
of cross-default provisions. See "Risk Factors--
Restrictions on Certain Activities."
MODIFICATION OF INDENTURE...
Amendments to the First Mortgage Note Indenture
will be permitted with the consent of the holders
of not less than a majority of the principal
amount of the outstanding First Mortgage Notes;
provided, however, the consent of all holders
will be required with respect to release any of
the collateral from the Liens created by the
Mortgage Documents other than in accordance with
the terms thereof or to make certain changes,
including those that would change the time of
payment of interest or principal or reduce the
principal amount or interest rate payable on any
First Mortgage Note or that reduce the percentage
in principal amount of outstanding First Mortgage
Notes, the consent of whose holders is required
for any such modification or waiver; and provided
further, the holders of at least two-thirds in
aggregate principal amount will be required to
approve any change in the obligations of the
Issuers to make a Change of Control Offer.
Certain changes may be made without the consent
of the holders, for example to cure any
ambiguities in the documents that do not
materially adversely affect the rights of the
holders.
9
<PAGE>
THE STOCK OFFERING
(Offered by THCR exclusively pursuant to a separate prospectus)
Concurrently with and as a condition to consummation of the First Mortgage
Note Offering, THCR, Trump Atlantic City's indirect corporate parent, will
issue up to 12.5 million shares of its THCR Common Stock in an underwritten
public offering (together with up to an additional 1.875 million shares subject
to an over-allotment option) pursuant to the Stock Offering.
The Stock Offering and the First Mortgage Note Offering (collectively, the
"Offerings") are part of a comprehensive plan relating to the merger (the
"Merger") of a subsidiary of THCR with and into Taj Mahal Holding Corp. ("Taj
Holding"), which currently beneficially owns a 50% equity interest in Taj
Associates; the contribution by THCR to Trump Atlantic City (on behalf, and at
the direction, of Trump Atlantic City Holdings) of all of its direct and
indirect ownership interests in Taj Associates acquired in the Merger; the
contribution by Donald J. Trump ("Trump") of the remaining 50% equity interest
in Taj Associates to Trump Atlantic City (on behalf, and at the direction, of
THCR Holdings); and the refinancing of substantially all of the outstanding
indebtedness of Taj Associates and Plaza Associates.
The consummation of the First Mortgage Note Offering is conditioned upon the
consummation of each transaction contemplated by the Merger Transaction,
including the Senior Note Consent Solicitation (as defined), the Plaza Note
Consent Solicitation (as defined), the Plaza Note Purchase (as defined) and the
Stock Offering.
RISK FACTORS
Prospective investors should carefully evaluate the matters set forth herein,
including those under the heading "Risk Factors." Factors to be considered
include:
. the high leverage and fixed charges of Trump Atlantic City
. Trump Atlantic City's holding company structure
. Trump Atlantic City's need for additional financing
. the risks associated with changes of control
. the restrictions imposed on certain activities by certain debt
instruments
. the non-recourse nature of the First Mortgage Notes
. the historical results and net losses of Trump Plaza and the Taj Mahal
. conflicts of interest
. control by and the involvement of Trump
. risks associated with financial forecasts
. risks associated with the Atlantic City Properties Expansion
. the absence of a public trading market, and the potential volatility of
market prices, for the First Mortgage Notes
. competition in the gaming industry
. reliance on certain key personnel
. the strict regulation by gaming authorities, including the potential
disqualification of holders of First Mortgage Notes
. limitations on the license of the "Trump" name
. fraudulent transfer considerations.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to Trump Atlantic City from the First Mortgage Note
Offering, after payment of underwriting discounts and expenses of the First
Mortgage Note Offering, are estimated to be $ million. The proceeds from the
First Mortgage Note Offering, together with net proceeds of $ million from
the Stock Offering, which will be paid as Merger consideration or contributed
to Trump Atlantic City (on behalf, and at the direction, of THCR Holdings), and
available cash, will be used as set forth below:
(i) pay cash to those holders of Class A Common Stock, par value $.01 share
of Taj Holding (the "Taj Holding Class A Common Stock") electing to receive
cash in the Merger (see note (b) below);
(ii) redeem the outstanding 11.35% Mortgage Bonds, Series A, due 1999 of Taj
Funding (the "Taj Bonds") (the "Taj Bond Redemption"), at a redemption price
equal to 100% of the principal amount thereof, plus accrued interest to the
date of redemption;
(iii) redeem the outstanding shares of the Class B Common Stock of Taj
Holding (the "Taj Holding Class B Common Stock"), as required in connection
with the Taj Bond Redemption at the redemption price of $.50 per share;
(iv) retire the outstanding 10 7/8% First Mortgage Notes due 2001 (the "Plaza
Notes") of Trump Plaza Funding, Inc. ("Plaza Funding") (the "Plaza Note
Purchase");
(v) satisfy the indebtedness of Taj Associates under a loan agreement with
National Westminster Bank USA ("NatWest") (the "NatWest Loan");
(vi) satisfy the indebtedness of Trump Taj Mahal Realty Corp. ("Realty
Corp."), a corporation wholly owned by Trump, under a loan agreement with First
Fidelity Bank, National Association ("First Fidelity") (the "First Fidelity
Loan"), for $50 million in cash and 500,000 shares of THCR Common Stock, and
purchase from Realty Corp. for $10 certain real property that is currently
leased by Taj Associates from Realty Corp., including land underlying a 20,000
square-foot multi-purpose entertainment complex known as the Xanadu Theater
with a seating capacity for approximately 1,200 people, which can be used as a
theater, concert hall, boxing arena or exhibition hall (the "Taj Entertainment
Complex"), land adjacent to the Taj Mahal used by it for surface parking and
bus terminals, the pier located across The Boardwalk from the Taj Mahal (the
"Steel Pier"), and a warehouse complex (collectively, the "Specified Parcels");
(vii) purchase certain real property used in the operation of Trump Plaza
that is currently leased from an unaffiliated third party, pursuant to the
purchase option (the "Trump Plaza East Purchase Option") held by Plaza
Associates;
(viii) pay Bankers Trust Company ("Bankers Trust") $10 million to obtain
releases of liens and guarantees that Bankers Trust has in connection with
certain outstanding indebtedness owed by Trump to certain lenders, including
Bankers Trust (the "Trump Indebtedness"); and
(ix) pay related fees and expenses and provide for working capital.
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming an April 15, 1996 consummation):
(DOLLARS IN MILLIONS)
ANTICIPATED SOURCES OF FUNDS
<TABLE>
<CAPTION>
CASH SOURCES
- ------------
<S> <C>
First Mortgage Note Offering... $1,100.0
THCR Stock Offering(b)(d)...... 300.0
Available Cash................. 10.7
--------
Total Cash Sources............ 1,410.7
<CAPTION>
NON-CASH SOURCES
- ----------------
<S> <C>
THCR Common Stock Equivalents
to be issued to Trump(c)...... 40.5
THCR Common Stock to be issued
to First Fidelity(d).......... 12.0
--------
Total Non-Cash Sources........ 52.5
--------
TOTAL SOURCES.................. $1,463.2
========
</TABLE>
ANTICIPATED USES OF FUNDS
<TABLE>
<CAPTION>
CASH USES
- ---------
<S> <C>
Redeem Taj Bonds(a)............ $ 794.4
Retire Plaza Notes............. 370.9
Satisfy NatWest Loan........... 36.5
Exercise Trump Plaza East
Purchase Option............... 28.0
Financing Fees and Expenses.... 49.4
Payment to First Fidelity...... 50.0
Payment to Bankers Trust....... 10.0
Payment to Holders of Taj
Holding Class A Common
Stock(b)...................... 40.5
Redeem Taj Holding Class B
Common Stock.................. 0.4
Transaction Fees and Expenses
and Working Capital........... 30.6
--------
Total Cash Uses............... 1,410.7
NON-CASH USES
- -------------
Acquisition of Trump's direct
and indirect equity interests
in Taj Associates............. 40.5
THCR Common Stock issued to
First Fidelity(d)............. 12.0
--------
Total Non-Cash Uses........... 52.5
--------
TOTAL USES..................... $1,463.2
========
</TABLE>
- --------------------
(a) Includes the Additional Amount (as defined) through April 15, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(b) Assumes all holders of Taj Holding Class A Common Stock elect Cash
Consideration (as defined) in the Merger. In the event any holder of Taj
Holding Class A Common Stock elects Stock Consideration (as defined) in
lieu of Cash Consideration, THCR may decrease the size of the THCR Stock
Offering. See "--The Merger Transaction."
(c) Includes the value of the shares of THCR Common Stock into which the
limited partnership interest in THCR Holdings to be issued to Trump and
Trump Taj Mahal, Inc., a corporation wholly owned by Trump, in connection
with the Merger Transaction will be convertible.
(d) Assumes a price of $24.00 per share of THCR Common Stock.
11
<PAGE>
SUMMARY FINANCIAL INFORMATION
SUMMARY FINANCIAL INFORMATION OF TRUMP ATLANTIC CITY
The following tables set forth (a) certain historical consolidated financial
information of Trump Atlantic City and Plaza Associates for each of the five
years ended December 31, 1991 through 1995 and (b) certain unaudited pro forma
financial information of Trump Atlantic City. The unaudited pro forma financial
information also gives effect to the Merger Transaction (including the
Offerings, the Taj Bond Redemption, the Plaza Note Purchase and the
consolidation of Taj Associates in Trump Atlantic City's financial statements).
The historical financial information of Trump Atlantic City and Plaza
Associates as of December 31, 1994 and 1995 and for the years ended December
31, 1993, 1994 and 1995 as set forth below has been derived from the audited
consolidated financial statements of Trump Atlantic City and Plaza Associates
included elsewhere in this Prospectus. The historical financial information of
Trump Atlantic City and Plaza Associates as of December 31, 1991, 1992 and 1993
and for the years ended December 31, 1991 and 1992 as set forth has been
derived from the audited consolidated financial statements of Trump Atlantic
City and Plaza Associates not included in this Prospectus. Trump Atlantic City
Funding was recently formed and has had no operations to date.
The pro forma Statement of Operations Data and Other Data give effect to the
Merger Transaction as if it had occurred on the first day of the periods
presented and the pro forma Balance Sheet Data gives effect to the same as if
the same had occurred on December 31, 1995. The pro forma financial information
should not be considered indicative of actual results that would have been
achieved had the transactions occurred on the date or for the period indicated
and does not purport to indicate results of operations as of any future date or
for any future period. All financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Unaudited Pro Forma Financial Information" and the
consolidated and condensed financial statements and the related notes thereto
included elsewhere in this Prospectus.
12
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $ 279,684 $ 313,318 $ 300,491 $ 295,063 $ 333,321
Depreciation and amor-
tization.............. 16,193 15,842 17,554 15,653 16,213
Income from opera-
tions................. 16,087 35,003 49,640 43,415 59,787
Interest expense, net.. 33,363 31,356 39,889 48,219 43,261
Extraordinary gain
(loss) (a)............ -- (38,205) 4,120 -- (9,250)
Net income (loss) (b).. (29,230) (35,787) 9,338 (8,870) 1,533
OTHER DATA:
EBITDA (c)............. $ 44,000 $ 60,399 $ 68,241 $ 60,524 $ 75,290
Capital expenditures
(d)................... 5,509 8,643 10,052 20,489 109,756
Ratio of earnings to
fixed charges (defi-
ciency) (e)........... (32,094) 1.1x 1.1x (9,735) 1.2x
Cash flows provided by
(used in)
Operating activities... 9,514 26,191 21,820 19,950 26,923
Investing activities... (6,175) (10,469) (12,679) (21,691) (112,934)
Financing activities... (2,870) (7,367) (13,550) (1,508) 90,804
BALANCE SHEET DATA (AT
END OF PERIODS):
Total assets........... $ 378,398 $ 370,349 $ 374,498 $ 375,643 $ 480,024
Total long-term debt,
net of current
maturities (f)........ 33,326 249,723 395,948 403,214 332,721
Total capital (defi-
cit).................. 54,043 11,362 (54,710) (63,580) 110,812
OPERATING DATA (AT END
OF PERIOD): (g)
Casino square footage
(h)................... 60,000 60,000 60,000 73,000(h) 73,604
Number of hotel rooms.. 557 557 557 555 732
Hotel occupancy rate... 87.1% 86.9% 87.6% 88.6% 89.7%
TABLE GAMES:
Total Atlantic City
table drop (i)........ $7,219,192 $7,055,034 $6,835,572 $6,832,517 $7,110,612
Atlantic City table
drop growth........... (8.7)% (2.3)% (3.1)% 0.0% 4.1%
Trump Plaza table drop
(i)................... $ 646,480 $ 689,919 $ 626,621 $ 599,881 $ 626,832
Trump Plaza table games
market share (j)...... 9.0% 9.8% 9.2% 8.8% 8.8%
Trump Plaza table games
fair share (k)........ 8.5% 8.2% 7.8% 8.0% 8.6%
Trump Plaza table games
efficiency (l)........ 105.1% 118.8% 118.0% 110.6% 102.5%
Trump Plaza table
units................. 112 98 87 89 97
Trump Plaza table
revenue............... $ 98,905 $ 95,864 $ 93,392 $ 92,770 $ 96,518
Trump Plaza table
revenue per unit per
day (actual dollars).. $ 2,419 $ 2,679 $ 2,940 $ 2,855 $ 2,726
SLOTS:
Total Atlantic City
slot revenue.......... $1,851,070 $2,113,829 $2,214,638 $2,297,280 $2,572,719
Atlantic City slot
revenue growth........ 7.4% 14.2% 4.8% 3.7% 12.0%
Trump Plaza slot
revenue (m)........... $ 136,128 $ 168,388 $ 173,215 $ 170,316 $ 204,230
Trump Plaza slot market
share (j)............. 7.4% 8.0% 7.8% 7.4% 7.9%
Trump Plaza slot fair
share (k)............. 7.8% 7.8% 7.6% 8.0% 8.2%
Trump Plaza slot
efficiency (l)........ 94.5% 102.6% 103.1% 92.5% 96.7%
Trump Plaza slot
units................. 1,659 1,727 1,812 2,076 2,339
Trump Plaza slot
revenue per unit per
day (actual
dollars) (m).......... $ 225 $ 267 $ 262 $ 225 $ 239
</TABLE>
(footnotes on following page)
13
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA (n)
--------------------------------
YEAR ENDED DECEMBER 31, 1995
----------------------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA: (UNAUDITED)
<S> <C> <C>
Net revenues................................. $ 887,069
Depreciation and amortization................ 64,747
Income from operations....................... 156,942
Interest expense, net (o).................... 124,435
Net income (loss)............................ 29,884
OTHER DATA:
EBITDA (c)(o)................................ $ 224,069
Ratio of earnings to fixed charges (e)....... 1.23x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................. $1,526,410
Total long-term debt, net of current
maturities.................................. 1,106,378
Total capital................................ 333,198
</TABLE>
- --------------------
(a) 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 repaid 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 12 1/2% Pay-in-Kind Notes due 2003 of
Trump Atlantic City ("PIK Notes") and related warrants to acquire PIK Notes
(the "PIK Note Warrants") and the write off of related unamortized deferred
financing costs.
(b) Net loss for the year ended December 31, 1991, includes a $10.9 million
charge associated with the rejection of the lease of the former Trump
Regency Hotel and $4.0 million of costs associated with certain litigation.
Net loss for 1992 includes $1.5 million of costs associated with certain
litigation. Net income (loss) for 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.
(c) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, restructuring costs, and the non-cash write-
down of CRDA investments. EBITDA should not be construed as an alternative
to net income or any other measure of performance determined in accordance
with generally accepted accounting principles or as an indicator of Trump
Atlantic City's operating performance, liquidity or cash flows generated by
operating, investing and financing activities. Management has included
information concerning EBITDA as management understands that it is used by
certain investors as one measure of Trump Atlantic City's historical
ability to service its debt.
(d) Capital expenditures attributable to Trump Plaza East were approximately
$2.8 million, $8.7 million and $24.9 million for the years ended December
31, 1993, 1994 and 1995, respectively. Capital expenditures for routine or
ongoing maintenance and for more substantial improvements to existing
facilities were $7.3 million, $11.8 million and $11.2 million for the years
ended December 31, 1993, 1994 and 1995.
(e) For purposes of computing this ratio, earnings consist of income (loss)
before income taxes, extraordinary items, and fixed charges, adjusted to
exclude capitalized interest. Fixed charges consist of interest expense,
including amounts capitalized, preferred partnership distribution
requirements and the portion of operating lease rental expense that is
representative of the interest factor (deemed to be one-third of operating
lease rental expense). Earnings were insufficient to cover fixed charges
for the years ended 1991 and 1994, and, on a pro forma basis, for the year
ended 1994.
(f) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
(g) Atlantic City industry data has been compiled from information filed with
and published by the New Jersey Casino Control Commission ("CCC") and is
unaudited.
(h) The expansion of 13,000 square feet was commenced in April 1994 and
completed at the end of that year.
(i) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(j) Market share represents the total Trump Plaza table drop or slot revenues,
as applicable expressed as a percentage of total Atlantic City gaming table
drop or slot revenues, as applicable.
(k) Fair share is the percentage of the total number of gaming units (table
games or slot machines, as applicable) in Trump Plaza to the total number
of such units in casino hotels in Atlantic City.
(l) Efficiency is the ratio of Trump Plaza's market share to its fair share.
(m) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
(n) The Pro Forma Statement of Operations Data and Other Data give effect to
the Merger Transaction as if same had occurred on January 1, 1995 and the
Pro Forma Balance Sheet Data gives effect to the Merger Transaction as if
same had occurred on December 31, 1995.
(o) Does not give effect to any return on investment of the net proceeds of the
June 1995 Offerings (as defined) for the period in 1995 prior to the June
1995 Offerings.
14
<PAGE>
SUMMARY FINANCIAL INFORMATION OF TAJ ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1991 through 1995. The financial information of Taj Associates as of December
31, 1991, 1992, 1993, 1994 and 1995 for the years then ended set forth below
has been derived from the audited consolidated financial statements of Taj
Associates. The audited financial information as of December 31, 1994 and 1995
and for the years ended December 31, 1993, 1994 and 1995 are included elsewhere
in this Prospectus. The audited financial information as of December 31, 1991
and 1992 has been derived from the audited consolidated financial statements of
Taj Associates not included herein. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Taj Associates," "Unaudited Pro Forma Financial
Information" and the consolidated financial statements and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1991(a) 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net Revenues........... $ 438,313 $ 469,753 $ 498,911 $ 517,182 $ 553,748
Depreciation and
amortization.......... 36,202 36,388 36,858 39,750 43,387
Income from
operations............ 31,828 68,027 84,458 76,634 89,890
Interest expense, net.. (100,683) (103,126) (106,997) (113,292) (116,513)
Extraordinary gain .... 259,618 0 0 0 0
Net income (loss)...... 188,513 (35,099) (22,539) (36,658) (26,623)
OTHER DATA:
EBITDA(b).............. $ 99,883 $ 111,022 $ 128,371 $ 127,796 $ 140,835
Capital expenditures... 17,045 12,111 16,752 23,030 26,498
Ratio of earnings to
fixed charges
(deficiency)(c)....... (71,105) (35,099) (22,539) (36,658) (26,623)
Cash flows provided by
(used in)
Operating activities.. 35,126 31,786 48,634 33,422 62,899
Investing activities... (18,901) (17,759) (22,160) (27,231) (32,571)
Financing activities... (16,170) (2,500) (2,492) (3,039) (2,583)
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets........... $ 814,051 $ 802,556 $ 811,508 $ 807,612 $ 821,793
Total long-term debt,
net of current
maturities(d)......... 573,844 595,682 625,765 656,701 694,192
Total capital.......... 167,837 130,913 106,641 67,812 39,635
OPERATING DATA (AT END
OF PERIOD)(E):
Casino square
footage(f)............ 120,000 120,000 130,110 132,317 132,856
Number of hotel rooms.. 1,250 1,250 1,250 1,250 1,250
Hotel occupancy rate... 87.3 % 91.3 % 92.3 % 92.4% 91.2%
TABLE GAMES:
Total Atlantic City
table drop(g)......... $7,219,192 $7,055,034 $6,835,572 $6,832,517 $7,110,612
Atlantic City table
drop growth........... (8.7)% (2.3)% (3.1)% 0.0% 4.1%
Taj Mahal table
drop(g)............... $1,160,714 $1,061,595 $1,062,047 $1,125,029 $1,192,200
Taj Mahal table games
market share(h)....... 16.1 % 15.1 % 15.5 % 17.1% 17.9%
Taj Mahal table games
fair share(i)......... 12.7 % 13.3 % 14.5 % 16.5% 16.8%
Taj Mahal table games
efficiency(j)......... 126.8 % 113.5 % 106.9 % 116.2% 126.1%
Taj Mahal table units.. 166 159 163 159 150
Taj Mahal table
revenue............... $ 186,644 $ 169,112 $ 173,432 $ 184,774 $ 201,817
Taj Mahal table revenue
per unit per day
(actual dollars)...... 3,080 2,913 2,915 3,184 3,686
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1991(b) 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SLOTS:
Total Atlantic City
slot revenue(k)....... $1,851,070 $2,113,829 $2,214,638 $2,297,280 $2,572,719
Atlantic City slot rev-
enue growth........... 7.4% 14.2% 4.8% 3.7% 12.0%
Taj Mahal slot
revenue(k)............ $ 197,383 $ 246,947 $ 264,504 $ 259,114 $ 285,248
Taj Mahal slot market
share(h).............. 10.7% 11.7% 11.9% 11.3% 11.1%
Taj Mahal slot fair
share(i).............. 13.0% 12.7% 13.1% 12.6% 12.3%
Taj Mahal slot
efficiency(j)......... 82.3% 92.1% 90.8% 89.7% 90.2%
Taj Mahal slot units... 2,778 2,840 3,146 3,342 3,514
Taj Mahal slot revenue
per unit per day (ac-
tual dollars)(k)...... $ 195 $ 238 $ 230 $ 213 $ 222
</TABLE>
- --------
(a) Taj Associates and Taj Funding completed the 1991 Taj Restructuring (as
defined) on October 4, 1991, which may affect the comparability of prior
periods.
(b) EBITDA represents income from operations before depreciation, amortization,
restructuring costs, the non-cash write-down of CRDA investments, a
nonrecurring cost of a litigation settlement in 1994, lease payments on the
Specified Parcels and payments under the Taj Services Agreement. In
connection with the Merger Transaction, the lease payments under the Taj
Services Agreement will be terminated. EBITDA should not be construed as an
alternative to net income or any other measure of performance determined in
accordance with generally accepted accounting principles or as an indicator
of Taj Associates' operating performance, liquidity or cash flows generated
by operating, investing and financing activities. Management has included
information concerning EBITDA, as management understands that it is used by
certain investors as one measure of Taj Associates' historical ability to
service its debt.
(c) For purposes of computing this ratio, earnings consist of loss before
income taxes and extraordinary items and fixed charges, adjusted to exclude
capitalized interest. Fixed charges consist of interest expense, including
amounts capitalized, partnership distribution requirements and the portion
of operating lease rental expense that is representative of the interest
factor (deemed to be one-third of operating lease rental expense).
(d) The years ended December 31, 1991, 1992, 1993, 1994 and 1995 include
approximately $528,124, $550,140, $580,464, $611,533 and $649,139 of Taj
Bonds, net of discount of approximately $201,334, $188,162, $172,417,
$153,597 and $131,103, respectively, which is being accreted as additional
interest expense to maturity and results in an effective interest rate of
approximately 18.0%. See Note 2 of Notes to Consolidated Financial
Statements of Taj Associates. The carrying value of such bonds were
$611,533 and $649,139, at December 31, 1994 and 1995, respectively, with a
face value of $765,130 and $780,242, respectively.
(e) Atlantic City industry data has been compiled from information filed with
and published by the CCC and is unaudited.
(f) 1993, 1994 and 1995 casino square footage includes an approximately 12,000
square foot poker, keno and race simulcasting room.
(g) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(h) Market share represents the total Taj Mahal table drop or slot revenues, as
applicable, expressed as a percentage of total Atlantic City table drop or
slot revenues, as applicable.
(i) Fair share is the percentage of the total number of gaming units (table
games or slot machines, as applicable) in the Taj Mahal to the total number
of such units in casinos in Atlantic City.
(j) Efficiency is the ratio of the Taj Mahal's market share to its fair share.
(k) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
16
<PAGE>
THE MERGER TRANSACTION
Upon consummation of the Merger Transaction, THCR Holdings, through
subsidiaries of Trump Atlantic City, will own and operate Trump Plaza and the
Taj Mahal. Pursuant to the Agreement and Plan of Merger, dated as of January 8,
1996, as amended on January 31, 1996, among THCR, Taj Holding and THCR Merger
Corp. ("Merger Sub") (the "Merger Agreement"), each outstanding share of Taj
Holding Class A Common Stock will be converted into the right to receive, at
each holder's election, either (i) $30.00 in cash ("Cash Consideration") or
(ii) that number of shares of THCR Common Stock as is determined by dividing
$30.00 by the Market Value of such shares ("Stock Consideration"). Market Value
is defined as the average of the high and low per share sales price on the 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 (the "Effective Time"). In addition
to the Merger, the Merger Transaction includes the transactions discussed
below.
Real Property Purchases. The Specified Parcels are currently leased by Taj
Associates from Realty Corp. for approximately $3.3 million per year. See
"Business--Certain Indebtedness--Taj Associates--First Fidelity Loan/Specified
Parcels." Realty Corp. has outstanding indebtedness of approximately $78
million under the First Fidelity Loan which is due November 15, 1999. The First
Fidelity Loan is currently secured by a mortgage on the Specified Parcels, and
Taj Associates has previously guaranteed the repayment of the First Fidelity
Loan up to a maximum of $30 million. Trump has also previously personally
guaranteed (up to a maximum of approximately $19.2 million), and pledged his
direct and indirect equity interests in Taj Associates as collateral for, the
First Fidelity Loan. As mortgagee, First Fidelity has the right to terminate
the lease on the Specified Parcels under certain circumstances. See "Business--
Certain Indebtedness--Taj Associates--First Fidelity Loan/Specified Parcels."
In order to secure future use of the Specified Parcels and eliminate all
future lease payments on the Specified Parcels, Taj Associates expects to
satisfy the First Fidelity Loan through the payment of $50 million in cash and
500,000 shares of THCR Common Stock and purchase the Specified Parcels from
Realty Corp. for $10 by exercising a purchase option with respect to the
Specified Parcels. Upon consummation of the purchase of the Specified Parcels,
(i) the lease relating to the Specified Parcels will be terminated, thus
eliminating Taj Associates' rental obligations thereunder; (ii) the $30 million
guaranty by Taj Associates of the First Fidelity Loan will be released; and
(iii) Trump's guaranty of such indebtedness will be released and First Fidelity
will relinquish its lien on Trump's direct and indirect equity interests in Taj
Associates. The Specified Parcels will be part of the collateral securing the
First Mortgage Notes. See "Business--Certain Indebtedness--Taj Associates--
First Fidelity Loan/Specified Parcels."
Pursuant to the Trump Plaza East Purchase Option, Plaza Associates has the
right to purchase 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 intends to exercise the Trump
Plaza East Purchase Option in connection with the Merger Transaction and
purchase Trump Plaza East, thereby eliminating approximately $3.1 million of
annual lease payments associated with Trump Plaza East. Plaza Associates will
thereby secure future use of Trump Plaza East. Should Plaza Associates be
unable to finance the purchase price of Trump Plaza East pursuant to the Trump
Plaza East Purchase Option and its leasehold interest therein is terminated,
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 unaffiliated third party that owns Trump Plaza East and
not to Plaza Associates. As a result of such purchase, Trump will obtain a
release of approximately $18 million of indebtedness owed by him, which debt
was associated with Trump's original purchase of the real property underlying
Trump Plaza East. See "Business--Properties--Trump Plaza--Trump Plaza East."
Consent and Release Payment. The Trump Indebtedness is currently secured by,
among other things, a lien on Trump's direct and indirect equity interests in
Taj Associates, as well as the pledge of a promissory note from Trump Taj
Mahal, Inc. ("TTMI"), a corporation wholly owned by Trump and the holder of a
49.995% general partnership interest in Taj Associates, to Trump (the "TTMI
Note"). As part of the Merger Transaction,
17
<PAGE>
Taj Associates will pay $10 million to Bankers Trust to obtain the consent of
Bankers Trust to the Merger Transaction and to obtain releases of certain liens
on Trump's direct and indirect equity interests in Taj Associates and related
guarantees, and the pledge of the TTMI Note, all of which secure a portion of
the Trump Indebtedness. See "Business--Certain Indebtedness--Taj Associates--
TTMI Note."
Plaza Note Purchase; Consent Solicitations. As part of the Merger
Transaction, Plaza Funding intends to retire the Plaza Notes. Any such purchase
of Plaza Notes will be conditioned upon, among other things, the concurrent
consummation of the other transactions contemplated by the Merger Transaction.
Plaza Associates and Plaza Funding also intend to solicit the consent of
holders of a majority in aggregate principal amount of the Plaza Notes (the
"Plaza Note Consent Solicitation") to amend certain provisions in the indenture
pursuant to which the Plaza Notes were issued (the "Plaza Note Indenture").
To effect the Merger Transaction, THCR Holdings and its subsidiary Trump
Hotels & Casino Resorts Funding, Inc. ("THCR Funding"), the issuers of the
Senior Notes, will solicit from the holders of the Senior Notes the waiver of,
and consent to modify, certain provisions of the indenture pursuant to which
the Senior Notes were issued (the "Senior Note Indenture") (the "Senior Note
Consent Solicitation"). Consent of holders of a majority in aggregate principal
amount of outstanding Senior Notes is required in connection with the Senior
Note Consent Solicitation.
The successful completion of the Plaza Note Consent Solicitation and the
Senior Note Consent Solicitation are conditions to the consummation of the
First Mortgage Note Offering.
Trump Contribution and Consideration. In connection with the Merger
Transaction, Trump will contribute or cause to be contributed all of his direct
and indirect equity interests in Taj Associates (representing a 50% economic
interest) to Trump Atlantic City (on behalf, and at the direction of, THCR
Holdings). Trump will contribute to Trump Atlantic City his shares (consisting
of 50% of the outstanding capital stock) of The Trump Taj Mahal Corporation,
the holder of a .01% general partnership interest in Taj Associates ("TTMC"),
and will cause TTMI to contribute to Trump Atlantic City (on behalf, and at the
direction, of THCR Holdings) TTMI's 49.995% general partnership interest in Taj
Associates.
In addition, Trump will contribute to Taj Holding all of his Class C Common
Stock of Taj Holding ("Taj Holding Class C Common Stock") which will be
canceled pursuant to the Merger Agreement. The Taj Holding Class C Common Stock
provides Trump with the ability to elect a majority of the members of the Board
of Directors of, and thereby control, Taj Holding. It also affords Trump
separate class voting rights in certain events, including in connection with
the Merger. The Taj Services Agreement (as defined herein), pursuant to which
Trump has received or will receive approximately $1.7 million, $1.4 million and
$1.6 million (less $575,000 which was paid annually by Trump to First Fidelity
to reduce the amount owed by Taj Associates under the lease for the Specified
Parcels) in respect of the years ended 1995, 1994 and 1993, respectively, as
compensation for services rendered to Taj Associates, will also be terminated
in connection with the Merger Transaction.
In exchange for the contribution by Trump and TTMI to Trump Atlantic City (on
behalf, and at the direction, of THCR Holdings), Trump's directly held limited
partnership interest in THCR Holdings will be modified and TTMI will receive a
limited partnership interest in THCR Holdings. As a result of the Merger
Transaction, Trump's aggregate beneficial ownership of limited partnership
interests in THCR Holdings will decrease from approximately 40% to
approximately 27%, of which an approximately 5% interest will be held directly
by TTMI (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 Stock Offering).
Trump's current limited partnership interest in THCR Holdings represents his
economic interest in the assets and operations of THCR Holdings and is
convertible, at Trump's option, into 6,666,667 shares of THCR Common Stock
(representing approximately 40% of the outstanding shares of THCR Common Stock
after giving effect to such conversion). Upon consummation of the Merger
Transaction (assuming a price of $24.00 per share
18
<PAGE>
of THCR Common Stock as the Market Value in connection with the Merger and as
the public offering price in the Stock Offering). Trump's and TTMI's limited
partnership interests in THCR Holdings will be convertible into an aggregate of
8,354,167 shares of Common Stock, representing approximately 27% of the then
outstanding shares of Common Stock (after giving effect to the Merger
Transaction and such conversion). At the time that TTMI becomes a limited
partner of THCR Holdings, Trump will contribute 200 shares of Class B Common
Stock of THCR, par value $.01 per share ("Class B Common Stock") to TTMI.
THCR's Class B Common Stock has voting power equivalent to the voting power of
the Common Stock into which a Class B Common Stockholder's limited partnership
interest in THCR Holdings is convertible. The Class B Common Stock is not
entitled to dividends or distributions. Upon conversion of all or any portion
of a holder's THCR Holdings limited partnership interest into shares of Common
Stock, the corresponding voting power of the Class B Common Stock (equal in
voting power to the number of shares of Common Stock issued upon such
conversion) will be proportionately diminished.
Concurrent with the consummation of the Merger Transaction, THCR will issue
to Trump a warrant to purchase an aggregate of 1.8 million shares of Common
Stock, (i) 600,000 of such underlying shares of which may be purchased on or
prior to the third anniversary of the issuance of the warrant at $30.00 per
share, (ii) 600,000 of such underlying shares of which may be purchased on or
prior to the fourth anniversary of the issuance of warrant at $35.00 per share
and (iii) 600,000 of such underlying shares of which may be purchased on or
prior to the fifth anniversary of the issuance of the warrant at $40.00 per
share.
Trump, through TTMI, has the right to reduce the equity interest of the Taj
Holding Class A Common Stock in Taj Associates from 50% to 20% by causing Taj
Associates to make a payment to the holders of the Taj Bonds in an amount
calculated to provide them with a cumulative return equal to approximately 14%
per annum (the "14% Payment"). If the 14% Payment is made (which can occur only
if the Taj Bonds are retired, redeemed or paid in full), Trump would
beneficially own 80% of Taj Associates. Moreover, the 14% Payment is permitted
to be financed with Taj Associates' borrowings. In connection with the Merger
Transaction, TTMI will not exercise its right to cause Taj Associates to make
such payment and such right will terminate upon the redemption of the Taj
Bonds.
THCR Contribution and Consideration. In connection with the Merger
Transaction, THCR will cause TM/GP Corporation ("TM/GP"), which will become an
indirect wholly owned subsidiary of THCR after the Effective Time and which
holds a 49.995% general partnership interest in Taj Associates, to contribute
to Trump Atlantic City (on behalf, and at the direction, of THCR Holdings) its
general partnership interest in Taj Associates, and will cause Taj Holding,
which will become a direct wholly owned subsidiary of THCR after the Effective
Time, to contribute to TM/GP and will then cause TM/GP to contribute to Trump
Atlantic City (on behalf, and at the direction, of THCR Holdings) its shares
(consisting of 50% of the outstanding capital stock) of TTMC (the holder of a
.01% general partnership interest in Taj Associates). As a result of the Merger
Transaction, THCR's beneficial equity interest in THCR Holdings will increase
from approximately 60% to approximately 73%, of which an approximately 5%
interest will be held directly by TM/GP (assuming a $24.00 price per share of
Common Stock as the Market Value in connection with the Merger and as the
public offering price in the Stock Offering).
Redemption of the Taj Bonds and the Taj Holding Class B Common Stock. The Taj
Holding Class B Common Stock is essentially a nonparticipating stock issued as
part of a unit ("Unit"), consisting of $1,000 principal amount of Taj Bonds and
one share of Taj Holding Class B Common Stock, that entitles the holders
thereof to elect the Class B Directors, to vote on matters presented to the
stockholders of Taj Holding and to separately approve certain matters. The Taj
Holding Certificate of Incorporation provides that the outstanding shares of
Taj Holding Class B Common Stock must be redeemed at such time as the principal
amount of Taj Bonds are redeemed, defeased or paid, at the redemption price of
$.50 per share. In connection with the Merger Transaction, Taj Funding will
redeem the outstanding Taj Bonds at a redemption price equal to 100% of the
principal amount thereof plus accrued interest to the date of redemption and
Taj Holding will cause each outstanding share of Taj Holding Class B Common
Stock to be redeemed at the redemption price of $.50 per share in accordance
with the provisions of the Taj Holding Certificate of Incorporation.
19
<PAGE>
MANAGEMENT AND CORPORATE STRUCTURE
Trump Atlantic City is an indirect subsidiary of THCR. THCR is a holding
company with no independent operations, the principal asset of which is its
general partnership interest in THCR Holdings. THCR Holdings is also a holding
company with no independent operations, the principal assets of which are its
ownership interests in subsidiary corporations and partnerships, including
Trump Atlantic City. Trump Atlantic City holds THCR Holdings' 100% equity
interest in Trump Plaza Associates, the partnership that owns and operates
Trump Plaza. Trump is THCR's Chairman of the Board and Nicholas L. Ribis is
THCR's President, Chief Executive Officer and Chief Financial Officer. The
partnership agreement governing THCR Holdings provides that all business
activities of THCR must be conducted through THCR Holdings or its subsidiary
corporations and partnerships. 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. Neither THCR nor THCR Holdings will be
an obligor or a guarantor with respect to the First Mortgage Notes.
THCR Holdings' subsidiary corporations and partnerships currently include
Plaza Associates, Plaza Funding, Trump Indiana, Inc. ("Trump Indiana"), Trump
Atlantic City (formerly Trump Plaza Holding Associates ("Plaza Holding")),
Trump Plaza Holding, Inc. ("Plaza Holding Inc."), Trump Atlantic City Funding
and Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding"). THCR Funding,
together with THCR Holdings, are the co-obligors of the Senior Notes. Plaza
Associates owns and operates Trump Plaza and is the guarantor of Plaza
Funding's 10 7/8% First Mortgage Notes due 2001 (the "Plaza Notes"). Plaza
Funding is the issuer of the Plaza Notes and currently owns a 1% equity
interest in Plaza Associates which will be transferred to TTMC in connection
with the Merger Transaction. The Plaza Notes will be repurchased or defeased in
connection with the Merger Transaction. See "--The Merger Transaction--Plaza
Note Purchase; Consult Solicitations." Trump Atlantic City currently owns a 99%
equity interest in Plaza Associates, and Plaza Holding Inc. owns a 1% equity
interest in Trump Atlantic City. Trump Indiana is in the process of developing
a riverboat casino project to be located at Buffington Harbor on Lake Michigan.
Trump Indiana will not be an obligor or a guarantor with respect to the First
Mortgage Notes.
Upon consummation of the Merger Transaction, Trump Atlantic City will
indirectly wholly own each of Plaza Associates and Taj Associates through its
ownership of a 99% equity interest in each of Plaza Associates and Taj
Associates, and its ownership of all of the capital stock of TTMC, which will
own a 1% equity interest in each of Plaza Associates and Taj Associates. In
connection with the consummation of the Merger Transaction, THCR will cause the
amendment of the Amended and Restated Partnership Agreement of Taj Associates
to increase TTMC's equity interest in Taj Associates from .01% to 1.0% and to
reduce Trump Atlantic City's equity interest from 99.99% to 99%. In connection
with the Merger Transaction, Plaza Funding will be merged with and into TTMC.
Trump Atlantic City and its subsidiary Trump Atlantic City Funding will be the
Issuers and co-obligors of the First Mortgage Notes.
Trump Atlantic City, a New Jersey general partnership, was formed under the
name Trump Plaza Holding Associates on February 17, 1993. Trump Atlantic City
Funding, a Delaware corporation, was formed on January 20, 1996 for the purpose
of acting as co-issuer of the First Mortgage Notes. On or before the
consummation of the Merger Transaction, THCR intends to change Trump Atlantic
City's name from Trump Plaza Holding Associates to Trump Atlantic City
Associates. Plaza Associates was organized as a New Jersey general partnership
in June 1992. The principal executive offices of each of Trump Atlantic City,
Trump Atlantic City Funding and Plaza Associates are located at Mississippi
Avenue and The Boardwalk, Atlantic City, New Jersey 08401, and their telephone
number is (609) 441-6060. Taj Associates was originally formed as a limited
partnership under the laws of the State of New Jersey on June 23, 1988. On
December 11, 1990, Taj Associates was converted to a general partnership. The
principal executive offices of Taj Associates are located at 1000 The
Boardwalk, Atlantic City, New Jersey 08401, and its telephone number is (609)
449-5540.
20
<PAGE>
OWNERSHIP STRUCTURE AFTER THE MERGER TRANSACTION
[INSERT TABLE]
21
<PAGE>
RISK FACTORS
Each prospective investor should consider carefully all information
contained in this Prospectus and should give particular consideration to the
following factors before deciding to purchase the First Mortgage Notes offered
hereby.
HIGH LEVERAGE AND FIXED CHARGES
Upon consummation of the Merger Transaction, Trump Atlantic City and its
subsidiaries will have a substantial amount of indebtedness on a consolidated
basis. At December 31, 1995, after giving pro forma effect to the Merger
Transaction, Trump Atlantic City's consolidated indebtedness for borrowed
money would have totaled approximately $1.1 billion, principally representing
the First Mortgage Notes. See "Use of Proceeds" and "Business--Certain
Indebtedness." Assuming that the Merger Transaction had been consummated on
January 1, 1995, Trump Atlantic City's ratio of consolidated earnings to fixed
changes on a pro forma basis was 1.23x for the year ended December 31, 1995.
Interest on the First Mortgage Notes will be payable semiannually in cash.
The ability of the Issuers to pay interest on the First Mortgage Notes will be
dependent upon the ability of Plaza Associates and Taj Associates to generate
enough cash from operations sufficient for such purposes. See "--Holding
Company Structure;" "Risk in Refinancing and Repayment of Indebtedness; Need
for Additional Financing," "--Recent Results--Trump Plaza," and "--Recent
Results--Taj Mahal."
Taj Associates has a working capital facility (the "Working Capital
Facility") which matures in 1999 and permits borrowings of up to $25 million.
During 1994 and 1995, no amounts were borrowed under the Working Capital
Facility. Trump Atlantic City anticipates either modifying the Working Capital
Facility or terminating the Working Capital Facility and replacing it with a
new $25 million facility which would be available to Trump Atlantic City and
its subsidiaries. See "Business--Certain Indebtedness--Taj Associates--Working
Capital Facility" and "Description of the First Mortgage Notes."
The substantial consolidated indebtedness and fixed charges of Trump
Atlantic City may limit its ability to respond to changing business and
economic conditions, to fund capital expenditures for future expansion or
otherwise, either through cash flow or additional indebtedness, to absorb
adverse operating results or to maintain its facilities at an operating level
that will continue to attract patrons. Although management believes that the
Merger Transaction will allow Trump Atlantic City to realize certain cost
savings (expected by management to be approximately $18-$20 million per year
by the end of two years), no assurance can be given as to the amount, if any,
that will be realized from these cost savings. Future operating results are
subject to significant business, economic, regulatory and competitive
uncertainties and contingencies, many of which are outside its control. Trump
Atlantic City may be required to reduce or delay planned capital expenditures,
sell assets, restructure debt or raise additional equity to meet principal
repayment and other obligations of it and its Subsidiaries in later years. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Plaza Associates--Liquidity and Capital Resources." There is no
assurance that any of these alternatives could be effected on satisfactory
terms, if at all. See "--Risk in Refinancing and Repayment of Indebtedness;
Need for Additional Financing." Furthermore, such alternatives could impair
Trump Atlantic City's competitive position, reduce cash flow and/or have a
material adverse effect on its results of operations. See "--Atlantic City
Properties Expansion."
HOLDING COMPANY STRUCTURE
Trump Atlantic City Funding has no material assets, and Trump Atlantic City
is a holding company, the principal asset of which will be its direct and
indirect ownership of partnership interests in Taj Associates and Plaza
Associates, and it has no independent means of generating revenue. As a
holding company, Trump Atlantic City will depend on distributions and other
permitted payments from Taj Associates and Plaza Associates to meet its cash
needs. The ability of such entities to make such payments may be restricted
by, among other things, the regulations of the CCC. See "Regulatory Matters."
22
<PAGE>
RISK IN REFINANCING AND REPAYMENT OF INDEBTEDNESS; NEED FOR ADDITIONAL
FINANCING
The ability of the Issuers to pay their indebtedness when due will depend
upon the ability of Plaza Associates and Taj Associates to generate cash from
operations sufficient for such purpose or to refinance such indebtedness on or
before the date on which it becomes due. Management does not currently
anticipate being able to generate sufficient cash flow from operations to
repay a substantial portion of the principal amount of the First Mortgage
Notes. Thus, the repayment of the principal amount of the First Mortgage Notes
will likely depend primarily upon the ability to refinance the First Mortgage
Notes when due. The future operating performance and the ability to refinance
the First Mortgage Notes will be subject to the then prevailing economic
conditions, industry conditions and numerous other financial, business and
other factors, many of which are beyond the control of Trump Atlantic City.
There can be no assurance that the future operating performance of Trump
Atlantic City and its subsidiaries 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 and to Trump Atlantic City will be conducive to refinancing
the First Mortgage Notes or other attempts to raise capital. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Plaza Associates--Liquidity and Capital Resources."
Management contemplates obtaining an aggregate of approximately $17.5
million of equipment financing in connection with the acquisition of slot
machines and related gaming equipment for Trump Plaza's existing facilities,
Trump World's Fair and Trump Plaza East. Plaza Associates has obtained
commitments for $7.2 million of such financing and is seeking commitments for
the remainder of the financing. The Taj Mahal Expansion is expected to depend
in part on additional debt financing, for which no commitments are in place.
In addition, no assurances may be made that Trump Atlantic City will
successfully amend or replace the Working Capital Facility. Finally Taj
Associates' obligations to the CCC with respect to the Steel Pier may require
additional financing. See "Business--Properties." The failure of management to
obtain all or a significant portion of the financings discussed above may have
a material adverse effect on Trump Atlantic City. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Plaza
Associates--Liquidity and Capital Resources."
RISKS ASSOCIATED WITH A CHANGE OF CONTROL
The First Mortgage Note Indenture will contain provisions relating to
certain changes of control of THCR, THCR Holdings, Trump Atlantic City, Plaza
Associates and Taj Associates. Upon the occurrence of such a change of
control, the Issuers would be obligated to make an offer to purchase all of
the First Mortgage Notes then outstanding at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest to the date of
purchase. There can be no assurance that funds necessary to effect such a
purchase would be available if such an event were to occur. See "Description
of the First Mortgage Notes."
RESTRICTIONS ON CERTAIN ACTIVITIES
The First Mortgage Note Indenture will impose restrictions on Trump Atlantic
City and its subsidiaries. Generally, the restrictions contained in these
instruments relate to the incurrence of additional indebtedness, the
distribution of cash and/or property to partners, the repayment or repurchase
of pari passu or junior securities, investments, mergers and sales of assets
and the creation of liens. These restrictions could limit the ability of Trump
Atlantic City (including Plaza Associates and Taj Associates) to respond to
changing business and economic conditions. A failure to comply with any of
these obligations could also result in an event of default under the First
Mortgage Note Indenture, which could permit acceleration of the First Mortgage
Notes and acceleration of certain other indebtedness of THCR and its
subsidiaries under other instruments that may contain cross-acceleration or
cross-default provisions.
NON-RECOURSE NATURE OF THE FIRST MORTGAGE NOTES
No direct or indirect partner, employee, officer, stockholder or director,
as such, past, present or future, of either of the Issuers, any Guarantor, or
any successor entity of any Issuer or Guarantor, will have any personal
liability in respect of the obligations of the Issuers under the First
Mortgage Note Indenture, the First Mortgage Notes or any guarantees thereof by
reason of the status as such partner, employee, officer, stockholder or
director unless such person is an Issuer or Guarantor of the First Mortgage
Notes.
23
<PAGE>
HISTORICAL RESULTS; PAST NET LOSSES
Trump Plaza. Plaza Associates had net losses of $29.2 million, $35.8 million
(including an extraordinary loss of $38.2 million) and $8.9 million for the
years ended December 31, 1991, 1992 and 1994, respectively, and net income of
$9.3 million and $1.5 million (including an extraordinary gain of $4.1
million) for the years ended December 31, 1993 and 1995, respectively. In
1991, Plaza Associates began to experience liquidity problems, principally due
to amortization requirements of its long-term debt. On May 29, 1992, Plaza
Associates and Plaza Funding completed a restructuring (the "1992 Plaza
Restructuring"), the purpose of which was to improve the amortization schedule
and extend the maturity of Plaza Associates' indebtedness. Management believes
that the deterioration in results experienced in 1990 and 1991 was
attributable primarily to a recession in the Northeast and increased industry
competition, primarily due to the opening of the Taj Mahal in April 1990,
which had a disproportionate impact on Trump Plaza as compared to certain
other Atlantic City casinos due in part to the common use of the "Trump" name.
In June 1993, Plaza Associates, Plaza Funding and Trump Atlantic City
completed a refinancing, the purpose of which was to enhance Plaza Associates'
liquidity and to position Plaza Associates for a subsequent deleveraging
transaction. See "Business--Restructurings--The 1992 Plaza Restructuring." A
portion of the proceeds from the June 1995 Offerings were contributed to Plaza
Associates to help reduce its indebtedness.
Taj Mahal. Taj Associates had net losses of $35.1 million, $22.5 million,
$36.7 million and 26.6 million for the years ended December 31, 1992, 1993,
1994 and 1995, respectively. From the opening of the Taj Mahal in April 1990
through the Spring of 1991, cash generated from Taj Associates' operations was
insufficient to cover its fixed charges. As a result, Taj Associates failed to
provide Taj Funding with sufficient funds to meet its debt servicing needs.
During 1991, Taj Funding, Taj Associates and Taj Associates' then existing
general partners (TTMI and TTMC) restructured their existing indebtedness (the
"1991 Taj Restructuring"). Pursuant to the terms of the 1991 Taj
Restructuring, Taj Funding's 14% First Mortgage Bonds, Series A, due 1998 (the
"Old Taj Bonds") were exchanged for the Taj Bonds and certain modifications
were made to the terms of bank borrowings and amounts owed to both Trump and
his affiliates. In addition, approximately 50% of the ownership interest in
Taj Associates was transferred indirectly to the holders of the Old Taj Bonds.
See "Business--Restructurings--The 1991 Taj Restructuring."
CONFLICTS OF INTEREST
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 the Taj Mahal and Trump Plaza, and Trump could, under certain
circumstances, have an incentive to operate Trump's Castle to the competitive
detriment of the Taj Mahal and 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, Plaza Associates and Taj Associates, is also the
Chief Executive Officer of Trump's Castle Associates ("TCA"), the partnership
that owns and operates Trump's Castle. Messrs. Robert M. Pickus and John P.
Burke, officers of THCR and Plaza Associates, are each executive officers of
TCA, and Mr. Pickus is an officer of Taj Associates. In addition, Messrs.
Trump, Ribis, Pickus and Burke serve on one or more of the governing bodies of
THCR, Plaza Associates, 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 and other common officers, a conflict
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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 (including Trump Atlantic City) or is
otherwise inconsistent with their obligations as officers and directors of
THCR, or its affiliates. See "Management--Compensation Committee Interlocks
and Insider Participation--Certain Related Party Transactions of Trump."
CONTROL AND INVOLVEMENT OF TRUMP
Trump's Substantial Voting Power. Upon consummation of the Merger
Transaction, through his beneficial ownership of the THCR Class B Common
Stock, Trump will control approximately 27% of the total voting power of THCR
(assuming a price of $24.00 per share of THCR Common Stock as market value in
connection with the Merger and as the public offering price in the Stock
Offering). Management believes that the involvement of Trump in the affairs of
THCR is an important factor that will affect the prospects of Trump Atlantic
City. Following the Merger Transaction, Trump will continue to pursue,
develop, control and conduct all of his gaming business (except for Trump's
Castle) through THCR. See "--Conflicts of Interest."
Trump's Personal Indebtedness. Although Trump has no obligation to
contribute funds to THCR, THCR Holdings or Trump Atlantic City and is not
providing any personal guarantees in connection with the Merger Transaction,
management believes that Trump's financial condition and general business
success together with the public's perception of such success may be relevant
to the success of Trump Atlantic City due, in part, to the marquee value of
the "Trump" name. The association of the "Trump" name with high quality
amenities and first class service at Trump Atlantic City's properties could be
diminished in the event that Trump experienced business reversals or the
public perceived such reversals, and accordingly, the value of a holder's
First Mortgage Notes could be adversely effected. Trump is engaged, through
various enterprises, in a wide range of business activities. During 1989
through 1992, certain of Trump's businesses, including businesses for which
Trump supplied personal guarantees, experienced financial difficulties that
necessitated a comprehensive financial restructuring of certain of his
properties and holdings, including Trump's interest in Trump Plaza, Trump's
Castle and the Taj Mahal, and his personal indebtedness. See "Management."
Since 1990, Trump has engaged in a series of transactions designed to reduce
his personal indebtedness. However, Trump will continue to have a substantial
amount of personal indebtedness following the Merger Transaction. See
"Business--Properties."
Trump has informed Trump Atlantic City that certain of his current or
proposed lenders, including an affiliate of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), are expected to refinance certain of his
personal indebtedness, which new indebtedness would have covenants and events
of default similar in scope to those contained in his existing indebtedness.
As security for some or all of the new indebtedness, it is anticipated that
Trump will pledge, and cause TTMI to pledge, all of their interests in THCR
and THCR Holdings. In the event that Trump is unable to pay such indebtedness
when due, subject to applicable regulatory approval, such lenders will have
the right to foreclose on the pledged limited partnership interests in THCR
Holdings and cause such interests to be converted into shares of THCR Common
Stock and to have such shares registered for resale under the Securities Act.
Such an event could have an adverse effect on the value of a holder's shares
of THCR Common Stock. Trump is currently subject to certain loan agreements
which contain covenants that relate to his equity interests in Taj Associates.
In connection with the Merger Transaction, Trump is seeking to obtain from his
personal creditors, among other things, releases of liens on his equity
interests in Taj Associates, which releases are required to consummate the
Merger Transaction. See "The Merger Transaction" and "Business--Certain
Indebtedness--Taj Associates." Bankers Trust, an affiliate of BT Securities
Corporation ("BT Securities"), is a significant creditor of Trump and will be
receiving a payment of $10 million in connecting with the Merger Transaction
in order to release certain liens and guarantees. BT
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Securities has rendered financial advisory services to THCR, Trump Atlantic
City and Taj Associates in the past, acted as a co-manager in the June 1995
Offerings and is an underwriter in the Offerings. See "Business--Certain
Indebtedness--Taj Associates--TTMI Note" and "Underwriting"."
In connection with the Merger Transaction, Plaza Associates intends to
purchase Trump Plaza East from Missouri Boardwalk, Inc. ("Boardwalk"), a
wholly owned subsidiary of Midlantic National Bank ("Midlantic"). As a result
of such purchase, Trump will obtain a release of approximately $18 million of
indebtedness owed by him to Midlantic, which debt was associated with Trump's
original purchase of the real property underlying Trump Plaza East.
FINANCIAL FORECAST
The forecasted financial information included this Prospectus (the
"Financial Forecast") represents, to the best of management's current
knowledge and belief, the expected results of operations for Plaza Associates,
Taj Associates and Trump Atlantic City for the fiscal years ending December
31, 1996 and December 31, 1997. The Financial Forecast, which consists of
forward looking statements, was prepared by management of Trump Atlantic City
and is qualified by, and subject to, the assumptions set forth herein and the
other information contained in this Prospectus. These assumptions are
inherently uncertain and, though considered reasonable by Trump Atlantic City,
are subject to significant business, economic, competitive, regulatory and
other uncertainties and contingencies, all of which are difficult or
impossible to predict accurately, and many of which are beyond the control of
Trump Atlantic City. Accordingly, there can be no assurance that the Financial
Forecast will be realized or that actual results will not be significantly
lower. Trump Atlantic City was the sole preparer of the Financial Forecast,
which was prepared in accordance with standards established by the American
Institute of Certified Public Accountants, except that it omits the effects of
non-operating items, income taxes, extraordinary items and the calculation of
net income. The Financial Forecast has not been audited by, examined by,
compiled by or subjected to agreed-upon procedures by, independent
accountants, and no third-party (including Underwriters) has independently
verified or reviewed the Financial Forecast.
The assumptions disclosed in the Financial Forecast are those that Trump
Atlantic City believes are significant to the Financial Forecast and reflects
management's subjective judgment as of the date hereof (which is subject to
change). However, not all assumptions used in the preparation of the Financial
Forecast have been set forth. There will be differences between the values
used by management in deriving the key assumptions and the actual results
causing differences between forecasted and actual results. Events and
circumstances usually do not occur as expected, and the differences between
actual and expected results may be material. In addition, as disclosed
elsewhere in this Prospectus under "Risk Factors" the business and operations
of Trump Atlantic City are subject to substantial risks which increase the
uncertainty inherent in the Financial Forecast. Many of the factors disclosed
under "Risk Factors" in this Prospectus could cause actual results to differ
materially from those expressed in the Financial Forecast. Trump Atlantic City
does not intend to update or otherwise revise the Financial Forecast to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. The inclusion of the Financial Forecast in
this Prospectus should not be regarded as a representation by Trump Atlantic
City or any other person (including the Underwriters) that the Financial
Forecast will be achieved.
In light of the foregoing, prospective investors in the First Mortgage Notes
are cautioned not to place undue reliance on the Financial Forecast.
ATLANTIC CITY PROPERTIES EXPANSION
Construction and Regulatory Approvals. The Trump Plaza Expansion is expected
to be substantially completed in the second quarter of 1996, and the Taj Mahal
Expansion, the plans for which are subject to modification, is expected to be
completed in phases by 1998. Construction projects, however, such as those
contemplated by the Trump Plaza Expansion and the Taj Mahal Expansion, can
entail significant development and construction risks including, but not
limited to, labor disputes, shortages of material and skilled labor,
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weather interference, unforeseen engineering problems, environmental problems,
geological problems, construction, demolition, excavation, zoning or equipment
problems and unanticipated cost increases, any of which could give rise to
delays or cost overruns. There can be no assurance that Plaza Associates and
Taj Associates will receive the licenses and regulatory approvals necessary to
undertake, in the case of the Taj Mahal Expansion, and to complete, in the
case of each of the Trump World's Fair Expansion and the Taj Mahal Expansion,
their respective expansion plans, or that such licenses and regulatory
approvals will be obtained within the anticipated time frames.
The Trump World's Fair and the Taj Mahal Expansion will each require various
licenses and regulatory approvals, including the approval of the New Jersey
Casino Control Commission (the "CCC"). Furthermore, the New Jersey Casino
Control Act (the "Casino Control Act") requires that additional guest rooms be
put in service within a specified time period after any such casino expansion.
If Plaza Associates or Taj Associates completed any casino expansion and
subsequently did not complete the requisite number of additional guest rooms
within the specified time period, such party might have to close all or a
portion of the expanded casino in order to comply with regulatory
requirements, which could have a material adverse effect on the results of
operations and financial condition of Plaza Associates or Taj Associates, as
applicable. In addition, in order to operate the additional casino space
contemplated by the Taj Mahal Expansion, Taj Associates must obtain, among
other regulatory approvals, the approval of the CCC and determinations by the
CCC that the Taj Mahal's additional casino space, together with its current
casino space, is a "single room" under the Casino Control Act and that the
operation of this additional casino space by Taj Associates will not
constitute undue economic concentration of Atlantic City casino operations.
Taj Associates will file a petition with the CCC seeking such determinations.
See "Regulatory Matters--New Jersey Gaming Regulations--Casino Licensee" and
"Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities."
Trump Plaza East. Plaza Associates has opened the casino and 249 hotel rooms
at Trump Plaza East and intends to exercise the option with an unaffiliated
third party to purchase Trump Plaza East (the "Trump Plaza East Purchase
Option") in connection with the Merger Transaction. If Plaza Associates were
unable to finance the purchase price of Trump Plaza East pursuant to the Trump
Plaza East Purchase Option and its leasehold interest therein is terminated,
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 unaffiliated third party that owns 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, Plaza Associates would be required to write off
the capitalized construction costs associated with the project. See
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump."
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into a sublease (the "Time
Warner Sublease") with Time Warner pursuant to which Time Warner subleased the
entire first floor of retail space at Trump Plaza East for a Warner Brothers
Studio Store which opened in July 1994. 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 (which will be extinguished by 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. No
assurances can be made that Trump Plaza East will continually be operated as a
first class hotel or that sales for the Warner Brothers Studio Store will
exceed the threshold amounts. See "Management--Compensation Committee
Interlocks and Insider Participation--Certain Related Party Transactions of
Trump."
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Trump World's Fair. The ongoing renovation of Trump World's Fair is
currently expected to be completed in the second quarter of 1996, although
there can be no assurance that the project will be completed by such time.
Upon the completion of such renovation, management intends to operate Trump
World's Fair as a casino hotel. In order to operate the casino space in Trump
World's Fair, Plaza Associates must obtain all necessary regulatory approvals,
including approval of the CCC, which approval cannot be assured. Plaza
Associates has applied for a separate casino license with respect to Trump
World's Fair. The CCC was required to determine that the operation of the
casino by Plaza Associates will not result in undue economic concentration in
Atlantic City. On May 18, 1995, the CCC ruled that the operation of Trump
World's Fair by Plaza Associates will not result in undue economic
concentration. Although this determination is a required condition precedent
to the CCC's ultimate issuance of a casino license for Trump World's Fair, and
management believes that a casino license will ultimately be issued for Trump
World's Fair, there can be no assurance that the CCC will issue this casino
license or what conditions may be imposed, if any, with respect thereto. See
"Regulatory Matters--New Jersey Gaming Regulations--Casino Licensee" and
"Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities." Although construction at Trump World's Fair has commenced, if the
costs of developing, constructing, equipping and opening Trump World's Fair
exceed the proceeds allocated from the June 1995 Offerings for such
expenditures, Plaza Associates may be forced to rely on alternative methods of
financing, which may not be available and which could impair the competitive
position of Trump Plaza and reduce Plaza Associates' cash flow. See "--High
Leverage and Fixed Charges," "--Need for Additional Financing" and "--
Restrictions on Certain Activities."
The Taj Mahal. It is expected that the Taj Mahal Expansion, the plans for
which are subject to modification, will be principally funded out of the cash
from the operations of the Taj Mahal and Trump Plaza. The ability to complete
such expansion is also expected to depend on the ability to obtain debt
financing for such purpose. There can be no assurance that Taj Associates and
Plaza Associates will be able to generate sufficient cash flow from operations
or that financing could be obtained on terms satisfactory to Trump Atlantic
City, if at all. In addition, any indebtedness to be incurred in connection
with the Taj Mahal Expansion would be subject to the limitations set forth in
the Senior Note Indenture and the First Mortgage Note Indenture. See "--High
Leverage and Fixed Charges," "--Holding Company Structure," "Risk in
Refinancing and Repayment of Indebtedness; Need for Additional Financing," "--
Restrictions on Certain Activities" and "Business--Business Strategy--The Taj
Mahal."
ABSENCE OF PUBLIC MARKET; POTENTIAL VOLATILITY OF MARKET PRICES
The Issuers do not intend to list the First Mortgage Notes on a national
securities exchange or to seek the admission thereof for trading in the
National Association of Securities Dealers Automated Quotation System. The
Underwriters have advised the Issuers that, following the consummation of the
First Mortgage Note Offering, they currently intend to make a market in the
First Mortgage Notes, but are not obligated to do so and may discontinue any
such market making at any time without notice. Further, there can be no
assurance as to the liquidity of, or that an active trading market will
develop for, the First Mortgage Notes.
In addition, factors such as quarterly fluctuations in Taj Associates' and
Plaza Associates' financial and operating results, announcements by the
Issuers or others and developments affecting Taj Associates and Plaza
Associates, their customers or Atlantic City market or the gaming industry
generally could cause the market price of the First Mortgage Notes to
fluctuate substantially.
COMPETITION
The Atlantic City Market. Competition in the Atlantic City casino hotel
market is intense. Trump Plaza and the Taj Mahal compete with each other and
with the other casino hotels located in Atlantic City, including the other
casino hotel owned by Trump, Trump's Castle Casino Resort ("Trump's Castle").
See "--Conflicts of Interest." Trump Plaza and the Taj Mahal are located on
The Boardwalk, approximately 1.2 miles apart from
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each other. At present, there are 12 casino hotels located in Atlantic City,
including the Taj Mahal and Trump Plaza, all of which compete for patrons. In
addition, there are several sites on The Boardwalk and in the Atlantic City
Marina area on which casino hotels could be built in the future 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 either Trump Plaza or the
Taj Mahal. There also can be no assurance that the Atlantic City development
projects which are planned or underway will be completed.
Total Atlantic City gaming revenues have increased over the past four years,
although at varying rates. Although all 12 Atlantic City casinos reported
increases in gaming revenues in 1992 as compared to 1991, management believes
that this was due, in part, to the depressed industry conditions in 1991. In
1993, nine casinos experienced increased gaming revenues compared to 1992
(including the Taj Mahal), while three casinos (including Trump Plaza)
experienced decreased revenues. In 1994, ten casinos experienced increased
gaming revenues compared to 1993 (including the Taj Mahal), while two casinos
(including Trump Plaza) experienced decreased revenues. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994.
In 1990, the Atlantic City casino industry experienced a significant
increase in room capacity and in available casino floor space, including the
rooms and floor space made available by the opening of the Taj Mahal. The
effects of such expansion were to increase competition and to contribute to a
decline in 1990 in gaming revenues per square foot of casino floor space. In
1990, the Atlantic City casino industry experienced a decline in gaming
revenues per square foot of 5.0%, which trend continued in 1991, although at
the reduced rate of 2.9%. In 1992, however, the Atlantic City casino industry
experienced an increase of 6.9% in gaming revenues per square foot from 1991.
Gaming revenues per square foot increased by 1.4% for 1993 (excluding poker
and race simulcast rooms, which were introduced for the first time in such
year), compared to 1992. In 1994, gaming revenues per square foot decreased
2.5% (or 4.5% including square footage devoted to poker, keno and race
simulcasting). The 1994 decline was due, in part, to the increase in casino
floor space in Atlantic City as a result of expansion of a number of casinos
and to the severe weather conditions which affected the Northeast during the
winter of 1994. Between April 30, 1993 and December 31, 1995, many operators
in Atlantic City expanded their facilities in anticipation of and in
connection with the June 1993 legalization of simulcasting and poker,
increasing total gaming square footage by approximately 181,200 square feet
(23.3%) of which approximately 83,700 square feet is currently devoted to
poker, keno and race simulcasting. During this same period, 172 poker tables
and 5,500 slot machines were added. See "Business--Atlantic City Market."
Trump Plaza and the Taj Mahal also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, Trump Plaza and the Taj Mahal face
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 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 and the Taj
Mahal compete directly with each other and with Trump's Castle for gaming
patrons. Although management does not intend to operate Trump Plaza and the
Taj Mahal to the competitive detriment of each other, the effect may be that
Trump Plaza or Taj Mahal will operate to the competitive detriment of the
other.
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Other Competition. In addition, Trump Plaza and the Taj Mahal face
competition from casino facilities in a number of states operated by federally
recognized Native American tribes. Pursuant to the Indian Gaming Regulatory
Act ("IGRA"), which was passed by Congress in 1988, any state which permits
casino style gaming (even if only for limited charity purposes) is required to
negotiate gaming compacts with federally recognized Native American tribes.
Under IGRA, Native American tribes enjoy comparative freedom from regulation
and taxation of gaming operations, which provides them with an advantage over
their competitors, including Trump Plaza and the Taj Mahal. See "Business--
Competition."
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 3,100 slot machines. The
Mashantucket Pequot Nation has announced various expansion plans, including
its intention to build another casino in Ledyard together with hotels,
restaurants and a theme park. 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 Sun International,
an entity headed by a South African investor, is scheduled to be as large as
Foxwoods and 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 or the Taj Mahal'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, 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 and the Taj Mahal 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.
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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, in the past,
proposals have 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 Trump Atlantic City's results of operations or
financial condition.
RELIANCE ON KEY PERSONNEL
The ability of Trump Atlantic City to operate successfully is dependent, in
part, upon the continued services of certain of its employees, including
Nicholas L. Ribis, the President and Chief Executive Officer of THCR, the
Chief Executive Officer of THCR Holdings, Plaza Associates and Taj Associates.
Mr. Ribis' employment agreements with THCR and THCR Holdings on the one hand
and Taj Associates on the other will expire on June 7, 2000 and September 25,
1996, respectively (subject to earlier termination upon the occurrence of
certain events). There can be no assurance that a suitable replacement for Mr.
Ribis could be found in the event of a termination of his employment. A
shortage of skilled management-level employees currently exists in the gaming
industry which may make it difficult and expensive to attract and retain
qualified employees. In addition, Mr. Ribis and certain other executives of
THCR and Taj Associates currently allocate their time among THCR's and Taj
Associates' various operations as well as certain other enterprises owned by
Trump. Following the consummation of the Merger Transaction, Mr. Ribis will
devote approximately 75% of his professional time to the affairs of THCR and
its subsidiaries. See "Management."
STRICT REGULATION BY GAMING AUTHORITIES
The ownership and operation of the gaming-related businesses of Plaza
Associates and Taj Associates are subject to strict state regulation under the
Casino Control Act. Plaza Associates and Taj Associates and their various
officers and other qualifiers have received the licenses, permits and
authorizations required to operate Trump Plaza and the Taj Mahal,
respectively. Failure to maintain or obtain the requisite casino licenses
would have a material adverse effect on Trump Atlantic City. On June 22, 1995,
the CCC renewed Taj Associates' casino license through March 31, 1999 and
renewed Plaza Associates' casino license through June 30, 1999. No assurance
can be given as to the term for which the CCC will renew these licenses or as
to what license conditions, if any, may be imposed by the CCC in connection
with any future renewals. The Merger Transaction is subject to approval by the
CCC. See "Regulatory Matters--New Jersey Gaming Regulation."
The Casino Control Act imposes substantial restrictions on the ownership of
securities of Trump Atlantic City and its subsidiaries. See "Regulatory
Matters." A holder of First Mortgage Notes may be required to meet the
qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. The CCC will determine the qualification of
specific security holders, including Institutional Investors (as defined in
the Casino Control Act) subsequent to consummation of the First Mortgage Note
Offering. The First Mortgage Note Indenture will provide that if the CCC
requires a holder of securities (whether the record or beneficial owner) to
qualify under the Casino Control Act and such holder does not so qualify, then
such holder must dispose of his interest in the First Mortgage Notes within 30
days after receipt by such issuer, as the case may be
31
<PAGE>
of notice of such finding that such holder does not so qualify, or such
issuer, as the case may be, may redeem such First Mortgage Notes at the lower
of outstanding principal amount or Fair Market Value (as defined in the Casino
Control Act) of such First Mortgage Notes.
Trump Atlantic City's current gaming operations are, and any future gaming
operations are likely to be, subject to significant taxes and fees in addition
to normal federal and state corporate income taxes, and such taxes and fees
are subject to increase at any time. Any material increase in these taxes or
fees would adversely affect Trump Atlantic City.
LIMITATIONS ON LICENSE OF THE TRUMP NAME
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) 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"). See
"Business--Trademark/Licensing." THCR's rights under the License Agreement are
secured by a security interest in the names "Trump," "Donald Trump" and
"Donald J. Trump" (including variations thereon, the "Trump Names") and
related intellectual property rights (collectively, the "Marks") for use in
connection with casino services, pursuant to a security agreement (the
"Trademark Security Agreement"). If there were a default under the License
Agreement or the Trademark Security Agreement, THCR would have rights, subject
to the requirements of applicable state law, to enforce the rights and
remedies contained in the Trademark Security Agreement. In the event of a
foreclosure sale of the Marks, the net amount realized in such sale by THCR
might not yield the full amount of damages that THCR could sustain as a result
of the default. In addition, the existence of rights of others to the use of
the Trump Names, including pursuant to the existing security interests with
respect to trademarks associated with Trump's Castle as well as to any other
security interests in trademarks for non-gaming hotels, could adversely affect
the ability of THCR to realize the benefits of the Trademark Security
Agreement. THCR's right to repossess and dispose of the Marks upon a breach of
the License Agreement may be significantly impaired if the owner of the Marks
were to become the subject of a case under the United States Bankruptcy Code
(the "Bankruptcy Code") prior to THCR's having repossessed and disposed of the
Marks. Under the Bankruptcy Code, secured creditors, such as THCR, are
automatically stayed from repossessing or disposing of their collateral
without bankruptcy court approval. Moreover, the Bankruptcy Code permits a
defaulting debtor to retain and continue to use the collateral if the secured
creditor is given "adequate protection" of its interest in the collateral.
Such adequate protection under the Bankruptcy Code may take various forms,
including the granting of a replacement lien or other relief that will enable
the secured creditor to realize the "indubitable equivalent" of its interest
in the collateral. Accordingly, it is impossible to predict whether or when
THCR would repossess or dispose of the Marks, or whether or to what extent
THCR would then be compensated for any delay in payment or loss of value of
the Marks through the requirement of "adequate protection" if the owner of the
Marks were to become the subject of a bankruptcy or reorganization case.
Furthermore, the License Agreement could be rejected in connection with a
bankruptcy of the licensor if, in the business judgment of a trustee or the
licensor, as debtor-in-possession, rejection of the contract would benefit the
licensor's estate. In the event of such rejection, THCR could assert a claim
for damages, secured by THCR's lien on the Marks.
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of Trump Atlantic City under the First Mortgage Notes may be
subject to review under state or federal fraudulent transfer laws in the event
of the bankruptcy or other financial difficulty of Trump Atlantic City. Under
those laws, if a court in a lawsuit by an unpaid creditor or representative of
creditors of Trump Atlantic City, such as a trustee in bankruptcy, or Trump
Atlantic City as debtor-in-possession, were to find that at the time Trump
Atlantic City incurred its obligations under the First Mortgage Notes, it (a)
did so with actual intent to hinder, delay or defraud its creditors or (b) did
not receive reasonably equivalent value or fair consideration therefor, and
either (i) was insolvent, (ii) was rendered insolvent, (iii) was engaged in a
business or transaction for which its remaining unencumbered assets
constituted unreasonably small capital or (iv) intended to incur or believed
that it would incur debts beyond its ability to pay as such debts matured,
such
32
<PAGE>
court could avoid Trump Atlantic City obligations under the First Mortgage
Notes and direct the return of any amounts paid thereunder to Trump Atlantic
City or to a fund for the benefit of its creditors.
Similarly, the obligations of Taj Associates, Plaza Associates or any other
Guarantor under its guarantee of the First Mortgage Notes, as well as the
security interest granted by such Guarantor in its assets to secure the First
Mortgage Notes and such guarantee, may be subject to review under such laws in
the event of the bankruptcy or other financial difficulty of such Guarantor.
In the event that a court were to find that at the time such Guarantor
incurred such obligations or granted such security interest the factors set
forth in either clause (a) or (b) in the foregoing paragraph applied to such
Guarantor, such court could avoid such Guarantor's obligations under its
guarantee, as well as the security interests securing such guarantee, and
direct the return of any amounts paid under such guarantee to such Guarantor
or to a fund for the benefit of its creditors. The First Mortgage Notes do not
have the benefit of a pledge of the equity interests of the Subsidiaries of
Trump Atlantic City, which such interests are exclusively pledged for the
benefit of the Senior Notes.
Among other things, a court might conclude that a Guarantor did not receive
reasonably equivalent value or fair consideration for its guarantee to the
extent that the economic benefits realized by it in the Merger Transaction
(including the payment of its outstanding obligations) was less than the
aggregate amount of its liability under its guarantee.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
would be required to pay its probable liability on its existing debts as they
become absolute and matured.
33
<PAGE>
USE OF PROCEEDS
The net proceeds to Trump Atlantic City from the First Mortgage Note
Offering, after payment of underwriting discounts and expenses, are estimated
to be $ million. In connection with the Merger Transaction, the net proceeds
from the First Mortgage Note Offering, together with the net proceeds from the
Stock Offering (estimated to be $ million) and available cash, will be used
as set forth below.
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming an April 15, 1996 consummation):
(DOLLARS IN MILLIONS)
ANTICIPATED SOURCES OF FUNDS
<TABLE>
<CAPTION>
CASH SOURCES
- ------------
<S> <C>
First Mortgage Note Offering.... $1,100.0
THCR Stock Offering (b)(d)...... 300.0
Available Cash.................. 10.7
--------
Total Cash Sources............. 1,410.7
<CAPTION>
NON-CASH SOURCES
- ----------------
<S> <C>
THCR
Common Stock Equivalents to be issued
to Trump(c).................... 40.5
THCR Common Stock to be issued
to First Fidelity(d)........... 12.5
--------
Total Non-Cash Sources......... 52.5
--------
TOTAL SOURCES................... $1,463.2
========
</TABLE>
ANTICIPATED USES OF FUNDS
<TABLE>
<CAPTION>
CASH USES
- ---------
<S> <C>
Redeem Taj Bonds(a)............ $ 794.4
Retire Plaza Notes............. 370.9
Satisfy NatWest Loan........... 36.5
Exercise Trump Plaza East
Purchase Option............... 28.0
Payment to First Fidelity...... 50.0
Payment to Bankers Trust and
Working Capital............... 10.0
Payments to Holders of Taj
Holding Class A Common
Stock(b)...................... 40.5
Redeem Taj Holding Class B
Common Stock.................. 0.4
Transaction Fees and Expenses.. 30.6
-------
Total Cash Uses............... 1,410.7
-------
NON-CASH USES
- -------------
Acquisition of Trump's direct
and indirect equity interests
in Taj Associates............. 40.5
THCR Common Stock issued to
First Fidelity(d)............. 12.0
-------
Total Non-Cash Uses........... 52.5
-------
TOTAL USES..................... 1,463.2
=======
</TABLE>
- ---------------------
(a) Includes the additional Amount (as defined) through April 15, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(b) Assumes all holders of Taj Holding Class A Common Stock elect Cash
Consideration in the Merger. In the event any holder of Taj Holding Class A
Common Stock elects Stock Consideration in lieu of Cash Consideration, THCR
may decrease the size of the THCR Stock Offering. See "Summary--The Merger
Transaction."
(c) Includes the value of the shares of THCR Common Stock into which the
limited partnership interest in THCR Holdings to be issued to Trump and
TTMI in connection with the Merger Transaction will be convertible.
(d) Assumes a price of $24.00 per share of THCR Common Stock.
34
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Trump Atlantic City as
of December 31, 1995, as adjusted to give effect to the Merger Transaction.
This table should be read in conjunction with Trump Atlantic City's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
------------------------------------------
ACTUAL
-------------------------------
TAJ ASSOCIATES PLAZA ASSOCIATES PRO FORMA
-------------- ---------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash: $ 88,941 $ 15,937 $ 50,225
======== ======== ==========
Debt:
First Mortgage Notes $ -- $ -- $1,100,000
Plaza Notes -- 330,000(b) --
Taj Bonds 780,242(a) -- --
Other debt 45,973 8,970 9,999
-------- -------- ----------
Total debt 826,215 338,970 1,109,999
-------- -------- ----------
Partners' capital:
Contributed capital 123,765 94,087 375,587
Retained earnings (deficit) (84,130) 16,725 (42,389)
-------- -------- ----------
Total partners' capital 39,635 110,812 333,198
-------- -------- ----------
Total capitalization $826,850 $449,782 $1,443,197
======== ======== ==========
</TABLE>
- ---------------------
(a)Does not include unamortized discount of $131,103.
(b)Does not include unamortized discount of $3,348.
35
<PAGE>
SELECTED HISTORICAL
COMBINED FINANCIAL INFORMATION
TRUMP PLAZA ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Plaza Associates and Trump Atlantic City for each of the five
years ended December 31, 1991 through 1995. The historical financial
information of Trump Atlantic City and Plaza Associates as of December 31,
1994 and 1995 and for the years ended December 31, 1993, 1994 and 1995 as set
forth below has been derived from the audited consolidated financial
statements of Trump Atlantic City and Plaza Associates included elsewhere in
this Prospectus. The historical financial information of Trump Atlantic City
and Plaza Associates as of December 31, 1991, 1992 and 1993 and for the years
ended December 31, 1991 and 1992 as set forth below has been derived from the
audited consolidated financial statements of Trump Atlantic City and Plaza
Associates not included in this Prospectus. Trump Atlantic City Funding was
recently formed and has had no operations to date.
All financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Financial Information" and the consolidated and condensed
financial statements and the related notes thereto included elsewhere in this
Prospectus.
<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.
36
<PAGE>
TAJ ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1991 through 1995. The historical financial information of Taj Associates as
of December 31, 1994 and 1995, and for the years ended December 31, 1993, 1994
and 1995 as set forth below has been derived from the audited consolidated
financial statements of Taj Associates included elsewhere in this Prospectus.
The historical financial information of Taj Associates as of December 31,
1991, 1992 and 1993, and for the years ended December 31, 1991 and 1992 as set
forth below has been derived from the audited consolidated financial
statements of Taj Associates not included in this Prospectus. All financial
information should be read in conjunction with "Management's Discussion and
Analysis and Results of Operations--Taj Associates" and "Unaudited Pro Forma
Financial Information" and the consolidated and condensed financial statements
and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming.................. $ 380,997 $ 414,045 $ 442,064 $ 461,622 $501,378
Other................... 111,251 116,958 113,291 117,738 116,368
--------- --------- --------- --------- --------
Gross Revenues......... 492,248 531,003 555,355 579,360 617,746
Promotional allowances.. 53,935 61,250 56,444 62,178 63,998
--------- --------- --------- --------- --------
Net Revenues........... 438,313 469,753 498,911 517,182 553,748
Costs and Expenses:
Gaming.................. 204,513 227,394 237,566 260,472 283,786
Other................... 39,181 39,125 40,605 40,697 39,842
General and
Administrative......... 100,191 98,819 99,424 99,629 96,843
Depreciation and
Amortization........... 36,202 36,388 36,858 39,750 43,387
Restructuring costs..... 26,398 -- -- -- --
--------- --------- --------- --------- --------
Income (loss) from
Operations............. 31,828 68,027 84,458 76,634 89,890
Net interest expense.... (100,683) (103,126) (106,997) (113,292) (116,513)
Extraordinary gain(a)... 259,618 -- -- -- --
--------- --------- --------- --------- --------
Net Income (loss)....... $ 188,513 $ (35,099) $ (22,539) $ (36,658) $(26,623)
========= ========= ========= ========= ========
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents............ $ 22,535 $ 34,062 $ 58,044 $ 61,196 $ 88,941
Property and equipment-
net.................... 766,135 742,129 722,834 706,785 690,987
Total assets............ 814,051 802,556 811,508 807,612 821,793
Total long-term debt,
net of current
maturities............. 573,844 595,682 625,765 656,701 694,192
Total capital........... 167,837 130,913 106,641 67,812 39,635
</TABLE>
- --------
(a) The extraordinary gain of $259,618 for the year ended December 31, 1991
reflects a $204,276 accounting adjustment to carry the Old Taj Bonds at
fair market value based on current interest rates at the date of issuance
(effective rate of approximately 18%), and $20,000 related to settlement
of the subcontractors' note payable, with the balance representing a
discharge of accrued interest on indebtedness.
37
<PAGE>
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. Also set forth below is a
discussion and analysis of the financial condition and results of operations
of Taj Associates.
PLAZA ASSOCIATES
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 $170.3 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.
38
<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 "Management--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.
39
<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 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 Atlantic City and Plaza Associates.
TAJ ASSOCIATES
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Net revenues were approximately $553.7 million for the year ended December
31, 1995, an increase of $36.5 million or 7.1% from net revenues of $517.2
million for the year ended December 31, 1994. This increase was primarily due
to an increase in gaming revenues.
Gaming revenues comprise the major component of net revenues and consist of
win from table games, poker, slot machines, horserace simulcasting and keno.
Total gaming revenues were $501.4 million for the year ended December 31,
1995, an increase of $39.8 million or 8.6% from total gaming revenues of
$461.6 million for the year ended December 31, 1994. These revenues represent
a market share of 13.5% of the Atlantic City gaming market in each of 1995 and
1994, based on figures filed with the CCC.
Table game win was approximately $201.8 million for the year ended December
31, 1995, an increase of $17.1 million or 9.3% from table game win of $184.7
million for the year ended December 31, 1994. Dollars wagered at table games
were $1,192.2 million for the year ended December 31, 1995, an increase of
$67.2 million or 6.0% from dollars wagered at table games of $1,125.0 million
for the year ended December 31, 1994. Table win percentage was 16.9% for the
year ended December 31, 1995, an increase from 16.4% in 1994. Table win
percentage, which represents the percentage of dollars wagered retained by Taj
Associates, tends to be fairly constant over the long term, but may vary
significantly in the short term, due to large wagers by "high rollers." The
win percentage for the year ended December 31, 1995 is significantly above Taj
Associates' and the industry's historical win percentage, and Taj Associates'
win percentage could decrease in the future. During the twelve months ending
December 31, 1994 and 1993, Taj Associates' win percentage was approximately
16.4% and 16.3% respectively. The Atlantic City average for the years ended
December 31, 1995, 1994 and 1993 was approximately 15.8%, 15.8% and 15.6%
respectively. Management believes that a significant factor in Taj Associates'
table game win being higher than the Atlantic City average is its mix of
higher hold table games.
Slot revenues were approximately $285.2 million for the year ended December
31, 1995, an increase of $26.1 million or 10.1% from slot win of $259.1
million for the year ended December 31, 1994. Dollars wagered in slot machines
was $3,376.5 million for the year ended December 31, 1995, an increase of
$436.4 million or
40
<PAGE>
14.8% from dollars wagered in slot machines of $2,940.0 million for the year
ended December 31, 1994. This increase was offset by a decrease in slot win
percentage to 8.3% in 1995 from 8.8% in 1994. The increase in slot machine
wagering and the reduced slot win percentage is consistent with the industry
trend in Atlantic City in recent years.
In addition to table game and slot revenues, Taj Associates' operations
generated approximately $17.2 million in poker revenues, $1.4 million of
simulcasting revenue and $1.8 million of keno revenue in 1995, compared to
$16.3 million of poker revenue, $1.4 million of simulcasting revenue and $1.3
million of keno revenue in 1994. Keno operations commenced June 15, 1994.
Increases in gaming revenues during the year ended December 31, 1995 as
compared to the year ended December 31, 1994 were attributable primarily to
(i) the increase in dollars wagered on slots relative to the depressed 1994
levels caused by severe winter weather during the first three months of the
year, (ii) the increase in dollars wagered on table games and the improved win
percentage, both of which were substantially attributable to international
high level players and (iii) the general growth of the Atlantic City market.
Nongaming revenues consist primarily of room, food, beverage and
entertainment revenues. Nongaming revenues were $117.7 million for the year
ended December 31, 1994, an increase of $4.4 million or 3.9% from nongaming
revenues of $113.3 million in 1993. This increase was attributable primarily
to an increase in food and beverage revenue of approximately $2.1 million or
3.8%, and an increase in room revenue of approximately $1.2 million or 2.9%.
Food and beverage revenue and room revenue was $58.0 million and $41.8
million, respectively, for the fiscal year ended December 31, 1994, an
increase from food and beverage revenue and room revenue of $56.0 million and
$40.7 million, respectively, in 1993. The increase in food and beverage
revenue was partially attributable to the increase of the average food check
to $11.68 in 1994 from $10.82 in 1993 and the increased banquet functions
associated with gaming promotions. Room occupancy was 92.4% and 92.5% and the
average room rate was $99.19 and $96.38 for the years ended December 31, 1994
and 1993, respectively.
Promotional allowances were $62.2 million in 1994, an increase of $5.8
million from promotional allowances of $56.4 million in 1993. Promotional
allowances were 10.7% of gross revenues in 1994 compared to 10.2% of gross
revenues in 1993, reflecting the more aggressive marketing posture necessary
in order to maintain or achieve increases in gaming revenues comparable to
1993.
Gaming expenses were $260.5 million in 1994, an increase of $22.9 million or
9.6% from gaming expenses of $237.6 million in 1993, primarily due to
increased marketing promotional costs directed at slot machine and table game
play and operating expenses associated with the new or expanded games of
poker, simulcasting and keno.
During the year ended December 31, 1994, room expenses increased slightly
and food and beverage expenses decreased slightly over the comparable period
in 1993, reflecting continuing cost controls in this area. General and
administrative expenses increased slightly, primarily due to costs associated
with a settlement of outstanding litigation, offset by decreases in real
property taxes resulting from settlement of appeals. Costs for settlement of
litigation were approximately $3.7 million in 1994, an increase of $3.7
million or 100% from 1993. Real property taxes were $12.2 million in 1994, a
decrease of approximately $4.9 million or 28.7% from real property taxes of
$17.1 million for 1993. Were it not for these items, costs in this category
would have increased approximately $2.0 million over the comparable period of
1993. Depreciation expense increased in 1994 compared to 1993 due to increased
capital expenditures on replacement furniture, fixtures and equipment and the
shorter lives associated therewith.
Total operating expenses as a percentage of net revenue increased to 85.2%
in 1994 from 83.1% in 1993.
Interest expense was $115.3 million in 1994, an increase of $6.9 million or
6.4% from interest expense of $108.4 million in 1993. The increase is
attributable to the increased amount of principal outstanding resulting from
the issuance of the Taj Bonds to satisfy the Additional Amount (as defined),
the increased accretion of
41
<PAGE>
discount on the Taj Bonds as they approach maturity and professional fees
incurred during the first six months of 1994 related to a proposed
recapitalization, which was not consummated.
As a result of the foregoing factors, income from operations was $76.6
million in 1994, a decrease of $7.9 million or 9.3% from income from
operations of $84.5 million in 1993.
Taj Associates experienced a net loss of $36.7 million for 1994 as compared
to a net loss of $22.5 million for 1993.
LIQUIDITY AND CAPITAL RESOURCES
General. On June 12, 1995, THCR consummated the initial public offering by
THCR of 10 million shares of THCR Common Stock at an offering price of $14.00
per share (the "June 1995 Stock Offering"), resulting in aggregate gross
proceeds to THCR of $140,000,000, and THCR Holdings and THCR Funding
consummated the public offering by THCR and THCR Holding of $155,000,000
Senior Notes (the "June 1995 Note Offering" and, together with the June 1995
Stock Offering, (the "June 1995 Offerings")). The proceeds to THCR from the
June 1995 Stock Offering were contributed by THCR to THCR Holdings in return
for an approximately 60% general partnership interest in THCR Holdings. THCR
Holdings, in turn, has used net proceeds from the June 1995 Offerings through
December 31, 1995 for the following Plaza Associates related purposes: (a)
repurchase and redemption of the PIK Notes and PIK Note Warrants (including
accrued interest payable) for $86,209,000, (b) exercise of the option to
acquire Trump World's Fair (the "Trump World's Fair Purchase Option") for
$58,150,000, (c) construction costs for Trump World's Fair of $13,346,000, and
(d) construction costs at Trump Plaza East for $15,150,000. A portion of the
balance of the proceeds have been and will be used for the completion of the
construction at Trump Plaza, Trump Plaza East, Trump World's Fair as well as
for general corporate purposes.
Plaza Associates. 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, and were primarily
attributable to the purchase of Trump World's Fair for $60.0 million and $11.7
million of related renovation expenditures. Also, expenditures for renovation
costs associated with Trump Plaza East were $24.9 million for the year ended
December 31, 1995 versus $8.7 million for 1994. See "Business--Facilities and
Amenities--Trump Plaza."
Plaza Associates has approximately $2.9 million of indebtedness maturing
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 "Business--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.
See "Risk Factors--High Leverage and Fixed Charges," and "--Atlantic City
Properties Expansion."
42
<PAGE>
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
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 "Management--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. See "Risk Factors-- Atlantic City
Properties Expansion." 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 partial use of proceeds from
the Offerings is intended 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
43
<PAGE>
anticipates incurring approximately $5.2 million of pre-opening costs, which
will be expensed at the time of its opening.
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
"Management--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 the Occupational Safety and Health Administration
("OSHA"), if adopted. Trump Atlantic City is unable to estimate the cost, if
any, to Plaza Associates of such compliance. See "Regulatory Matters--Other
Laws and Regulations."
Giving pro forma effect to the consolidation of Taj Associates and the other
elements of the Merger Transaction, Trump Atlantic City will have
approximately $1.1 billion of indebtedness for borrowed money on a
consolidated basis, principally representing the First Mortgage Notes, and may
also have access to up to $ .0 million of borrowings under the Working
Capital Facility or a replacement thereof. See "Capitalization" and "Unaudited
Pro Forma Financial Information."
Taj Associates. Following the consummation of the Merger Transaction, the
Taj Mahal plans to undertake an expansion plan of its existing operations,
which plans are subject to modification. It is currently expected that the
expansion will be funded principally out of cash from the operations of the
Atlantic City Properties and is scheduled to be completed in phases from the
first quarter of 1997 through early 1998. The Taj Mahal Expansion involves the
construction of an approximately 800 room hotel tower adjacent to the Taj
Mahal's existing hotel tower, each containing at least 640 rooms, an
approximately 2,000 space expansion of the Taj Mahal's existing self-parking
facilities, conversion of the Mark Etess Arena into a new 60,000 square foot
circus-themed casino with 2,500 slot machines, and construction of a new arena
on a surface parking area located adjacent to the Taj Mahal.
In addition, the Taj Mahal is adding three new nationally recognized themed
restaurants: the Hard Rock Cafe, the Rainforest Cafe and the All Star Cafe.
Construction costs for each of the three themed restaurants will be the
obligation of the lessees. However, the lease for the Rainforest Cafe will
require Taj Associates to contribute $2.5 million towards construction after
the project is completed and the restaurant opens for business.
Capital expenditures by Taj Associates totaled approximately $26.5 million,
$23.0 million and $16.8 million for the years ended 1995, 1994 and 1993,
respectively. Major 1995 capital expenditures included the replacement of slot
machines, with new slot machines having bill acceptors, hotel room
renovations, opening the Dragon Room (an Asian themed table gaming area), new
telephone reservation equipment, continued casino floor reconfiguration,
carpet replacement, casino signage and limousine replacements. Major 1994
capital expenditures included the expansion of the poker room, the addition of
the game of keno to the casino floor, relocation of the lobby cocktail lounge,
construction of a new slot player's club, continued casino floor
reconfiguration, purchase of new slot machines and hotel room renovations.
Major 1993 capital expenditures included parking garage upgrades, restaurant
and room renovations, carpet replacement, and ongoing casino floor
reconfiguration, including additional slot machines, completion of the Taj
Entertainment Complex and modification of existing space to accommodate the
new games of race simulcasting and poker.
44
<PAGE>
Taj Associates' capital budget for fiscal 1996 is approximately $28.6
million and is expected to be financed principally by cash from operations.
The budget includes provisions for hotel tower and room renovations,
completion of a program to replace older slot machines, construction of a high
end slot player gaming area and club, ongoing casino floor reconfiguration and
limousine replacements. Taj Associates may be obligated to expend up to $30
million in improvements to the Steel Pier in order to maintain its Coastal
Area Facilities Review Act ("CAFRA") Permit, which is a condition to its
casino license. In March 1993, Taj Associates obtained a modification of its
CAFRA Permit providing for the extension of the required commencement and
completion dates of these improvements for one year based upon an interim use
of the Steel Pier for an amusement park. Taj Associates received additional
one-year extensions, most recently through March 1997, of the required
commencement and completion dates of the improvements based upon the same
interim use of the Steel Pier for an amusement park pursuant to a sublease
with an amusement park operator. See "Business--Properties--Steel Pier." In
addition, Taj Associates may be obligated to comply with certain proposed
regulations of the OSHA, if adopted. Taj Associates is unable to estimate the
cost, if any, to Taj Associates of such compliance. See "Regulatory Matters--
Other Laws and Regulations."
Taj Associates' capital expenditures historically included a component to
expand the facility as well as maintain its first class operation.
Historically, amounts necessary to maintain the first class nature of the
facility were approximately $6.4 million, $19.2 million and $24.0 million for
the years ended 1993, 1994 and 1995, respectively. The capital budget for 1996
includes approximately $24.3 million to maintain Taj Associates' facilities.
Except with respect to the Taj Mahal Expansion, management believes that
following the Merger Transaction, cash from the Atlantic City Properties'
operations, together with equipment financings, should be sufficient to meet
anticipated capital and debt service requirements through 1999. Commitments
are currently in place for only a portion of necessary equipment financings,
although management believes that it will be able to obtain the remainder of
such financings on customary terms acceptable to Trump Atlantic City. The Taj
Mahal Expansion is expected to depend in part on additional debt financing,
for which no commitments are in place. In addition, no assurances may be made
that Trump Atlantic City will successfully amend or replace the Working
Capital Facility. Finally, Taj Associates' obligations to the CCC with respect
to the Steel Pier may require additional financing. See "Business--
Prospectus." See "Risk Factors--Holding Company Structure," "--Risk in
Refinancing and Repayment of Indebtedness; Need for Additional Financing" and
"--Atlantic City Properties Expansion."
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza and the Taj Mahal occurring during the period from May through
September. Consequently, Trump Atlantic City's operating results during the
two quarters ending in March and December would not likely be as profitable as
the two quarters ending in June and September.
INFLATION
There was no significant impact on Plaza Associates' or Taj Associates'
respective operations as a result of inflation during 1995, 1994 or 1993.
45
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP ATLANTIC CITY ASSOCIATES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet of Trump Atlantic City as
of December 31, 1995 and the Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1995 (the "Unaudited Pro Forma
Consolidated Financial Statements") are set forth below.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared
assuming the Merger Transaction had occurred on December 31, 1995. The
Unaudited Pro Forma Consolidated Statements of Operations have been prepared
assuming that the Merger Transaction had occurred on January 1, 1995.
The Unaudited Pro Forma Financial Statements are presented for informational
purposes only and do not purport to present what the Balance Sheet would have
been had the Merger Transaction, in fact, occurred on December 31, 1995 or
what the results of operations for the year ended December 31, 1995 would have
been had the Merger Transaction, in fact, occurred on January 1, 1995, or to
project the results of operations for any future period.
The Unaudited Pro Forma Financial Statements of Trump Atlantic City give
effect to (a) consolidation of Taj Associates, which will be an indirect
wholly owned subsidiary of Trump Atlantic City after the Merger Transaction,
(b) the redemption of the Taj Bonds and the Taj Holding Class B Common Stock
and the retirement of the Plaza Notes, (c) the First Mortgage Note Offering,
(d) the contribution by THCR of a portion of the net proceeds of the Stock
Offering to Trump Atlantic City, (e) the "push down" by THCR of the purchase
accounting adjustments associated with the Merger with Taj Associates, (f) the
termination of the Taj Services Agreement, (g) the cancellation of payments to
Realty Corp. and First Fidelity in connection with the acquisition of the
Specified Parcels and (h) the payment to Bankers Trust to obtain releases of
the liens and guarantees that Bankers Trust has with respect to the Trump
Indebtedness. See "Summary--The Merger Transaction."
The pro forma financial statements do not include (i) the financial
statements of Taj Holding as Taj Holding will not be an operating entity or
incur any further costs and (ii) the financial statements of Merger Sub,
TM/GP, TTMI and TTMC as such companies are not operating entities and have
incurred no prior costs.
The Merger is expected to be accounted for as a "purchase" for accounting
and reporting purposes.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the Financial Statements and related notes thereto included elsewhere in
this Prospectus and the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
46
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP ATLANTIC CITY
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TRUMP MORTGAGE THCR OTHER THCR
ATLANTIC TAJ NOTE STOCK MERGER ATLANTIC CITY
CITY ASSOCIATES OFFERING OFFERING TRANSACTIONS PRO FORMA
------------ ------------ ---------- -------- ------------ -------------
(HISTORICAL) (HISTORICAL)
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ 15,937 $ 88,941 $1,100,000 (a) $200,000(j) $(10,000)(k) $ 50,225
(780,243)(b) (50,000)(l)
(390)(c) (9,900)(g)
(375,900)(d)
(28,000)(e)
(18,775)(f)
(43,450)(g)
(36,500)(h)
(1,495)(i)
Investment in THCR
Common Stock........... 10,500(j) (10,500)(l)
Accounts receivable,
net.................... 14,058 17,215 31,273
Inventories............. 2,609 7,161 9,770
Due from affiliates..... 1,298 1,298
Prepaid expenses and
other current assets... 5,045 3,864 8,909
-------- -------- ----------
Total current assets... 38,947 117,181 101,475
Property and Equipment,
net.................... 395,942 690,987 28,000 (e) 9,900 (g) 1,332,591
43,347 (l)
40,500 (m)
40,500 (m)
83,415 (n)
Land rights............. 29,320 29,320
Deferred loan costs..... 9,866 43,450 (g) 43,450
(9,866)(d)
Other assets............ 5,949 13,625 19,574
-------- -------- ----------
Total assets........... $480,024 $821,793 $1,526,410
======== ======== ==========
Current Liabilities:
Current maturities of
long-term debt........ $ 2,901 $ 920 (200)(h) $ 3,621
Accounts payable and
accrued expenses...... 22,655 8,335 30,990
Accrued interest
payable............... 1,497 9,154 (9,144)(f) 12
(1,495)(i)
Due to affiliates,
net................... 931 931
Other current
liabilities........... 5,257 35,253 40,510
-------- -------- ----------
Total current liabili-
ties.................. 32,310 54,593 76,064
Other long-term
liabilities............ 33,373 (9,631)(f) (17,153)(l) 6,589
Taj Bonds, net of
discount............... 649,139 (649,139)(b)
Plaza Notes, net of
discount............... 326,652 (326,652)(d)
First Mortgage Notes.... 1,100,000 (a) 1,100,000
Other long term debt.... 6,069 45,053 (44,744)(h) 6,378
Distribution payable to
Plaza Funding.......... 3,822 3,822
Deferred state income
taxes.................. 359 359
-------- -------- ----------
Total liabilities...... 369,212 782,158 1,193,212
Partners' Capital:
Contributed capital.... 94,087 123,765 210,500(j) (10,000)(k) 375,587
40,500 (m)
40,500 (m)
(123,765)(o)
Retained Earnings
(Deficit)............. 16,725 (84,130) (131,104)(b) 83,415 (n) (42,389)
(390)(c) 123,765 (o)
(59,114)(d)
8,444 (h)
-------- -------- ----------
Total Partners' capi-
tal................... 110,812 39,635 333,198
-------- -------- ----------
Total Liabilities and
Capital.............. $480,024 $821,793 $1,526,410
======== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
47
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP ATLANTIC CITY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TRUMP
TRUMP ATLANTIC
ATLANTIC TAJ PRO FORMA CITY
CITY ASSOCIATES ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------
(HISTORICAL) (HISTORICAL)
<S> <C> <C> <C> <C>
Revenues:
Gaming................... $298,073 $501,378 $ 799,451
Rooms.................... 19,986 43,309 63,295
Food and Beverage........ 44,602 57,195 101,797
Other.................... 9,594 15,864 25,458
-------- -------- ---------
Gross Revenues.......... 372,255 617,746 990,001
Less--Promotional
Allowances.............. 38,934 63,998 102,932
-------- -------- ---------
Net Revenues............ 333,321 553,748 887,069
-------- -------- ---------
Cost and Expenses:
Gaming................... 164,839 283,786 448,625
Rooms.................... 2,263 15,230 17,493
Food and Beverage........ 18,306 24,612 42,918
General and
Administrative.......... 68,550 96,843 $(2,725)(l) 152,981
(1,743)(r)
(7,944)(s)
Depreciation and
Amortization............ 16,213 43,387 416 (l) 64,747
4,731 (t)
Other.................... 3,363 3,363
-------- -------- ---------
273,534 463,858 730,127
-------- -------- ---------
Income from Operations..... 59,787 89,890 156,942
Interest Income............ 1,003 3,922 4,925
Interest Expense........... (44,264) (120,435) 30,821 (p) (129,360)
5,058 (q)
Other non-operating
expense................... (5,743) 3,120 (e) (2,623)
-------- -------- ---------
Income (loss) before
Extraordinary Loss and
state income taxes........ 10,783 (26,623) 29,884
Provision for state income
taxes(u).................. 0 0 0
-------- -------- ---------
Income (loss) before
Extraordinary Loss........ $ 10,783 $(26,623) $ 29,884
======== ======== =========
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
48
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION(DOLLARS IN THOUSANDS,
EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(a) To record the issuance of $1,100,000 aggregate principal amount of
Mortgage Notes issued by Trump Atlantic City and Trump Atlantic City
Funding.
(b) To record the redemption of the Taj Bonds at par which had a face value
of $780,243 and a book value of $649,139 as of December 31, 1995, and
an extraordinary loss of $131,494 which includes the redemption of the
Taj Holding Class B Common Stock (see note (c) below).
(c) To record the payment of $.50 for the redemption of the 780,243
outstanding shares of Taj Holding Class B Common Stock as an
extraordinary loss.
(d) To record the retirement of the Plaza Notes which have a face value of
$330,000 and a book value of $326,652 as of December 31, 1995 for
$375,900 and related deferred loan costs, resulting in an extraordinary
loss of $59,114.
(e) To record the payment of $28,000 in connection with exercise of the
Trump Plaza East Purchase Option and the effect of the termination of
the Trump Plaza East lease and the $3,120 of associated annual
expenses.
(f) To record the payment of accrued interest on the redemption of the Taj
Bonds as of December 31, 1995, including $9,631 of the Additional
Amount.
(g) To record the payment of fees and expenses associated with the Merger
Transaction.
(h) To record the satisfaction of indebtedness under the NatWest Loan which
had a book value of $44,944 for $36,500 and an extraordinary gain of
$8,444 resulting from such satisfaction.
(i) To record the payment of accrued interest on the retirement of the
Plaza Notes as of December 31, 1995.
(j) To record the contribution by THCR to Trump Atlantic City (on behalf of
and at the direction of THCR Holdings) of a portion of the net proceeds
from the Stock Offering and 500,000 shares of THCR Common Stock for the
purchase of the Specified Parcels (see note (l) below). Assumes the
underwriters' over-allotment option is not exercised.
(k) To record the payment to Bankers Trust to obtain certain releases of
the liens that Bankers Trust has with respect to the Trump
Indebtedness. The obligation under this indebtedness is a personal
liability of Trump and, accordingly, the release of indebtedness is
considered a payment to Trump and a reduction of the interests
attributable to him as such payment would only occur as part of the
Merger Transaction.
(l) To record the purchase of the Specified Parcels and the release of the
Taj Associates-First Fidelity Guarantee, the elimination of the lease
payments on the Specified Parcels and the additional depreciation
associated with the purchase. The aggregate cost of acquiring the
Specified Parcels is $50,000 in cash and the contribution by THCR to
Trump Atlantic City (on behalf of and at the direction of THCR
Holdings) of 500,000 shares of Common Stock valued at $10,500 (an
average value of $21 per share of THCR Common Stock based on the price
of the THCR Common Stock several days before and after the date of the
amended Merger Agreement). Taj Associates had accrued $17,153 with
respect of its obligations under the Taj Associates -- First Fidelity
Guarantee.
(m) To record the contribution by Trump to Trump Atlantic City (on behalf
and at the direction of THCR Holdings) of all of his direct and
indirect ownership interest in 50% of Taj Associates and the purchase
of the Taj Holding Class A Common Stock by THCR which is pushed down to
Taj Associates. THCR will pay $30 for each of the 1,350,000 outstanding
shares of Taj Holding Class A Common Stock which is payable at the
option of the holder in cash or shares of THCR Common Stock. It is
assumed herein that all holders elect to receive cash.
(n) To record the historical book value of Taj Associates and Taj Funding
($39,635), as adjusted for the pro forma extraordinary loss on the
redemption of the Taj Bonds ($131,494) and the extraordinary gain
resulting from the satisfaction of indebtedness under the NatWest Loan
($8,444), which results in a negative book value of $83,415, as part of
the push down of the cost of the purchase of the Taj Holding Class A
Common Stock by THCR.
49
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS EXCEPT PER SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(o) To reclassify the remaining capital deficit of Taj Associates to
contributed capital as the carryforward accumulated deficit should be
that of the Company in accordance with purchase accounting.
(p) To record adjustments to historical interest expense to give effect to
the Merger Transaction as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
(i) Elimination of interest and discount accretion on the
redemption of the Taj Bonds and the Plaza Notes (146,714)
(ii) Elimination of accretion on the Taj Associates--First
Fidelity
Guarantee (2,375)
(iii) Elimination of interest on the NatWest Loan (4,281)
(iv) Elimination of refinancing transaction expenses (1,787)
(v) Elimination of amortization of deferred offering costs (2,973)
(vi) Reflects interest and amortization of deferred loan
costs on the Mortgage Notes 127,849
---------
Pro Forma Adjustment $ (30,281)
=========
</TABLE>
(q) To eliminate interest expense (including amortization of deferred
financing costs) on the PIK Notes which were redeemed with the proceeds
contributed by THCR Holdings to Trump Atlantic City from the offering
of the Senior Notes.
(r) To record the elimination of the fee resulting from the termination of
the Taj Services Agreement.
(s) To reflect the reduction of identifiable costs resulting from the
consolidation of departments and the reduction of personnel. Management
believes that within two years, annual cost savings, from the Merger
Transaction will total $18.20 million.
(t) To record the additional depreciation expense resulting from the
allocation of the purchase price ($174,315--see notes (g), (m) and (n)
above) to property and equipment based on an appraisal. Amounts are
being allocated to land ($8,715) and building ($165,600) based on a pro
rata basis and are being depreciated over the remaining life of the
building (35 years).
(u) A provision for state taxes is not required as the state tax net
operating losses are used to offset pro forma taxable income.
50
<PAGE>
BUSINESS
Trump Atlantic City agreed to acquire as part of the Merger Transaction, all
of the outstanding equity interests of Trump Taj Mahal Associates, which owns
and operates the Trump Taj Mahal Casino Resort. The Merger Transaction will
create one of the largest casino entertainment companies in the United States
by combining into one entity, Trump Atlantic City, two "Four Star" Atlantic
City casino hotels. Upon consummation of the Merger Transaction, Trump
Atlantic City, an indirect subsidiary of THCR, will own and operate the Taj
Mahal and Trump Plaza. The Taj Mahal is currently Atlantic City's largest
casino hotel, and Trump Plaza is expected to be the largest casino hotel in
Atlantic City upon completion of the Trump Plaza Expansion. Following the
consummation of the Merger Transaction, Trump Atlantic City plans to undertake
the Taj Mahal Expansion.
The acquisition of the Taj Mahal will strengthen Trump Atlantic City's
position as a leader in the casino entertainment industry through its
ownership of two successful land-based casino hotels. Furthermore, the Merger
Transaction will enhance Trump Atlantic City's presence in the growing
Atlantic City market, which, in terms of gaming revenues, has demonstrated a
ten-year compound annual growth rate of 5.8% and a growth rate of 9.5% for
calendar year 1995 versus calendar year 1994. After giving effect to the
Merger Transaction and the Trump Plaza Expansion, Trump Atlantic City will
have approximately one-quarter of Atlantic City's casino square footage, slot
machines, table games and hotel room inventory. In addition, the combination
of the Taj Mahal with Trump Atlantic City's existing operations will provide
opportunities for operational efficiencies, economies of scale and benefits
from the expertise and experience of management at the two operating entities.
Management believes Trump Atlantic City will benefit from the following
factors:
. LEADING ATLANTIC CITY FACILITIES. Upon consummation of the Trump Plaza
Expansion, Trump Atlantic City will own and operate the two largest
casino hotel properties in Atlantic City, both of which are strategically
located on The Boardwalk. Trump Atlantic City believes that the Atlantic
City Properties' prime locations, reputations for high quality amenities
and first-class customer service and targeted marketing strategies are
ideally suited to capitalize on the expected growth in the Atlantic City
gaming market. Management believes that its leading size and market share
in Atlantic City following the consummation of the Merger Transaction,
will provide it with a competitive advantage in marketing the Atlantic
City Properties, particularly to large convention groups and multi-day
stay destination resort visitors.
. ATLANTIC CITY PROPERTIES EXPANSION. Trump Atlantic City is in the process
of executing expansion projects at the Atlantic City Properties to
increase their gaming space and hotel room capacity, allowing Trump
Atlantic City to meet both existing demand and the anticipated demand
from the increased number of available rooms and infrastructure
improvements that are currently under development to enhance further the
"vacation destination appeal" of Atlantic City.
The following table profiles Trump Atlantic City's casino and hotel
capacity following the expansion of the Atlantic City Properties:
<TABLE>
<CAPTION>
TRUMP TAJ TRUMP PLAZA TAJ MAHAL
PLAZA(a) MAHAL EXPANSION(b)(c) EXPANSION(d) TOTAL
-------- ------- --------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Casino square footage... 75,395 120,000(e) 64,158 60,000 319,553(e)
Slot machines........... 2,368 3,550 1,898 2,500 10,316
Table games............. 97 169 44 -- 310
Hotel rooms............. 555 1,250 849 800 3,454
</TABLE>
---------------------
(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) Scheduled to be completed in the second quarter of 1996.
51
<PAGE>
(c) Includes the 15,000 square foot casino with 400 slot machines and 13
table games and 249 hotel rooms which have already opened at Trump
Plaza East. The remaining 91 hotel rooms and suites are scheduled to be
opened by the end of April 1996. Also reflects nine super suites
scheduled to be opened early in 1997 and not otherwise included in the
"Trump Plaza Expansion."
(d) Plans for the Taj Mahal Expansion, scheduled to be completed early in
1998, are preliminary and subject to modification. There can be no
assurance that the Taj Mahal Expansion will be completed as indicated.
(e) Excludes a 12,000 square foot poker, keno and race simulcasting room
which contains 64 poker tables.
. OPERATING SYNERGIES. Trump Atlantic City intends to capitalize on the
opportunities for efficiencies which can be generated by integrating
certain operations of the Atlantic City Properties which have previously
been operated separately, although there can be no assurance that any
cost savings will be realized. Management has identified certain
potential cost savings which Management estimates, by the end of the
second year following the Merger Transaction, to be approximately $18-20
million on an annual basis. Management believes that it will be able to
consolidate certain departments at the Atlantic City Properties, reduce
general and administrative expenses through possible personnel reductions
and the consolidation of certain marketing efforts, and reduce operating
costs through efficiencies that are expected to result from the combined
purchasing power of the Atlantic City Properties.
. THE "TRUMP" NAME. Trump Atlantic City capitalizes on the widespread
recognition of the "Trump" name and its association with high quality
amenities and first class service. To this end, Trump Atlantic City
provides a broadly diversified gaming and entertainment experience
consistent with the "Trump" name and reputation for quality, tailored to
the gaming patron in the Atlantic City market.
ATLANTIC CITY PROPERTIES
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 main highway into Atlantic City
makes it highly accessible for both "drive-in" and "walk-in" patrons. Upon
completion of the Trump Plaza Expansion, Trump Plaza's casino floor space
would be the largest in Atlantic City, increasing from 75,395 square feet to
an aggregate of approximately 139,553 square feet of gaming space, housing a
total of 4,266 slot machines and 141 table games. Trump Plaza's hotel capacity
would increase to a total of 1,404 guest rooms from 555 rooms, making Trump
Plaza's guest room inventory the largest in Atlantic City.
Trump Atlantic City 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 of $42.5 million. Upon completion, Trump World's Fair would add
49,272 square feet of casino floor space, approximately 15,872 of which are
directly accessible from The Boardwalk and 500 hotel rooms, connected with the
current 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. See "Risk
Factors--Atlantic City Properties Expansion."
52
<PAGE>
Trump Plaza has opened the casino and 249 rooms at Trump Plaza East, located
adjacent to Trump Plaza's existing facility. Management intends to open the
remaining rooms and suites at Trump Plaza East by April 1996. Trump Plaza East
has 15,000 square feet of casino space and, when fully opened, will have 349
hotel rooms. Trump Plaza currently leases Trump Plaza East and intends to
exercise its option to acquire it from an unaffiliated entity. See
"Management--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 it better to meet demand and
accommodate its casino guests, as well as to host additional and larger
conventions and corporate meetings.
The following table details plans for the Trump Plaza Expansion:
<TABLE>
<CAPTION>
TRUMP PLAZA TRUMP PLAZA TRUMP WORLD'S
FACILITY(a) EAST(b) FAIR TOTAL
----------- ----------- ------------- -------
<S> <C> <C> <C> <C>
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
</TABLE>
- ---------------------
(a) Includes the 2,000 square foot area which connects 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 April 1996. Also reflects
the nine super suites are scheduled to be opened early in 1997 and not
otherwise included in the "Trump Plaza Expansion."
Management 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.
THE TAJ MAHAL
The Taj Mahal is currently the largest casino hotel in Atlantic City and has
ranked first among all Atlantic City casinos in terms of total gaming
revenues, table revenues and slot revenues since it commenced operations in
1990. The Taj Mahal capitalizes on the widespread recognition and marquee
status of the "Trump" name and its association with high quality amenities and
first-class service as evidenced by its "Four Star" Mobil Travel Guide rating.
Management believes that the breadth and diversity of the Taj Mahal's casino,
entertainment and convention facilities and its status as a "must see"
attraction will enable the Taj Mahal to benefit from the expected continued
growth of the Atlantic City market.
In recent years, under the direction of Trump and the management team led by
Nicholas L. Ribis, its Chief Executive Officer, Taj Associates has completed
construction of the Taj Entertainment Complex, reconfigured and expanded the
casino floor to provide race simulcasting, poker wagering and the recently
introduced game of keno and increased the number of poker tables and slot
machines. The Taj Mahal's poker room is the largest in Atlantic City, which
management believes adds to its overall gaming mix. Taj Associates continually
monitors operations to adapt to and anticipate industry trends. Since 1994,
the Taj Mahal has embarked on a strategy to refurbish all of its hotel guest
rooms and corridors by April 1996 and to replace all of its existing slot
machines by the middle of 1996 with new, more efficient machines with bill
collectors. Moreover, to further attract high-end players, the Taj Mahal has
recently opened the "Dragon Room," an Asian themed table gaming area with 16
tables games, and is currently in the process of constructing "Sultan's
Palace," a separate 5900 square-foot high-end slot lounge and private club to
be completed in the second quarter of 1996.
53
<PAGE>
The Taj Mahal Expansion. Following the consummation of the Merger
Transaction, management plans to undertake an expansion plan at the Taj Mahal
to meet both existing demand and the increase in demand that management
anticipates will result from the increased number of rooms and infrastructure
improvements that are currently being implemented to enhance further the
"vacation destination appeal" of Atlantic City. It is currently expected that
the Taj Mahal Expansion will be funded principally out of the Atlantic City
Properties' cash from operations and is scheduled to be completed in phases
from the first quarter of 1997 through early 1998. The Taj Mahal Expansion,
the plans for which are subject to modification, involves the construction of
an approximately 2,000 space expansion of the Taj Mahal's existing self-
parking facilities and a new 10,000 seat arena adjacent to the Taj Mahal, each
scheduled to be completed in the first quarter of 1997; the conversion of the
current site of the Mark Etess Arena into a new 60,000 square foot circus-
themed casino with 2,500 slot machines, scheduled to be completed in mid-1997;
and the construction of an approximately 800 room hotel tower adjacent to the
Taj Mahal's existing hotel tower, scheduled to be completed early in 1998. See
"Risk Factors--Atlantic City Properties Expansion--The Taj Mahal."
The following table details the plans for the Taj Mahal Expansion:
<TABLE>
<CAPTION>
CURRENT TAJ
TAJ MAHAL MAHAL
FACILITIES EXPANSION TOTAL
---------- --------- -------
<S> <C> <C> <C>
Casino square footage........................... 120,000(/1/) 60,000 180,000
Slot machines................................... 3,550 2,500 6,050
Table games..................................... 169 -- 169
Hotel rooms..................................... 1,250 800 2,050
</TABLE>
- ---------------------
(/1/) Excludes a 12,000 square-foot poker, keno and race simulcasting room which
contains 64 poker tables.
The following table summarizes the different phases of the Taj Mahal
Expansion with their associated cost estimates:
<TABLE>
<CAPTION>
PROJECT
PROJECT COST
------- -------
(IN MILLIONS)
<S> <C>
Parking facility, approximately 2,000 spaces................... $ 26.0
New arena...................................................... 15.0
Circus themed casino........................................... 53.3
Hotel tower, 800 rooms......................................... 100.9
------
Total.......................................................... $195.2
======
</TABLE>
It is expected that the Taj Mahal Expansion, the plans for which are subject
to modification, will be principally funded out of the cash from operations of
the Atlantic City Properties. If the operations of the Atlantic City
Properties do not generate the anticipated cash flow to fund the Taj Mahal
Expansion will depend on the ability to obtain debt financing for such
purposes in addition to that currently contemplated. There can be no assurance
that Taj Associates and Plaza Associates will be able to generate sufficient
cash flow from operations or to obtain debt financing on terms satisfactory to
Trump Atlantic City, if at all.
ATLANTIC CITY MARKETING STRATEGY
In order to provide a sharpened marketing focus at the different properties
and appeal to a variety of segments in the Atlantic City marketplace,
management intends to pursue a targeted marketing approach with respect to the
Atlantic City Properties:
The Taj Mahal. The Taj Mahal will continue to capitalize on its status as
Atlantic City's "must see" casino entertainment facility by offering
"something for everyone." The Taj Mahal has been successful in attracting all
segments of the gaming market because of the size and diversity of its
entertainment and gaming facilities. The Taj Mahal has been particularly
successful in attracting the segments of the Atlantic City gaming
54
<PAGE>
market that tend to wager more frequently and in larger denominations than the
typical Atlantic City gaming customer. To attract these high-end players, the
Taj Mahal offers international musical and entertainment attractions and has
recently opened the Dragon Room, an Asian themed gaming table game area, and
is in the process of constructing the Sultan's Palace, a high-end slots lounge
and private club.
Trump Plaza. Trump Plaza East has been integrated into Trump Plaza and
together is 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 which will have a direct
access escalator which will transport bus customers directly to a separate
casino entertainment area via a dedicated escalator. 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 efficiently
serve 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
"Comping" Strategy. In order to compete effectively with other Atlantic City
casino hotels, the Atlantic City Properties offer complimentary drinks, meals,
room accommodations and/or travel arrangements to their patrons
("complimentaries" or "comps"). Management focuses the Atlantic City
Properties' promotional activities, including complimentaries, on middle and
upper middle market "drive in" patrons who visit Atlantic City frequently and
have proven to be the most profitable market segment. Additionally, as a
result of increased regulatory flexibility, the Taj Mahal has implemented a
cash comping policy to high-end players in order to compete with similar
practices in Las Vegas and to attract international business.
Entertainment. Management believes headline entertainment, as well as other
entertainment and revue shows, are effective in attracting and retaining
gaming patrons. 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. The Xanadu Theater allows
the Taj Mahal to offer longer running, more established productions that cater
to the tastes of the Taj Mahal's high-end international guests. The Taj
Mahal's facilities also include the Mark Etess Arena, an approximately 63,000
square-foot exhibition hall and entertainment facility. The Xanadu Theater,
together with the Mark Etess Arena, and subsequent to the conversion of the
Mark Etess Arena, the new arena that is intended to be constructed in
connection with the Taj Mahal Expansion, afford, and is expected to afford,
the Taj Mahal more flexibility in the use of its facilities for sporting and
other headline programs. The Taj Mahal regularly engages well-known musicians
and entertainment personalities and will continue to emphasize weekend
"marquee" events such as Broadway revues, high visibility sporting events,
festivals and contemporary concerts to maintain the highest level of glamour
and excitement. Mid-week uses for the facilities include convention events and
casino marketing sweepstakes.
Player Development/Casino Hosts. The Atlantic City Properties currently
employ gaming representatives in New Jersey, New York and other states, as
well as several international representatives, to promote the
55
<PAGE>
Atlantic City Properties 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. The Atlantic City Properties' casino hosts assist
patrons on the casino floor, make room and dinner reservations and provide
general assistance. In addition, targeted marketing to international clientele
will be continued and expanded at the Taj Mahal through new sales
representatives in Latin America, Mexico, Europe, the Far East and the Middle
East. As a special bonus to high-end players, the Taj Mahal offers three clubs
for the exclusive use of select customers: the Maharajah Club for table game
players, the Presidents Club for high-end slot players, and the Bengal Club
for other preferred slot players. The Atlantic City Properties also plan to
continue the development of their slot and coin programs through direct mail
and targeted marketing campaigns emphasizing the high-end player.
Promotional Activities. The Trump Card constitutes a key element in the
Atlantic City Properties' 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. The Atlantic City Properties
design promotional offers, conveyed via direct mail and telemarketing, to
patrons expected to provide revenues based upon their historical gaming
patterns. Such information is gathered on slot wagering by the Trump Card and
on table game wagering by the casino game supervisors. Promotional activities
include the mailing of vouchers for complimentary slot play. The Atlantic City
Properties also utilize a special events calendar (e.g., birthday parties,
sweepstakes and special competitions) to promote its gaming operations.
The Atlantic City Properties conduct slot machine and table game tournaments
in which cash prizes are offered to a select group of players invited to
participate in the tournament based upon their tendency to play. Special
events, such as "Slot Sweepstakes" and "bingo" at the Taj Mahal, are designed
to increase mid-week business and will continue to be emphasized throughout
1996. Players at these tournaments tend to play at their own expense during
"off-hours" of the tournament. At times, tournament players are also offered
special dining and entertainment privileges that encourage them to remain at
the Atlantic City Properties.
Bus Program. Trump Plaza and the Taj Mahal each have bus programs which
transport approximately 2,400 and gaming patrons per day during the week
and 3,500 and gaming patrons per day on the weekends, respectively.
Trump Plaza's Transportation Facility (as defined) contains 13 bus bays and is
connected by an enclosed pedestrian walkway to Trump Plaza, and the Taj Mahal
has an 18 bay bus terminal.
Credit Policy. Historically, the Atlantic City Properties have 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 at Trump
Plaza was approximately 18%, 17%, and 18%, respectively. As part of Trump
Plaza's business strategy, Trump Plaza has imposed stricter standards on
applications for new or additional credit. For the years ended December 31,
1993, 1994 and 1995, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 23.5%, 22.8% and 24.5%, respectively.
FACILITIES AND AMENITIES
Trump Plaza. 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.
Trump Plaza East recently opened the 15,000 square foot Ocean View Casino
and Bar and 249 of its 349 hotel rooms. The Ocean View Bar and Casino 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
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58 square foot video wall, complemented by six additional television sets
along the bar. With its high ceilings and windows overlooking the Atlantic
Ocean and The Boardwalk, Trump Plaza is creating a new and exciting
entertainment environment for its casino patrons.
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.
Trump Plaza's main tower's guest rooms are located in a tower which affords
most guest rooms a view of the ocean. While rooms are of varying size, a
typical guest room consists of approximately 400 square feet. Trump Plaza also
features 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 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 49,272 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
"--Properties--Trump Plaza--Trump World's Fair" and "Regulatory Matters--New
Jersey Gaming Regulations--Approved Hotel Facilities."
THE TAJ MAHAL
The Taj Mahal currently features Atlantic City's largest casino, with
120,000-square-feet of gaming space, 169 table games and 3,550 slot machines.
In addition, the Taj Mahal has a 12,000-square-foot poker, keno and race
simulcasting room with 64 poker tables, which was added in 1993 and expanded
in 1994. The casino's offerings include blackjack, progressive blackjack,
craps, roulette, baccarat, mini baccarat, red dog, sic-bo, pai gow, pai gow
poker, Caribbean stud poker, big six, mini big six and let it ride poker. In
December 1995, the Taj Mahal opened an Asian themed table game area which
offers 16 popular Asian table games catering to the Taj Mahal's growing Asian
clientele. In addition, as a special bonus to high-end players, Taj Associates
offers three clubs for the exclusive use of select customers: the Maharajah
Club for table game players, the Presidents Club for high-end slot players,
and the Bengal Club for other preferred slot players.
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The Taj Mahal currently consists of a 42-story hotel tower and contiguous
low-rise structure sited on approximately 17 acres of land. The Taj Mahal has
1,250 guest rooms (including 242 suites), 16 dining and 10 beverage locations,
parking for approximately 5,200 cars, an 18-bay bus terminal and approximately
65,000-square-feet of ballroom, meeting room and pre-function area space. The
Taj Mahal is also adding three nationally recognized themed restaurants: the
Hard Rock Cafe, the Rainforest Cafe and the All-Star Cafe. Construction costs
for each of the three deemed restaurants will be the obligation of the
lessees. However, the lease for the Rainforest Cafe will require Taj
Associates to contribute $2.5 million towards construction after the project
is completed and the restaurant opens for business. In addition, the Taj Mahal
features the Taj Entertainment Complex, a 20,000-square-foot multi-purpose
entertainment complex known as the Xanadu Theater with seating capacity for
approximately 1,200 people, which can be used as a theater, concert hall,
boxing arena or exhibition hall, and the Mark Etess Arena, which comprises an
approximately 63,000-square foot exhibition hall and entertainment facility.
The Xanadu Theater and the Mark Etess Arena have allowed the Taj Mahal to
offer longer running, more established productions that cater to the tastes of
the Taj Mahal's high-end international guests, and has afforded the Taj Mahal
more flexibility in the use of its facilities for sporting and other headline
programs. The Taj Mahal regularly engages well-known musicians and
entertainment personalities and will continue to emphasize weekend marquee
events such as Broadway revues, high visibility sporting events, international
festivals and contemporary concerts to maximize casino traffic and to maintain
the highest level of glamour and excitement at the Taj Mahal.
Management believes that the Taj Mahal's 1,250-room capacity and vast
casino, entertainment, convention and exhibition space, including the Mark
Etess Arena, make it a highly attractive convention and destination resort
facility at which visitors may stay for extended periods. In addition to its
normal advertising, Taj Associates actively promotes the Taj Mahal with
various local chambers of commerce, travel agencies which specialize in
convention travel and various corporate travel departments in order to attract
convention business.
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.
Both the Company and Taj Holding Management believe that this
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relatively slow growth is partially attributable to two key factors. First,
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. Secondly, 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 correlation between hotel room inventory and total casino
revenues.
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.
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. The Taj Mahal is approximately 1.5
miles from the site of the new convention center. 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 and to the Grand for
295 rooms (both of which are under construction) and to the Taj Mahal for
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."
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SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza and at the Taj Mahal during the period from May through
September, and with December and January showing substantial decreases in
activity. Revenues have been significantly higher on Fridays, Saturdays,
Sundays and holidays than on other days.
EMPLOYEES AND LABOR RELATIONS
TRUMP PLAZA
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
"Regulatory Matters--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.
TAJ MAHAL
Taj Associates has approximately 6,100 employees for the operation of the
Taj Mahal, of whom approximately 1,850 employees are covered by collective
bargaining agreements. Taj Associates believes that its relationships with its
employees are satisfactory and that its staffing levels are sufficient to
provide superior service. Since opening in April 1990, during which time some
collective bargaining agreements with various unions have expired prior to the
execution of new agreements, the business of Taj Associates has not been
interrupted due to any labor disputes. The collective bargaining agreement
with HERE Local 54, which covers substantially all of Taj Associates' hotel
and restaurant employees, was renegotiated in September 1994 and will expire
on September 14, 1999.
Certain Taj Associates' employees must be licensed under the Casino Control
Act. See "Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees."
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. Upon consummation of the Merger
Transaction, these parcels of land will secure the First Mortgage Notes. Upon
its acquisition, Trump Plaza East would also become subject to the mortgage
securing the First Mortgage Notes. See "Description of the First Mortgage
Notes--Security for the First Mortgage Notes."
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
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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 THCR.
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 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") (and, following the issuance of the First Mortgage Notes, the rights
of the First Mortgage Note Trustee) as leasehold mortgagee under 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
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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 connection with the issuance of the First
Mortgage Notes, the Mortgage will provide that Plaza Associates will assign
such rights to the First Mortgage Note Trustee.
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 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 on the Plaza Garage Parcel a ten-story parking garage capable of
accommodating approximately 2,650 cars and which includes offices and a bus
transportation center with bays accommodating up to 13 buses at one time. An
enclosed pedestrian walkway from the parking garage accesses Trump Plaza at
the casino level. Parking at the parking garage is available to Trump Plaza's
guests, as well as to the general public. 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 $1.3
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 Trump Plaza East Purchase Option, a five-
year option to purchase the fee and leasehold interests comprising Trump Plaza
East. 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--Plaza Associates--Liquidity and
Capital Resources" and "Management--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
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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 not exercised in connection
with the Merger Transaction, although there can be no assurance that such
extension would be granted. Failure of Trump Atlantic City 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 Trump Atlantic
City. See "Certain Transactions--Plaza Associates--Trump Plaza East."
Plaza Associates has substantially completed development 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 Atlantic City
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 "Management--Compensation Committee Interlocks
and Insider Participation--Certain Related Party Transactions of Trump."
Trump World's Fair. Pursuant to the Trump World's Fair Purchase Option, on
June 12, 1995, Plaza Associates acquired title to Trump World's Fair. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Plaza Associates--Liquidity and Capital Resources." Pursuant to an
easement agreement with The New 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.
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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 "Management--Compensation Committee Interlocks
and Insider Participation--Certain Related Party Transactions of Trump" and
"Regulatory Matters--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 and will be senior to the liens of mortgages associated with
the First Mortgage Notes. 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 and may be superior to the liens of mortgages associated with the
First Mortgage Notes.
TAJ MAHAL
Taj Associates owns and leases several parcels of land in Atlantic City, New
Jersey, each of which is used in connection with the operation of the Taj
Mahal and each of which is encumbered by the amended mortgage securing the Taj
Bonds, and the mortgage securing the $25 million Working Capital Facility.
Upon consummation of the Merger Transaction, these parcels of land will secure
the Working Capital Facility (or replacement facility) and the First Mortgage
Notes. All of the following properties (other than certain property underlying
the casino parcel and the facilities, which are owned by Taj Associates and
the office space leased in The Trump Tower) comprise the Specified Parcels.
See "Description of the Mortgage Notes--Security for the Mortgage Notes."
The Casino Parcel. The land comprising the site upon which the Taj Mahal is
located consists of approximately 17 acres, which are bounded by The Boardwalk
to the south, Maryland Avenue to the east, Pennsylvania Avenue to the west and
which extends to the north towards Pacific Avenue for approximately three-
quarters of a city block on the western portion of the site and two-thirds of
a city block on the eastern portion of the site. Construction was
substantially completed and the Taj Mahal was opened to the public on April 2,
1990.
Taj Entertainment Complex. The Taj Entertainment Complex is situated on a
parcel of land leased from Realty Corp. and features a 20,000 square foot
multi-purpose entertainment complex known as the Xanadu Theater with seating
capacity for approximately 1,200 people, which can be used as a theater,
concert hall, boxing arena or exhibition hall. In connection with the Merger
Transaction, Taj Associates will purchase the Taj Entertainment Complex.
Steel Pier. Taj Associates leases the Steel Pier from Realty Corp. In
connection with the Merger Transaction, Taj Associates will purchase the Steel
Pier. A condition imposed on Taj Associates' CAFRA Permit (which, in turn, is
a condition of Taj Associates' casino license) initially required that Taj
Associates begin construction of certain improvements on the Steel Pier by
October 1992, which improvements were to be completed within 18 months of
commencement. Taj Associates initially proposed a concept to improve the Steel
Pier, the estimated cost of which improvements was $30 million. Such concept
was approved by the New Jersey Department of Environmental Protection
("NJDEP"), the agency which administers CAFRA. In March 1993, Taj Associates
obtained a modification of its CAFRA Permit providing for the extension of the
required commencement and completion dates of the improvements to the Steel
Pier for one year based upon an interim use of the Steel Pier for an amusement
park. Taj Associates received additional one-year extensions, most recently
through March 1997, of the required commencement and completion dates of the
improvements of the Steel Pier based upon the same interim use of the Steel
Pier for an amusement park pursuant to a sublease ("Pier Sublease") with an
amusement park operator ("Pier Subtenant"). The Pier Sublease provides for a
five-year lease term through December 31, 1999. However, Taj Associates may
terminate the Pier Sublease after December 31 of each year if written notice
of termination is given to the Pier Subtenant on or before September 1 of such
year.
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Office and Warehouse Space. Taj Associates owns an office building located
on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Trump's Castle Associates which are presently leased to
commercial tenants and used for office space and vehicle maintenance
facilities. Taj Associates currently leases from Realty Corp a warehouse
complex of approximately 34,500 square feet. As a part of the Specified
Parcels purchase in connection with the Merger Transaction, Taj Associates
will purchase such warehouse.
Taj Associates has entered into a lease with The Trump-Equitable Fifth
Avenue Co., a corporation wholly owned by Trump, for the lease of office space
in The Trump Tower in New York City, which Taj Associates uses as a marketing
office. The monthly payments under the lease had been $1,000, and the premises
were leased at such rent for four months in 1992, the full twelve months in
1993 and 1994 and eight months in 1995. On September 1, 1995, the lease was
renewed for a term of five years with an option for Taj Associates to cancel
the lease on September 1 of each year, upon six months' notice and payment of
six months' rent. Under the renewed lease, the monthly payments are $2,184.
Parking. The Taj Mahal provides parking for approximately 5,200 cars of
which 4,600 spaces are located in indoor parking garages and 1,000 spaces are
located on land leased to Taj Associates by Realty Corp. In addition, Taj
Associates entered into a lease agreement with Trump's Castle Associates to
share its employee parking facilities. In connection with the Taj Mahal
Expansion, Taj Associates will expand its self-parking facilities by 2,200
spaces.
TRADEMARK/LICENSING
Pursuant to the License Agreement, Trump granted to THCR the world-wide
right and license to use 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.
The license is for a term of the later of (i) June 2015; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant
to an employment, management, consulting or similar services agreement with
THCR. Upon expiration of the term of the License, Trump will grant THCR a non-
exclusive license for a reasonable period of transition on terms to be
mutually agreed upon between Trump and THCR. Trump's obligations under the
License Agreement are secured by a security agreement, pursuant to which Trump
granted THCR a first priority security interest in the Marks for use in
connection with casino services, as well as related hotel, bar and restaurant
services. See "Risk Factors--Limitations on License of the Trump Name."
RESTRUCTURINGS
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
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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 Atlantic
City of $60 million aggregate principal amount of PIK Notes and PIK Note
Warrants to acquire an aggregate of $12 million in principal amount of
additional PIK Notes. Upon consummation of the refinancing, Plaza Funding held
a 1% equity interest in Plaza Associates and Plaza Holding held a 99% equity
interest.
THE 1991 TAJ RESTRUCTURING
During 1990 and 1991, Taj Associates experienced liquidity problems. Taj
Associates believes that these 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 and the Persian
Gulf War, as well as the risks inherent in the establishment of a new business
enterprise. Comparatively, excessive casino gaming capacity in Atlantic City
may also have contributed to Taj Associates' liquidity problems.
As a result of Taj Associates' liquidity problems, Taj Funding failed to
make its November 15, 1990 and May 15, 1991 interest payments on its Old Taj
Bonds, resulting in an event of default under the indenture with respect to
such Old Taj Bonds. During 1990 and 1991, Taj Associates also failed to pay
certain principal and interest installments on certain indebtedness due under
its loan with NatWest.
In order to alleviate its liquidity problems, during 1991, TTMC, Taj
Funding, Taj Associates and TTMI (together, the "Debtors") restructured their
indebtedness through the 1991 Taj Restructuring, which was a "prepackaged"
plan of reorganization under Chapter 11 of the Bankruptcy Code. At the time,
the Debtors believed that there was no alternative to their liquidity problems
other than filing petitions under the Bankruptcy Code. Taj Associates had been
unable to obtain additional financing, and Taj Funding was restricted from
amending the payment terms of the Old Taj Bonds outside of a case under the
Bankruptcy Code without the unanimous consent of the holders thereof. The
purpose of the 1991 Taj Restructuring was to improve the amortization schedule
and extend the maturity of Taj Associates' indebtedness by reducing and
deferring the Debtors' annual debt service requirements by (i) restructuring
Taj Associates' and affiliated entities' long-term indebtedness to NatWest,
First Fidelity and Bankers Trust and (ii) issuing the Taj Bonds with an
overall lower rate of interest as compared with Taj Funding's Old Taj Bonds.
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Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj
Associates issued to the holders of the Old Taj Bonds a general partnership
interest representing 49.995% of the equity of Taj Associates. Such holders in
turn contributed such partnership interest to Taj Holding. Taj Funding and Taj
Holding also issued the Units to the holders of the Old Taj Bonds. As part of
the 1991 Taj Restructuring, TM/GP, which has no other assets, received a
49.995% partnership interest in Taj Associates from Taj Holding. Trump also
contributed to Taj Holding a 50% ownership interest in TTMC, which owns a .01%
interest in Taj Associates, in exchange for the Taj Holding Class C Common
Stock, as described below.
At the time of these transfers, Taj Holding issued 1,350,000 shares of Taj
Holding Class A Common Stock and 729,458 shares of Taj Holding Class B Common
Stock to the holders of the Old Taj Bonds and 1,350,000 shares of Taj Holding
Class C Common Stock to Trump. In accordance with the terms of the Taj Bond
Indenture, a portion of the interest on the Taj Bonds may be paid in
additional Taj Bonds. At May 15, 1992, 1993, 1994 and 1995, 8,844 Units
comprised of $8,844,000 of Taj Bonds and 8,844 shares of Taj Holding Class B
Common Stock, 14,579 Units comprised of $14,579,000 of Taj Bonds and 14,579
shares of Taj Holding Class B Common Stock, 12,249 Units comprised of
$12,249,000 of Taj Bonds and 12,249 shares of Taj Holding Class B Common Stock
and 15,112 Units comprised of $15,112,000 of Taj Bonds and 15,112 shares of
Taj Holding Class B Common Stock, respectively, were issued in lieu of the
payment of a portion of the cash interest on the outstanding Taj Bonds.
CERTAIN INDEBTEDNESS
THCR
THCR Holdings and THCR Funding (the "THCR Obligors") are the issuers of $155
million principal amount of Senior Notes. The Senior Notes are the joint and
several obligations of the THCR Obligors. Interest on the Senior Notes is
payable semiannually in arrears. In connection with the Merger Transaction,
the THCR Obligors will solicit from the holders of the Senior Notes the waiver
of, and the consent to modify, certain provisions of the Senior Note
Indenture.
The Senior Notes mature on June 15, 2005. The Senior Notes are not
redeemable prior to June 15, 2000, except pursuant to a Required Regulatory
Redemption (as defined in the Senior Note Indenture). Thereafter, the Senior
Notes may be redeemed at the option of the THCR Obligors, in whole or in part,
at any time on or after June 15, 2000 at the redemption prices set forth in
the Senior Note Indenture, together with accrued and unpaid interest to the
date of redemption.
The obligations of the THCR Obligors under the Senior Note Indenture are
secured by (1) an assignment and pledge to the trustee under the Senior Note
Indenture (the "Senior Note Trustee") of (a) 99% of the general partnership
interests in Plaza Associates, (b) 100% of the capital stock of Plaza Funding
(the holder of the remaining 1% general partnership interest in Plaza
Associates, which 1% is pledged exclusively for the benefit of the holders of
the Plaza Notes until the Plaza Note Purchase, at which time such interest
will be pledged for the exclusive benefit of the holders of the Senior Notes),
(c) 100% of the general partnership interests in Trump Atlantic City, (d) 100%
of the capital stock of Plaza Holding Inc., (e) 100% of the capital stock of
Trump Indiana, (f) 100% of the capital stock of THCR Funding, (g) other equity
interests issued from time to time by THCR Holdings or any of its Subsidiaries
(as defined in the Senior Note Indenture) and (h) promissory notes issued by
THCR Holdings or any of its Subsidiaries, excluding Unrestricted Subsidiaries
(as defined in the Senior Note Indenture), from time to time directly owned or
acquired by THCR Holdings; (2) certain remaining net proceeds from the June
1995 Offerings; and (3) certain proceeds from time to time received,
receivable or otherwise distributed in respect of the assets described in
clauses (1) and (2) above (collectively, the "Senior Note Collateral"). The
security interests in the Senior Note Collateral are first priority security
interests and are exclusive except to the extent required by the Plaza Note
Indenture to equally and ratably secure the Plaza Notes (prior to the
retirement of the Plaza Notes) with respect to any of the direct or indirect
equity interests in Plaza Associates, Plaza Funding, Trump Atlantic City and
Plaza Holding Inc. (as described below). Any equity interests in Subsidiaries
of THCR Holdings which are acquired by THCR Holdings will be assigned and
pledged to the Senior Note Trustee and the security interests granted in such
equity interests will be exclusive, first priority security interests and
holders of the First Mortgage Notes will have no liens thereon.
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PLAZA ASSOCIATES
The Plaza Notes, $330 million of which are outstanding, were issued by Plaza
Funding, with Plaza Associates providing a full and unconditional guaranty
thereof. In connection with the Merger Transaction, the Plaza Notes will be
repurchased or defeased. 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.
Until the Plaza Note Purchase, Plaza Funding and Plaza Associates'
obligations under the Plaza Note Indenture will be secured principally by (i)
the Plaza Note Mortgage encumbering substantially all of Plaza Associates'
assets (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) THCR Holdings' 99% general partnership interest in Trump
Atlantic City, (y) Trump Atlantic City's 99% general partnership interest in
Plaza Associates and (z) 100% of the capital stock of Plaza Funding and Plaza
Holding Inc. (the holder of the remaining 1% of the equity interests in Trump
Atlantic City (collectively, the "Plaza Note Security"). Following the Plaza
Note Purchase in connection with the Merger Transaction, the Plaza Note
Security will be released and (i) subject to clause (ii), Plaza Associates'
assets, together with Taj Associates' assets will secure the First Mortgage
Notes and (iii) the direct or indirect Senior Notes will have an exclusive
security interest in 100% of the equity of all of THCR Holdings' Subsidiaries
(as defined in the Senior Note Indenture).
In addition to the foregoing, Plaza Associates' consolidated long-term
indebtedness includes approximately $3.0 million of outstanding mortgage notes
described under "--Properties" as of December 31, 1995.
Taj Associates
Taj Bonds. In connection with the 1991 Taj Restructuring, Taj Funding and
Taj Holding issued Units, each of which was comprised of $1,000 principal
amount of Taj Bonds and one share of Taj Holding Class B Common Stock.
Pursuant to the Taj Bond Indenture, Taj Funding may issue up to $860 million
of Taj Bonds. On October 4, 1991, at the time the Units were issued, the
principal amount of Taj Bonds issued was $729,458,000.
As of December 31, 1995, the principal amount of Taj Bonds issued was
$780,242,000. The Taj Bonds have a stated maturity date of November 15, 1999.
The Taj Bonds bear interest at 11.35% per annum. Interest on the Taj Bonds is
due semi-annually on each November 15 and May 15. Interest on the Taj Bonds
must be paid in cash on each interest payment date at a rate of 9.375% per
annum, and, in addition, effective May 15, 1992, and annually thereafter, an
additional amount of interest in cash or additional Taj Bonds or a combination
thereof, is payable in an amount to increase the interest paid to 11.35% per
annum. The obligations of Taj Funding to pay the principal of, premium, if
any, and interest on the Taj Bonds are guaranteed by Taj Associates. The Taj
Bonds are secured by an assignment by Taj Funding to the trustee under the Taj
Bond Indenture (the "Taj Bond Trustee") of a promissory note, dated as of
October 4, 1991, issued by Taj Associates to Taj Funding (the "Taj Bond
Partnership Note") in a principal amount of $675 million, with payment terms
substantially similar to the payment terms of the Taj Bonds, which is in turn
secured by an amended mortgage, dated as of October 4, 1991, by Taj Associates
as mortgagor and Taj Funding as mortgagee, securing payment of the Taj Bond
Partnership Note, as amended to reflect the terms of the Taj Bonds (the
"Amended Taj Mortgage"), which has been assigned to the Taj Bond Trustee and
encumbers Taj Associates' interest in the Taj Mahal and substantially all of
the other assets of Taj Associates, excluding certain furniture, furnishings,
fixtures, machinery and equipment which is subject to the lien of the NatWest
Loan. In addition, the Taj Bond Partnership Note is secured by a second,
subordinated lien on all the real estate owned by Realty Corp. Moreover, Taj
Associates has acquired an option to purchase the real estate owned by Realty
Corp., and such option has been assigned to the Taj Bond Trustee as security
for the Taj Bonds.
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NatWest Loan. On November 3, 1989, Taj Associates entered into the NatWest
Loan, which provided financing of $50 million for certain items of furniture,
fixtures and equipment installed in the Taj Mahal. On October 4, 1991, in
connection with the 1991 Taj Restructuring, the NatWest Loan was amended in
order to, among other things, modify the interest rate and other payment
terms.
As of December 31, 1995, the outstanding principal amount outstanding under
the NatWest Loan was $44,944,000, and the interest rate was 9.375% per annum.
Principal and interest on the NatWest Loan are payable as follows:
(i) on the last business day of each month until the earlier of the last
business day of October 1999 or the date the NatWest Loan, together with
all interest thereon, is paid in full, the sum of $416,667, to be applied
first in respect of accrued interest on the NatWest Loan and thereafter, to
the extent available, in reduction of the principal of the NatWest Loan;
provided, however, up to $525,000 of such payments received by NatWest in
any year shall be paid to either First Fidelity or Bankers Trust for
application by First Fidelity in payment of obligations of Taj Associates
to First Fidelity, and by Bankers Trust on behalf of Taj Associates on
behalf of TTMI in payment of interest on the TTMI Note. Such amounts paid
by NatWest shall not have been applied by NatWest in payment of the
principal of, interest on or any other sums due in respect of the NatWest
Loan or otherwise payable to NatWest;
(ii) on May 15 of each year (if any of the principal of or interest on
the NatWest Loan is then outstanding), commencing on May 15, 1992 to and
including May 15, 1999, an amount (the "EACF
Payment") equal to 16.5% (or, if the First Fidelity Loan shall have been
paid in full on or prior to any such May 15, 20%) of Excess Available Cash
Flow (as defined in the Taj Bond Indenture) for the preceding calendar year
in excess of the Additional Amount (as defined in the Taj Bond Indenture)
payable on such May 15 (such remaining Excess Available Cash Flow, the
"Remaining EACF Amount"), if any, to be applied first in reduction of then
accrued but unpaid interest on and then to principal of the NatWest Loan;
and
(iii) on November 15, 1999 the outstanding principal of and all accrued
but unpaid interest on the NatWest Loan.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus any
after-acquired furniture, fixtures and equipment that replaces such property,
or of the same type; provided, however, that the NatWest Loan may be
subordinated to a lien to secure purchase money financing of such after-
acquired property which does not exceed 50% of the purchase price of such
after-acquired property.
Upon the occurrence of an event of default under the NatWest Loan,
including, without limitation, the sale of any real estate by Realty Corp. for
less than the release price set forth in the First Fidelity Loan (as defined
below) without the prior written consent of NatWest, NatWest may accelerate
any and all indebtedness outstanding under the NatWest Loan.
Taj Associates intends to satisfy the NatWest Loan in connection with the
Merger Transaction.
First Fidelity Loan/Specified Parcels. On November 22, 1988, First Fidelity,
Realty Corp. and Trump, as guarantor, entered into the First Fidelity Loan in
the aggregate principal amount of $75,000,000. Pursuant to an amendment to the
First Fidelity Loan, effective as of October 4, 1991, the rate of interest
payable was modified, the dates of payment of principal and interest were
deferred and accrued interest in the amount of $1,793,750 was capitalized. As
of December 31, 1995, the principal amount outstanding on the First Fidelity
Loan was approximately $78 million. Unpaid principal and accrued interest on
the First Fidelity Loan is due and payable on November 15, 1999, unless
otherwise extended in connection with the extension of the maturity of the Taj
Bonds.
Taj Associates currently leases the Specified Parcels from Realty Corp., a
corporation wholly owned by Trump, pursuant to an Amended and Restated Lease
Agreement, dated as of October 4, 1991 (the "Specified
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Parcels Lease"). Pursuant to the Specified Parcels Lease, Taj Associates is
obligated to pay Realty Corp. $3.3 million plus 3.5% of the Remaining EACF
Amount per year. Such annual payment, however, is reduced by (i) all of the
Base Fees (as defined therein) and the first $75,000 of the Incentive Fees (as
defined therein) payable to Trump pursuant to the Taj Services Agreement which
are each assigned by Trump to First Fidelity (which amounts were $575,000 in
1995) and (ii) the portion of monies payable by Taj Associates to NatWest to
be remitted to First Fidelity (which amounts were $525,000 in 1995). The
Specified Parcels Lease expires on December 31, 2023; however, the lease may
be terminated prior to such date following a foreclosure or similar proceeding
on the Specified Parcels by First Fidelity, the holder of a first mortgage
lien on the Specified Parcels which secures the First Fidelity Loan (the
"First Fidelity Mortgage") or any other mortgagee thereof.
The Specified Parcels Lease provides that, upon payment of the First
Fidelity Loan, and upon discharge of the First Fidelity Mortgage, Taj
Associates may purchase the Specified Parcels for ten dollars. Payment of the
First Fidelity Loan is guaranteed by a guarantee (limited to any deficiency in
the amount owed under the First Fidelity Loan when due, up to a maximum of $30
million) by Taj Associates (the "Taj Associates-First Fidelity Guarantee"), a
personal guarantee by Trump (pursuant to which First Fidelity has agreed to
forbear from asserting any personal claim with respect thereto in excess of
approximately $19.2 million) (the "Trump-First Fidelity Guarantee") and
limited recourse guarantees by TTMC (the "TTMC-First Fidelity Guarantee") and
TTMI (as amended, the "TTMI-First Fidelity Guarantee" and, together with the
Trump-First Fidelity Guarantee and the TTMC-First Fidelity Guarantee, the
"Other First Fidelity Guarantees"). The Other First Fidelity Guarantees are
secured by pledges by Trump of 62.5% of his Taj Holding Class C Common Stock,
TTMC Common Stock and TTMI Common Stock and all of his shares of Realty Corp.
Common Stock, and pledges by TTMI and TTMC of 62.5% and 31.25%, respectively,
of their equity and financial interests as general partners in Taj Associates
(all such interests pledged to First Fidelity as security for the Other First
Fidelity Guarantees are referred to herein as the "Other First Fidelity
Guarantee Collateral"). First Fidelity's recourse under the TTMC-First
Fidelity Guarantee and the TTMI-First Fidelity Guarantee is limited to the
collateral pledged by TTMC and TTMI, respectively.
Upon the satisfaction in full of the obligations due under the First
Fidelity Loan at a negotiated amount of $50 million and 500,000 shares of THCR
Common Stock, Taj Associates will purchase the Specified Parcels from Realty
Corp. In connection therewith, First Fidelity will (i) release and discharge
Realty Corp. from the First Fidelity Loan and release its lien on the
Specified Parcels, (ii) release Taj Associates from the Taj Associates-First
Fidelity Guarantee, (iii) release each of Trump, TTMC and TTMI from their
respective obligations under the Other First Fidelity Guarantees and (iv)
release its lien on the Other First Fidelity Guarantee Collateral. In
addition, the purchase of the Specified Parcels will eliminate Taj Associates'
current obligations under the Specified Parcels Lease and the termination
rights with respect to the Specified Parcels Lease, thereby facilitating the
Taj Mahal Expansion by securing the future use of the Specified Parcels by Taj
Associates. Holders of the First Mortgage Notes will have a security interest
in the Specified Parcels.
TTMI Note. On April 30, 1990, Trump loaned $25 million to Taj Associates on
an unsecured basis, in exchange for a note payable to Trump (the "Old Taj
Associates Note"). The Old Taj Associates Note was pledged to certain lenders
to Trump, including Bankers Trust, as security for certain of Trump's personal
indebtedness. On October 4, 1991, in connection with the 1991 Taj
Restructuring and in order to facilitate the reorganization of Taj Associates
and certain of its affiliates, the Old Taj Associates Note was canceled and,
in lieu thereof, TTMI, a corporation wholly owned by Trump which was formed
for the purpose of holding a general partnership interest in Taj Associates,
executed the TTMI Note, a promissory note payable to Trump in the principal
amount of $27,188,000. At such time, in order to secure the Trump
Indebtedness, Trump pledged to certain lenders, including Bankers Trust, his
right, title and interest in the TTMI Note. As additional security for the
Trump Indebtedness, Trump pledged to Bankers Trust all of his shares of Taj
Holding Class C Common Stock, TTMC Common Stock and TTMI Common Stock, which
pledges are subordinate, in part, to the liens of First Fidelity in such
collateral. In addition, TTMI and TTMC have each guaranteed the repayment of
the Trump Indebtedness, which limited recourse guarantees are secured by
pledges by TTMI and TTMC to Bankers Trust and certain other lenders of 100%
and 50%, respectively, of their equity and financial interests as general
partners in Taj Associates, which pledges are subordinate, in part, to the
liens of First Fidelity in such collateral.
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In connection with the Merger Transaction, Bankers Trust will receive $10
million from Taj Associates in respect of certain of the Trump Indebtedness.
Upon such payment, Bankers Trust will release (i) its lien on the TTMI Note,
(ii) its liens on the remaining collateral pledged by Trump to Bankers Trust
and (iii) TTMI and TTMC from their respective obligations as guarantors of
certain of Trump's personal indebtedness and the liens securing such
obligations. See "Underwriting." All other liens in respect of the foregoing
in favor of other lenders holding a portion of the Trump Indebtedness will be
released at such time.
Working Capital Facility. On November 14, 1991, Taj Associates entered into
the Working Capital Facility with Foothill Capital Corporation ("Foothill") in
the amount of $25 million, which is secured by a lien on Taj Associates'
assets senior to the lien of the Taj Bond Mortgage securing the Taj Bonds. On
September 1, 1994, Taj Associates and Foothill extended the maturity of the
Working Capital Facility to November 13, 1999, in consideration of
modifications of the terms thereof. Borrowings under the Working Capital
Facility bear interest at a rate equal to the prime lending rate plus 3%, with
a minimum of 0.666% per month. The agreement further provides for a .75%
annual fee and a .50% unused line fee. As of December 31, 1995, no amounts
were outstanding under the Working Capital Facility.
The occurrence of any of the following events constitute an event of default
under the Working Capital Facility: (i) failure to pay principal, interest,
fees, charges or reimbursements due to Foothill, when due and payable or when
declared due and payable; (ii) failure or neglect to perform certain duties
and covenants under the agreement; (iii) any material portion of Taj
Associates' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any judicial officer or
assignee and such attachment or writ is not dismissed within 60 days; (iv) an
insolvency proceeding is commenced by Taj Associates; (v) an insolvency
proceeding is commenced against Taj Associates, and is not dismissed within 60
days; (vi) Taj Associates is enjoined, restrained, or in any way prevented by
certain governmental agencies from continuing to conduct all or any material
part of its business affairs; (vii) Taj Associates fails to pay certain liens,
levies or assessments on the payment date thereof; (viii) certain judgments or
claims in excess of $500,000 become a lien or encumbrance upon a material
portion of Taj Associates' assets; (ix) Taj Associates defaults in payments
owing to NatWest or the Taj Bond Trustee; (x) Taj Associates makes
unauthorized payments on debt subordinated to the Working Capital Facility;
(xi) misrepresentations are made by Taj Associates to Foothill in any
warranty, representation, certificate or report; (xii) certain ERISA
violations occur which could have a material adverse effect on the financial
condition of Taj Associates; or (xiii) Taj Associates incurs or enters into a
commitment to incur any indebtedness which is secured by Taj Associates assets
subject to the Working Capital Facility.
Upon the occurrence of an event of default, Foothill may, at its election,
without notice of its election and without demand, do any one or more of the
following: (i) declare all obligations immediately due and payable; (ii) cease
advancing money or extending credit; (iii) terminate the Working Capital
Facility without affecting Foothill's rights and security interest in Taj
Associates assets; (iv) settle disputes and claims directly with certain Taj
Associates debtors; (v) make such payments and perform such acts as Foothill
deems necessary to protect its security interests; (vi) set off amounts owed
under the Working Capital Facility by other Taj Associates' accounts or
deposits held by Foothill; (vii) prepare for sale and sell, after giving
proper notice, Taj Associates' assets securing the Working Capital Facility in
a commercially reasonable manner; (viii) exercise its rights under certain
mortgage and assignment documents between Taj Associates and Foothill; (ix)
credit bid and purchase at any public sale subject to the provisions of the
Casino Control Act; or (x) any deficiency which exists after disposition of
Taj Associates assets securing the Working Capital Facility will be paid
immediately by Taj Associates; any excess will be returned to Taj Associates,
without interest.
In connection with the Merger Transaction, Trump Atlantic City anticipates
either modifying the Working Capital Facility or terminating the Working
Capital Facility and replacing it with a new $25 million facility which will
be available to Trump Atlantic City and its subsidiaries, although there can
be no assurance that Foothill will agree to the modifications sought or that a
replacement facility could be obtained on acceptable terms, if at all. See
"Risk Factors--High Leverage and Fixed Charges."
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LEGAL PROCEEDINGS
PLAZA ASSOCIATES
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 "Regulatory Matters--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, 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 now awaits the scheduling of oral arguments.
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
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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 decision of the New Jersey
Superior Court may be appealed by the plaintiffs.
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.
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
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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. THCR 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 THCR 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 THCR.
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 THCR 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.
TAJ ASSOCIATES
General. Taj Holding, TM/GP, TTMI and TTMC are not parties to any material
legal proceedings. Taj Associates, its partners, certain members of its former
Executive Committee, Taj Funding, TTMI and certain of their employees are or
were involved in various legal proceedings, some of which are described below.
Taj 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.
Atlantic City Lease Agreement. On March 29, 1990, Taj Associates entered
into a lease agreement with the City of Atlantic City for a term of seven
years, subject to the explicit, prior approval of NJDEP to continue to use the
land beyond April 2, 1992, pursuant to which Taj Associates leased a parcel of
land containing approximately 1,300 spaces for employee intercept parking at a
cost of approximately $1 million. In addition, Taj Associates has expended in
excess of $1.4 million in improving the site. The permit under which the lease
is operated was issued by NJDEP on December 20, 1989 for five years and
contains several conditions, one of which required Taj Associates to find
another location "off-island" for employee parking by April 2, 1992. NJDEP
extended this condition for two successive one-year periods through April 2,
1994. On November 14,
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1994, as a result of the non-renewal of the permit, Taj Associates notified
Atlantic City that the lease agreement had become inoperative and was
therefore being canceled as of December 20, 1994. Taj Associates subsequently
obtained "off-island" parking with Trump's Castle Associates sufficient to
meet its employee parking requirements. Atlantic City has indicated in letters
to Taj Associates that it contests the cancellation of the lease agreement and
claims certain extensions to the permit apply, to which Taj Associates does
not agree. No legal proceedings have been commenced by Atlantic City to date.
There can be no assurances that Atlantic City will not institute or pursue
such an action.
Other Litigation. Various legal proceedings are now pending against Taj
Associates. Taj Associates considers all such proceedings to be ordinary
litigation incident to the character of its business. The majority of such
claims are covered by liability insurance (subject to applicable deductibles),
and Taj 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
Taj Associates.
From time to time, Taj 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 THCR or on the ability of Taj Associates to
otherwise retain or renew any casino or other licenses required under the
Casino Control Act for the operation of the Taj Mahal.
COMPETITION
Competition in the Atlantic City casino hotel market is intense. Trump Plaza
and the Taj Mahal compete with each other and with the other casino hotels
located in Atlantic City, including the other casino hotel owned by Trump,
Trump's Castle. See "Risk Factors--Conflicts of Interest." Trump Plaza and the
Taj Mahal are located on The Boardwalk, approximately 1.2 miles apart from
each other. At present, there are 12 casino hotels located in Atlantic City,
including the Taj Mahal and Trump Plaza, all of which compete for patrons.
Trump Plaza and the Taj Mahal primarily compete with other Atlantic City
casinos by, among other things, providing superior products and facilities,
premier locations, name recognition and targeted marketing strategies. See
"Business of THCR--Atlantic City Marketing Strategy," "--Trump Plaza Business
Strategy," "--Facilities and Amenities," "Business of Taj Holding--General"
and "--Business Strategy." 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 development of 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
either Trump Plaza or the Taj Mahal. There also can be no assurance that the
Atlantic City development projects which are planned or underway will be
completed.
Trump Plaza and the Taj Mahal also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, Trump Plaza and the Taj Mahal face
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 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
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aspects of certain of their respective marketing efforts, including the common
use of the "Trump" name, Trump Plaza and the Taj Mahal compete directly with
each other for gaming patrons. Although management does not intend to operate
Trump Plaza and the Taj Mahal to the competitive detriment of the other, the
effect may be that Trump Plaza or the Taj Mahal will operate to the
competitive detriment of the other.
In addition, Trump Plaza and the Taj Mahal face competition from casino
facilities in a number of states operated by federally recognized Native
American tribes. Pursuant to IGRA, 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 and the Taj Mahal.
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 3,100 slot machines. The
Mashantucket Pequot Nation has announced various expansion plans, including
its intention to build another casino in Ledyard together with hotels,
restaurants and a theme park. In addition, the Mohegan Nation has commenced
construction of a casino resort to be located ten miles from Foxwoods. The
Mohegan Nation resort will be built and managed by Sun International, an
entity headed by a South African investor, is scheduled to be as large as
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 or the Taj Mahal'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, 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
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Las Vegas has expanded significantly, with additional capacity planned and
currently under construction. The operations of Trump Plaza and the Taj Mahal
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. Trump Atlantic City 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 Trump Atlantic City.
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REGULATORY MATTERS
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 Trump Plaza's main tower, Trump Plaza East (which operates pursuant to
a single casino license held by Plaza Associates) and 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 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. Taj Associates was issued its initial casino license in
April 1990. On June 22, 1995, the CCC renewed Taj Associates' casino license
through March 31, 1999. 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 licenses currently held by Taj Associates and Plaza
Associates are renewable for periods of up to four years. The CCC may reopen
licensing hearings at any time, and must reopen a licensing hearing at the
request of the Division of Gaming Enforcement (the "Division").
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
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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. In addition, Taj Associates will be required to obtain a
prior determination from the CCC that the operation of the additional casino
space created by the Taj Mahal Expansion will not constitute undue economic
concentration of Atlantic City casino operations, and that such casino space,
together with the Taj Mahal's existing casino space, is a "single room" under
the Casino Control Act. See "Risk Factors--Atlantic City Properties
Expansion."
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 when due; to make
necessary capital and maintenance expenditures to insure that it has a
superior first-class facility; and to pay, exchange, refinance or extend debts
which will mature or become due and payable during the license term. 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."
Management believes that, upon consummation of the Merger Transaction, Taj
Associates and Plaza Associates will each have, and will each continue to
have, adequate financial resources to meet the financial stability
requirements of the CCC for the foreseeable future. Taj Associates and Plaza
Associates plan to petition the CCC to approve the transactions contemplated
by the Merger Transaction. It is a condition to the consummation of the Merger
that the Merger Transaction is approved by the CCC.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership
in the licensee, each person who in the opinion of the CCC has the ability to
control or elect a majority of the board of directors of the licensee (other
than a banking or other licensed lending institution which makes a loan or
holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains and maintains qualification
approval from the CCC. Qualification approval means that such person must, but
for residence, individually meet the qualification requirements as a casino
key employee. Pursuant to a condition of its casino license, payments by Plaza
Associates to or for the benefit of any related entity or partner, with
certain exceptions, are subject to prior CCC approval; and, if the Working
Capital Facility is not amended or replaced and Plaza Associates or Taj
Associates' cash position falls below $5.0 million for three consecutive
business days, Plaza Associates or Taj Associates, as the case may be 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 Taj Holding, TM/GP, Trump Atlantic City, 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-
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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. Taj
Associates and Plaza Associates will each petition the CCC for a determination
that the First Mortgage Notes will be widely distributed and freely traded in
the public market. There can be no assurance, however, that the CCC will grant
such a petition, will determine that the holders of First Mortgage Notes have
no ability to control either Taj Associates or Plaza Associates as a casino
licensee or will continue the practice of granting such waivers and, in any
event, 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.
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
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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 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 "--New Jersey Gaming Regulations--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 First Mortgage Notes are publicly-traded securities and that CCC approval
of the issuance or subsequent transfer of the securities is not required; the
individual holders of the First 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 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 TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, certain other entities that own
the Taj Holding Class A Common Stock or the Taj Holding Class B Common Stock,
Plaza Funding, Trump Atlantic City, 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. See "Description of the First
Mortgage Notes--Gaming Laws."
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
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to a casino licensee to close on the contract or own the securities until
plenary licensure or qualification. During the period of interim casino
authorization, the property relating to the casino operation or the securities
is held in trust.
Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already
licensed or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed
trust agreement in a form approved by the CCC. If, after the report of the
Division and a hearing by the CCC, the CCC grants interim authorization, the
property will be subject to a trust. If the CCC denies interim authorization,
the contract may not close or settle until the CCC makes a determination on
the qualifications of the applicant. If the CCC denies qualification, the
contract will be terminated for all purposes and there will be no liability on
the part of the transferor.
If, as the result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines that
qualification is required or declines to waive qualification. The application
must include a fully executed trust agreement in a form approved by the CCC
or, in the alternative, within 120 days after the CCC determines that
qualification is required, the person whose qualification is required must
divest such securities as the CCC may require in order to remove the need to
qualify.
The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for
residency; and (iv) interim operation will best serve the interests of the
public.
When the CCC finds the applicant qualified, the trust will terminate. If the
CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to
sell, assign, convey or otherwise dispose of the property subject to the trust
to such persons who are licensed or qualified or shall themselves obtain
interim casino authorization.
Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities
to a trust in application for interim casino authorization and the CCC
thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the
casino hotel or receive any return on its investment or debt security
holdings; and (ii) after disposition, if any, of the securities by the
trustee, proceeds distributed to the unqualified holder may not exceed the
lower of their actual cost to the unqualified holder or their value calculated
as if the investment had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit an existing licensee, such as
Taj Associates and 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. See "Risk Factors--Atlantic City Properties Expansion."
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
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that such persons do not have the ability to exercise significant control over
the building or the operation of the casino therein.
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
"Business--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. 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. For the years ended
December 31, 1993, 1994 and 1995, Taj Associates' gross revenue tax was
approximately $35.4 million, $36.7 million and $40.2 million, respectively,
and its license, investigation and other fees and assessments totaled
approximately $5.2 million, $5.2 million and $5.2 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 is (i) entitled to an investment tax credit in an
amount equal to twice the purchase price of such bonds or twice the amount of
its investments authorized in lieu of such bond investments or made in
projects designated as eligible by the CRDA and (ii) has the option of
entering into a contract with the CRDA
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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 by December 31, 1996. 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 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 and Taj Associates currently charge their
respective parking patrons $2.00 in order to make their required payments to
the New Jersey State Treasurer and cover related expenses. Amounts in the
special fund will be expended by the CRDA for eligible projects in the
corridor region of Atlantic City related to improving the highways, roads,
infrastructure, traffic regulation and public safety of Atlantic City or
otherwise necessary or useful to the economic development and redevelopment of
Atlantic City in this regard.
Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and
known as the Atlantic City Fund, its proportional share of an amount related
to the amount by which annual operating expenses of the CCC and the 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 TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, Plaza Associates, Plaza Funding,
Plaza Holding Inc., Trump Atlantic City, 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 Taj Associates and 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
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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. Taj Associates' and 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 the Taj Mahal and Trump Plaza is conducted by
trained and supervised personnel. Taj Associates and Plaza Associates employ
extensive security and internal controls. Security checks are made to
determine, among other matters, that job applicants for key positions have had
no criminal history or associations. Security controls utilized by the
surveillance department include closed circuit video 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 involves 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,
Trump Atlantic City 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. From 1992 through 1995, the Service conducted an audit of
"Currency Transaction Reports by Casino" filed by Taj Associates for the
period from April 2, 1990 through December 31, 1991. The U.S. Department of
Treasury has received a report detailing the audit as well as the response of
Taj Associates. Taj Associates is awaiting comments from the U.S. Department
of Treasury as to any potential violations.
On April 5, 1994, 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
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affected is not known at this time. Taj Associates is unable to estimate the
cost, if any, of compliance with these proposed regulations and is unable to
determine if the cost, if any, of such compliance would have a material
adverse effect on Taj Associates.
Trump Atlantic City is subject to other federal, state and local regulations
and, on a periodic basis, must obtain various licenses and permits, including
those required to sell alcoholic beverages in the State of New Jersey as well
as in other jurisdictions. Management believes all required licenses and
permits necessary to conduct business of Trump Atlantic City has been obtained
for operations in the State of New Jersey.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The managing general partner of Trump Atlantic City is THCR Holdings. The
managing general partner of THCR Holdings is THCR. The partnership agreement
governing THCR Holdings provides that all business activities of THCR must be
conducted through THCR Holdings or subsidiary partnerships or corporations,
such as Trump Atlantic City. As the sole general partner of THCR Holdings,
THCR will generally have the exclusive rights, responsibilities and discretion
in the management and control of THCR Holdings, and as such, of Trump Atlantic
City.
The following table sets forth certain information concerning each of THCR's
directors and executive officers:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Donald J. Trump......... Chairman of the Board
Nicholas L. Ribis....... President, Chief Executive Officer, Chief Financial Officer and Director
Robert M. Pickus........ Executive Vice President and Secretary
John P. Burke........... Senior Vice President of Corporate Finance and Corporate Treasurer
Wallace B. Askins....... Director
Don M. Thomas........... Director
Peter M. Ryan........... Director
</TABLE>
Donald J. Trump--Mr. Trump, 49 years old, has been Chairman of the Board of
THCR and THCR Funding since their formation in 1995. Mr. Trump is also
Chairman of the Board of Directors, President and Treasurer of Plaza Funding
and the managing general partner of Plaza Associates. Trump was a 50%
shareholder, Chairman of the Board of Directors, President and Treasurer of
Trump Plaza GP and the managing general partner of Plaza Associates prior to
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 Atlantic City from February 1993 until June 1995. Trump
has been Chairman of the Board of Directors of Trump Atlantic City Funding
since its formation in January 1996. 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 the sole director of Trump Indiana since its formation. 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 President, Chief
Executive Officer, Chief Financial Officer, and a director of THCR, THCR
Holdings and THCR Funding since their formation in 1995. Mr. Ribis has been
the Chief Executive Officer of Plaza Associates since February 1991, was
President from April 1994 to February 1995, 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 Atlantic City Funding since
its formation in January 1996. 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
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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. Mr. Ribis has been the
President and Chief Executive Officer of Trump Indiana since its formation. 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.
Robert M. Pickus--Mr. Pickus, 41 years old, has been Executive Vice
President and Secretary of THCR since its formation in 1995. He has also been
the Executive Vice President of Corporate and Legal Affairs of Plaza
Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates
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 Director of Trump Atlantic City Funding since its formation
in January 1996. 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. Mr. Pickus has been the
Executive Vice President and Secretary of Trump Indiana since its formation.
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 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. He has also been Corporate Treasurer of Plaza
Associates and Taj Associates since October 1991. Mr. Burke has been Treasurer
of Trump Atlantic City Funding since its formation in January 1996. Mr. Burke
has been a Class C Director of TM/GP and Taj Holding since October 1991 and
was Vice President of TM/GP until June 1995. Mr. Burke has been the Treasurer
of Trump Indiana since its formation. Mr. Burke has been the Corporate
Treasurer of TCA since October 1991, the Vice President of TCA, Trump's Castle
Funding, Inc., TC/GP, Inc. 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.
Wallace B. Askins--Mr. Askins, 65 years old, has been a director of THCR
since June 1995. He has also 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
served as a director of TC/GP, Inc. 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, has been a director of THCR 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
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Commissioner of the CCC from 1980 through 1984. Mr. Thomas 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. Mr. Thomas
is an attorney licensed to practice law in the State of New York.
Peter M. Ryan--Mr. Ryan, 58 years old, has been a director of THCR since
June 1995. He has also been the President of each of The Marlin Group, LLC and
The Brookwood Carrington Fund, LLC, real estate financial advisory groups,
since January 1995. Prior to that, Mr. Ryan was the Senior Vice President of
The Chase Manhattan Bank for more than five years. Mr. Ryan has been a
director of the Childrens Hospital FTD since October 1995.
The officers of THCR serve at the pleasure of the Board of Directors of
THCR.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
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.
THCR is the general partner of THCR Holdings. As the managing general
partner of THCR Holdings, THCR will generally have the exclusive rights,
responsibilities and discretion in the management and control of THCR
Holdings. Upon consummation of the Merger Transaction, TM/GP will also be a
limited partner of THCR Holdings.
MANAGEMENT OF TRUMP PLAZA
Plaza Funding is, and until the consummation of the Merger Transaction will
remain, the managing general partner of Plaza Associates. The Board of
Directors of each of Plaza Funding and Plaza Holding Inc. consists of Messrs.
Trump, Ribis, Wallace B. Askins and Don M. Thomas. The Plaza Note Indenture
requires that two directors of each of Plaza Funding and Plaza Holding Inc. 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 of the executive officers of Plaza Funding
and Plaza Associates other than those who are also directors or executive
officers of THCR.
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
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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 Greater Bay
Hotel and Casino.
All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
MANAGEMENT OF THE TAJ MAHAL
Until the consummation of the Merger Transaction, TM/GP will be the managing
general partner of Taj Associates.
Set forth below are the names, ages, positions and offices, and a brief
account of the business experience during the past five years, of each of the
executive officers of Taj Holding and a key employee of Taj Associates other
than those who are also directors or executive officers of THCR.
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R. Bruce McKee--Mr. McKee, 50 years old, has been acting Chief Operating
Officer of Taj Associates since October 1995; Senior Vice President, Finance
of Taj Associates since July 1993; Vice President, Finance of Taj Associates
from September 1990 through June 1993; Assistant Treasurer of Taj Funding,
TM/GP, Taj Holding, Realty Corp., TTMC and TTMI since October 1991; Vice
President of Finance of Elsinore Shore Associates, the owner and operator of
the Atlantis Casino Hotel, Atlantic City, from April 1984 to September 1990;
and Treasurer of Elsinore Finance Corp., Elsinore of Atlantic City and Elsub
Corp. from June 1986 to September 1990. The Atlantis Casino Hotel now
constitutes the portion of Trump Plaza known as Trump World's Fair.
Nicholas F. Moles--Mr. Moles, 42 years old, has been Assistant Secretary of
Taj Holding and TM/GP from October 1991 to February 1995; Secretary of Taj
Holding and TM/GP since February 1995; Senior Vice President, Law of Taj
Associates since January 1989 and General Counsel of Taj Associates since June
1993; Assistant Secretary of Taj Funding since September 1991 and Assistant
Secretary of TTMI since January 1989. From May 1986 to May 1988, Mr. Moles was
General Counsel of Plaza Associates and was Vice President and General Counsel
of Plaza Associates from May 1988 to December 1988. Mr. Moles was Vice
President and General Counsel of Elsinore Shore Associates from May 1985 to
May 1986 and was Director and Assistant Secretary of Elsinore Finance
Corporation from November 1985 to May 1986.
Larry W. Clark--Mr. Clark, 50 years old, has been Executive Vice President,
Casino Operations of Taj Associates since November 1991; Senior Vice
President, Casino Operations of Taj Associates from May 1991 to November 1991;
Vice President, Casino Administration of Taj Associates from April 1991 to May
1991 and from January 1990 to November 1990; Vice President, Casino
Operations, Dunes Hotel & Country Club from November 1990 to April 1991 and
was Director of Casino Marketing and Vice President, Casino Operations,
Showboat Hotel & Casino from November 1988 to January 1990.
Rudolfo E. Prieto--Mr. Prieto, 52 years old, has been Executive Vice
President, Operations of Taj Associates since December 1995. Prior to joining
the Taj Mahal, Mr. Prieto was Executive Vice President and Chief Operating
Officer for Elsinore Corporation from May 1995 to November 1995; Senior Vice
President in charge of the development of the Mojave Valley Resort for
Elsinore Corporation from December 1994 to April 1995 and Executive Vice
President and Assistant General Manager for the Tropicana Resort and Casino
from May 1988 to November 1994.
Walter Kohlross--Mr. Kohlross, 54 years old, has been Senior Vice President,
Food & Beverage of Taj Associates since June 1992; Vice President of
International Marketing of Taj Associates from June 1993 through October 1995;
Vice President, Hotel Operations of Taj Associates from June 1991 to June 1992
and was Vice President, Food & Beverage of Taj Associates from 1988 to June
1991.
Nicholas J. Niglio--Mr. Niglio, 49 years old, has been Senior Vice
President, Casino Marketing of Taj Associates since November 1995. From
February 1995 to October 1995, Mr. Niglio was Vice President, International
Marketing of Taj Associates. Prior to joining Taj Associates, Mr. Niglio was
Executive Vice President of International Marketing/Player Development for
TCA, the partnership that owns and operates Trump's Castle, from 1993 until
1995. Prior to that, Mr. Niglio served as Senior Vice President, Marketing of
Caesars World Marketing Corporation from 1991 until 1993.
All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
Trump, Nicholas L. Ribis, John P. Burke, R. Bruce McKee, Nicholas F. Moles,
Larry W. Clark and Walter Kohlross 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
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
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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. Rudolfo E. Prieto
was an Executive Vice President and the Chief Operating Officer for Elsinore
Corporation when it filed a petition for reorganization under Chapter 11 of
the Bankruptcy Code on October 31, 1995. Elsinore Corporation has not yet
filed a plan of reorganization.
EXECUTIVE COMPENSATION
General. Because THCR was formed in 1995, there was no salary or bonus paid
to, deferred or accrued for the benefit of, THCR's Chief Executive Officer or
any of the four remaining most highly compensated executive officers (whose
annual salary and bonus exceeded $100,000 for the year ended December 31, 1995
(collectively, the "Executive Group")) by THCR or THCR Holdings prior to or
during the fiscal year ended December 31, 1994. Similarly, no member of the
Executive Group received any other annual compensation, restricted stock
awards, stock options, stock appreciation rights ("SARs"), long-term incentive
performance ("LTIP") payouts or other compensation from THCR or THCR Holdings
prior to or for the fiscal year ended December 31, 1994. All cash compensation
paid to the Executive Group in respect of services provided to THCR since its
inception was paid and will continue to be paid by THCR Holdings in accordance
with the THCR Holdings Partnership Agreement.
1995 Stock Incentive Plan. The Board of Directors of THCR adopted the 1995
Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which, directors,
employees and consultants of THCR and certain of its subsidiaries and
affiliates who have been selected as participants are eligible to receive
awards of various forms of equity-based incentive compensation, including
stock options, stock appreciation rights, stock bonuses, restricted stock
awards, performance units and phantom stock, and awards consisting of
combinations of such incentives. The 1995 Stock Plan is administered by the
Stock Incentive Plan Committee of the Board of Directors of THCR (the "Stock
Incentive Plan Committee"). Subject to the provisions of the 1995 Stock Plan,
the Stock Incentive Plan Committee has sole discretionary authority to
interpret the 1995 Stock Plan and to determine the type of awards to grant,
when, if and to whom awards are granted, the number of shares covered by each
award and the terms and conditions of the award.
Options granted under the 1995 Stock Plan may be "incentive stock options"
("ISOs"), within the meaning of Section 422 of the Code, or nonqualified stock
options ("NQSOs"). The vesting, exercisability and exercise price of the
options are determined by the Stock Incentive Plan Committee when the options
are granted, subject to a minimum price in the case of ISOs of the Fair Market
Value (as defined in the 1995 Stock Plan) of the THCR Common Stock on the date
of grant and a minimum price in the case of NQSOs of the par value of THCR
Common Stock. In the discretion of the Stock Incentive Plan Committee, the
option exercise price may be paid in cash or in shares of THCR Common Stock or
other property having a fair market value on the date of exercise equal to the
option exercise price, or by delivering to THCR a copy of irrevocable
instructions to a stockbroker to deliver promptly to THCR an amount of sale or
loan proceeds sufficient to pay the exercise price. Except as provided by the
Stock Incentive Plan Committee in an underlying stock option agreement, in the
event of a Change of Control (as defined in the 1995 Stock Plan or in the
stock option agreement), all options subject to such agreement will be fully
exercisable.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant
SARs, either alone or in connection with an option. An SAR entitles its holder
to be paid an amount equal to the fair market value of THCR Common Stock
subject to the SAR on the date of exercise of the SAR, less the exercise price
of the related stock option in the case of an SAR granted in connection with a
stock option, or the fair market value of one share of stock on the date the
SAR was granted, in the case of an SAR granted independent of an option.
Shares of THCR Common Stock covered by a restricted stock award are issued to
the recipient at the time the award is granted, but are subject to forfeiture
in the event continued employment and/or other restrictions and conditions
established by the Stock Incentive Plan Committee at the time the award is
granted are not satisfied. Unless otherwise determined by the Stock Incentive
Plan Committee, a recipient of a restricted stock award has
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the same rights as an owner of THCR Common Stock, including the right to
receive cash dividends and to vote the shares. A performance unit or phantom
stock award provides for the future payment of cash or the issuance of shares
of THCR Common Stock to the recipient if continued employment and/or other
performance objectives established by the Stock Incentive Plan Committee at
the time of grant are attained. The 1995 Stock Plan also provides that
performance unit and phantom stock awards may be settled in cash, in the
discretion of the Stock Incentive Plan Committee and if indicated in the
applicable award agreement, on each date on which shares of THCR Common Stock
covered by the awards would otherwise have been delivered or become
unrestricted, in an amount equal to the fair market value of such shares on
such date. Except as provided in a particular award agreement, in the event of
a Change in Control (as defined in the 1995 Stock Plan), notwithstanding any
vesting schedule with respect to an award of options, SARs, phantom stock
units or restricted stock, such options or SAR will become immediately
exercisable with respect to the shares subject to such option or SAR, and
restrictions with respect to such phantom stock units or shares of restricted
stock will immediately expire. In addition, payment will be made as determined
by the Stock Incentive Plan Committee with respect to performance units. The
1995 Stock Plan also provides for the grant of unrestricted stock bonus
awards.
THCR has reserved 1,000,000 shares of THCR Common Stock for issuance under
the 1995 Stock Plan, provided, however, that in the event of changes in the
outstanding stock or the capital structure of THCR, adjustments will be made
by the Stock Incentive Plan Committee as to (i) the number, price or kind of a
share of stock or other consideration subject to outstanding awards and (ii)
the maximum number of shares of stock subject to all awards under the 1995
Stock Plan.
In 1995, the Stock Incentive Plan Committee granted to Nicholas L. 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 Mr. Ribis to receive 66,666 shares of 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,
subject to certain conditions (including vesting at a rate of 20% per year
over a five-year period). The options have an exercise price of $14.00 per
share.
Summary Compensation Table. The following table sets forth information
regarding compensation paid to or accrued by all the executive officers of
THCR for each of the last three completed fiscal years. Compensation accrued
during one year and paid in another is recorded under the year of accrual.
Because THCR was formed in 1995, compensation for the years ended December 31,
1994 and 1993 reflect solely the compensation paid to or accrued by these
individuals as executive officers of Plaza Associates and Taj Associates.
Compensation for the year ended December 31, 1995 includes compensation paid
to or accrued by these individuals as executive officers of THCR, Plaza
Associates and Taj Associates.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS ($) OPTIONS ($) COMPENSATION
- --------------------------- ---- ---------- --------- --------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Trump......... 1995 $ 583,333 $ -- $ -- -- -- $3,064,000(/2/)
Chairman of the Board 1994 -- -- -- -- -- 2,641,000(/2/)(/3/)
1993 -- -- -- -- -- 2,813,000(/2/)
Nicholas L. Ribis(/4/).. 1995 $1,355,636 $ 933,338 $ -- 933,324(/5/) 133,333 $ --
Chief Executive Officer 1994 1,306,000 250,000 169,407 -- -- --
1993 748,253 500,000 383,497 -- -- --
Robert M. Pickus........ 1995 $ 198,972 $ 85,000 $ -- -- -- $ 4,004(/6/)
Executive Vice President 1994 163,759 32,500 -- -- -- 3,291(/6/)
and
Secretary 1993 5,808 -- -- -- -- --
John P. Burke........... 1995 $ 100,000 $ 51,666 $ -- -- -- $ --
Senior Vice President of 1994 100,000 -- 46,000 -- -- --
Corporate Finance and 1993 95,590 28,000 46,000 -- -- --
Corporate Treasurer
</TABLE>
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- ---------------------
(1) Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for income
taxes. Following SEC rules, perquisites and other personal benefits are
not included in this table because the aggregate amount of that
compensation is less than the lesser of $50,000 or 10% of the total of
salary and bonus for each member of the Executive Group.
(2) The amounts listed represent amounts paid to Trump and TPM, a corporation
wholly owned by Trump, pursuant to the services agreements with Taj
Associates and Plaza Associates, respectively. See "--Compensation
Committee Interlocks and Insider Participation: THCR and Plaza
Associates--Certain Related Party Transactions of Trump" and "--
Compensation Committee Interlocks and Insider Participation: Taj
Associates--Certain Related Party Transactions of Trump." Payments
received by TPM under the TPM Services Agreement (as defined) are
currently pledged by TPM to secure lease payments for a helicopter that
TPM makes available to Plaza Associates. See "Certain Transactions--Plaza
Associates--TPM Services Agreement" and "--Taj Associates and Affiliates--
Taj Services Agreement." Trump is neither an employee of Plaza Associates
nor Taj Associates and receives no compensation from Plaza Associates or
Taj Associates other than pursuant to the TPM Services Agreement and the
Taj Services Agreement, respectively.
(3) In addition to the amount listed as payments under the TPM Services
Agreement and the Taj 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 Consolidated Financial Statement of Trump Atlantic City and
Plaza Associates.
(4) Mr. Ribis devotes a majority of his time to the affairs of THCR. See "--
Employment Agreements."
(5) As of December 31, 1995 Mr. Ribis also held 66,666 phantom stock units
issued pursuant to the 1995 Stock Plan. These units had a value as of
December 31, 1995 of $1,433,319. These phantom stock units were issued to
Mr. Ribis in connection with his employment agreement with THCR. Each
phantom stock unit entitles Mr. Ribis to one share of Common Stock on the
vesting date of the phantom stock unit. All of the phantom stock units are
scheduled to vest on June 12, 1997. Vesting will accelerate in the event
of Mr. Ribis' termination of employment with THCR (i) because of his death
or disability, (ii) by THCR without cause or (iii) voluntarily by Mr.
Ribis under circumstances which constitute a constructive termination.
Alternatively, the phantom stock units may expire prior to June 12, 1997
in the event Mr. Ribis voluntarily terminates his employment with THCR
under circumstances which do not constitute constructive termination or if
he is terminated by THCR with cause. Dividend equivalents with respect to
the phantom stock units will be credited to a bookkeeping account on
behalf of Mr. Ribis and will be paid out in cash at the time the phantom
stock units vest or will expire along with the phantom stock units.
(6) Represents vested and unvested contributions made by Plaza Associates to
Trump Plaza Hotel and Casino Retirement Savings Plan. Funds accumulated
for an employee under this plan consisting of a certain percentage of the
employee's compensation plus Plaza Associates' employer matching
contributions equaling 50% of the participant's contributions, are
retained until termination of employment, attainment of age 59 1/2 or
financial hardship, at which time the employee may withdraw his or her
vested funds.
The following table sets forth options granted to Mr. Ribis in 1995. No
other member of the Executive Group received stock options in 1995. THCR did
not issue any stock appreciation rights in 1995. This table also sets forth
the hypothetical gains that would exist for the options at the end of their
ten-year terms at assumed annual rates of stock price appreciation of 5% and
10%. The actual future value of the options will depend on the market value of
the THCR Common Stock, continued employment with THCR and other factors.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL STOCK APPRECIATION
GRANTS FOR OPTION TERM
----------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------ -------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nicholas L. Ribis....... 133,333(/1/) 100% $14.00 June 12, 2005 $1,173,060 $2,960,580
</TABLE>
(1) The options vest at the rate of 20% per year on each anniversary of the
date of the grant subject to acceleration in certain circumstances. See
"Employment Agreements" below.
The following table sets forth the number of shares covered by options held
by Mr. Ribis and the value of the options as of December 31, 1995. Mr. Ribis
was the only member of the Executive Group who held options in 1995. None of
these options were exercisable in 1995.
FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(/1/)
-------------------------- --------------------------
NAME EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
---- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Nicholas L. Ribis........ N/A 133,333 N/A $2,866,660
</TABLE>
(1) Based on a closing price of $21 1/2 per share of THCR Common Stock on
December 31, 1995.
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<PAGE>
EMPLOYMENT AGREEMENTS
THCR and Plaza Associates. 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 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 "Risk Factors--Conflicts of
Interest."
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 "Revised Ribis Plaza
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 Revised Ribis Plaza 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 Revised Ribis Plaza Agreement, Mr.
Ribis's annual salary is $988,250, which is 50% of the aggregate current
annual base salary ($1,996,500) that Mr. Ribis receives as Chief Executive
Officer of THCR ($988,250), Taj Mahal ($499,125) and Trump's Castle
($499,125). Following the consummation of the Merger Transaction, Mr. Ribis
will devote 75% of his professional time to the operations of THCR, Plaza
Associates and Taj Associates, and his annual salary will be $1,497,375 per
year with respect to his services to these entities. Mr. Ribis will continue
to receive $499,125 per year with respect to his services to Trump's Castle.
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. 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 Revised Ribis
Plaza 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 or (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 Revised Ribis Plaza 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 Revised
Ribis Plaza Agreement defines "change of control"
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<PAGE>
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 Revised Ribis Plaza Agreement also provides certain demand and piggyback
registration rights for THCR Common Stock issued pursuant to the foregoing.
Pursuant to the Revised Ribis Plaza Agreement, Mr. Ribis has agreed that upon
termination of his employment other than for "cause" or following a "change of
control," he would not engage in any activity competitive with THCR for a
period of up to one year.
Mr. Ribis is also Chief Executive Officer of TCA, the partnership that owns
Trump's Castle, and receives compensation from this entity for such services
as set forth above. Pursuant to the Revised Ribis Plaza Agreement, he is
required to devote the majority of his time to the affairs of THCR, and
following the consummation of the Merger Transaction, Mr. Ribis will devote
approximately 75% of his professional time to 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's (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.
Taj Associates. Taj Associates has an employment agreement with Nicholas L.
Ribis (the "Ribis Taj Agreement") pursuant to which Mr. Ribis acts as Chief
Executive Officer of Taj Associates, the term of which expires on September
25, 1996. Mr. Ribis received a $250,000 signing bonus. Pursuant to the terms
of the Ribis Taj Agreement, in the event that Taj Associates, or any entity
which acquires substantially all of Taj Associates, proposes to engage in an
offering of common shares to the public, Taj Associates and Mr. Ribis will
negotiate new compensation arrangements to include equity participation for
Mr. Ribis. Taj Associates may at any time terminate Mr. Ribis's employment for
"cause," which is defined in the Ribis Taj Agreement as Mr. Ribis's (i)
conviction of a felony or (ii) revocation or termination of his casino key
employee license issued by the CCC. Pursuant to the Ribis Taj Agreement, Mr.
Ribis has agreed that upon termination of his employment for cause by Taj
Associates or voluntarily by Mr. Ribis (other than following a material breach
of the agreement by Taj Associates), he would not engage in employment for or
on behalf of any other casino hotel located in Atlantic City for the lesser of
one year or the period then remaining in the term of the agreement, provided
that this covenant not to compete shall not be applicable in the case there is
a public offering of common shares and Mr. Ribis voluntarily terminates his
employment as the result of his and Taj Associates' failure to negotiate
mutually satisfactory compensation arrangements. Taj Associates and Mr. Ribis
expect to amend the Ribis Taj Agreement, retroactive June 12, 1995, pursuant
to which, among other things, Mr. Ribis's annual salary will change from
$550,000 (with annual increases of 10% on each anniversary) to $499,125.
Mr. Ribis acts as President, Chief Executive Officer and Chief Financial
Officer of THCR and THCR Holdings, the Chief Executive Officer of TCA and
Plaza Associates, the partnerships that own Trump's Castle and Trump Plaza,
and receives additional compensation from such entities. Mr. Ribis devotes
approximately one quarter of his professional time to the affairs of Taj
Associates. Following the consummation of the Merger Transaction, Mr. Ribis
will devote 75% of
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<PAGE>
his professional time to the operations of THCR, Plaza Associates and Taj
Associates. See "--Employment Agreements."
Taj Associates has an employment agreement with R. Bruce McKee (the "McKee
Agreement") pursuant to which he serves as Senior Vice President and Chief
Financial Officer of Taj Associates. The McKee Agreement, which expires on
September 30, 1997, provides for an annual salary of $175,000, a guaranteed
bonus of $25,000 and is terminable by Mr. McKee on each anniversary date of
the agreement. Mr. McKee will be considered further for additional bonus
compensation at Taj Associates' sole discretion. Factors considered by Taj
Associates in the awarding of all discretionary bonuses generally are the
attainment by Taj Associates of budgeted or forecasted goals and the
individual's perceived contribution to the attainment of such goals.
Taj Associates has an employment agreement with Larry W. Clark (the "Clark
Agreement") pursuant to which he serves as Executive Vice President, Casino
Operations of Taj Associates. The Clark Agreement, which expires on November
30, 1997, provides for an annual salary of $300,000 and, in addition, a
minimum guaranteed bonus of at least $124,200 per annum. Pursuant to the Clark
Agreement, Mr. Clark has agreed that in the event the agreement is terminated
by him for any reason or by Taj Associates for cause, he would not engage in
employment for or on behalf of any other casino hotel located in Atlantic City
for a period of one year.
Taj Associates has an employment agreement with Nicholas J. Niglio (the
"Niglio Agreement") which was assigned to Taj Associates by TCA on February 6,
1995, pursuant to which he serves as Senior Vice President, Casino Marketing
of Taj Associates. The Niglio Agreement, which expires on December 31, 1996,
provides for an annual salary of $250,000 and an annual bonus at the sole
discretion of management of Taj Associates. Pursuant to the Niglio Agreement,
Mr. Niglio has agreed that upon termination of his employment he would not
solicit or contact, directly or through any other casino in Atlantic City, any
customers whom he had developed during his employment with Taj Associates for
a period of ninety days. Mr. Niglio previously served as Executive Vice
President of TCA.
Taj Associates may terminate the employment agreements of Messrs. Clark,
McKee and Niglio in its sole discretion, without cause. If Mr. Clark's
employment agreement is terminated without cause, Taj Associates would be
obligated to pay Mr. Clark the greater of one year's salary or his salary for
the number of months remaining in the agreement, each at his then current
salary. If Mr. McKee's employment agreement is terminated without cause, Taj
Associates would be obligated to pay Mr. McKee an amount equal to one year's
then current salary. If Mr. Niglio's employment agreement is terminated
without cause, Taj Associates would be obligated to pay Mr. Niglio the lesser
of three month's salary or his salary for the number of months remaining in
the agreement, each at his then current salary. Taj Associates may also
terminate the McKee Agreement, the Clark Agreement and the Niglio Agreement
(a) in the event that the CCC license of Mr. McKee, Mr. Clark or Mr. Niglio,
respectively, is revoked or terminated or (b) for "cause," which is defined in
each of the agreements as (i) a material breach of the agreement or of any
employee conduct rules, (ii) dishonesty, (iii) intentional refusal to perform
duties or to properly perform them upon notice, (iv) alcohol or drug abuse or
(v) disability or death.
Taj Associates entered into a severance agreement with Nicholas F. Moles
(the "Moles Agreement") on August 11, 1994. The Moles Agreement provides that
upon Mr. Moles' termination other than for "cause," loss of his casino key
employee license from the CCC or voluntary resignation, Taj Associates will
pay Mr. Moles a severance payment equal to the amount of his salary at its
then current rate for the period of one year. The Moles Agreement defines
"cause" as Mr. Mole's (i) material breach of the agreement or of any employee
conduct rules, (ii) dishonesty, (iii) intentional refusal to perform his
duties or to properly perform them upon notice, (iv) alcohol or drug abuse or
(v) disability or death.
Taj Associates had an employment agreement with Dennis C. Gomes, pursuant to
which Mr. Gomes served as President and Chief Operating Officer of Taj
Associates. The agreement provided for an annual salary of $1,500,000 and
annual increases of 10% on each anniversary. Mr. Gomes received a signing
bonus of $600,000. On September 19, 1995, pursuant to the terms of the
employment agreement, Mr. Gomes terminated his
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<PAGE>
employment agreement as President and Chief Operating Officer of Taj
Associates and continued to serve in that position as an employee-at-will. On
October 3, 1995, the Board of Directors of TM/GP terminated Mr. Gomes from his
position as President and Chief Operating Officer of Taj Associates and Vice
President of Taj Holding. On that same date, Trump, the holder of the Taj
Holding Class C Common Stock, terminated Mr. Gomes as a Class C Director of
TM/GP and Taj Holding. Mr. Gomes did not receive any severance compensation in
connection with his termination.
COMPENSATION OF DIRECTORS
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,
provided that directors currently serving on the Board of Directors of Plaza
Funding or Plaza Holding Inc. receive no additional compensation. All such
fees are reimbursed to THCR by THCR Holdings in accordance with the THCR
Holdings Partnership Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
THCR has an Executive Committee, an Audit Committee, a Special Committee, a
Stock Incentive Plan Committee and a Compensation Committee. The Executive
Committee is composed of Messrs. Trump and Ribis. The Audit Committee and the
Special Committee are composed of Messrs. Askins, Ryan and Thomas, each of
whom is an independent director of THCR. The Stock Incentive Plan Committee is
composed of Messrs. Trump, Askins, Ryan and Thomas. The Compensation Committee
is composed of Messrs. Trump, Ribis, Askins and Thomas. The Special Committee
was established pursuant to THCR By-Laws and the THCR Holdings Partnership
Agreement and is empowered to vote on any matters which require approval of a
majority of the independent directors of THCR, including affiliated
transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: THCR AND PLAZA
ASSOCIATES
In general, the compensation of executive officers of THCR is determined by
the Compensation Committee of the Board of Directors of THCR, which consists
of Messrs. Trump, Ribis, Askins and Thomas. No officer or employee of THCR,
other than Messrs. Trump and Ribis, who serve on the Board of Directors of
THCR, participated in the deliberations of the Board of Directors of THCR
concerning executive compensation.
Certain Related Party Transactions of Trump. Trump entered into the
Executive Agreement, the Contribution Agreement and the License Agreement in
June 1995, and is currently the sole limited partner of THCR Holdings. See "--
Employment Agreements," "Business of THCR--Trademark/Licensing" and
"Description of the THCR Holdings Partnership Agreement."
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 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>
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<PAGE>
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 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 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 "Business of THCR--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
Mortgage Notes and PIK Notes.
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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 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
of THCR--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
100
<PAGE>
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.
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 (the "Super Puma Helicopter
Lease") 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 to time, legal services to Plaza
Associates.
Other Relationships. The Securities and Exchange Commission (the "SEC")
requires issuers 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 board of directors of other entities in
which members of the Board of Directors (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 in the last fiscal year.
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Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
the managing general partner of Plaza Associates, 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 Mr. 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. See "--Employment Agreements."
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. See "--Employment Agreements." 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 and THCR
Holdings and its subsidiaries.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: TAJ ASSOCIATES
In general, the compensation of executive officers of Taj Associates is
determined (prior to the Merger Transaction) by the Board of Directors of Taj
Holding and TM/GP. No officer or employee of Taj Associates other than Mr.
Ribis, who serves on the Boards of Directors of Taj Holding and TM/GP
participated in the deliberations concerning executive compensation.
Certain Related Party Transactions of Trump. On January 8, 1996, as an
inducement for Taj Holding, THCR and Merger Sub to enter into the Merger
Agreement, Trump agreed to vote, or cause to be voted, all shares of Taj
Holding Class C Common Stock beneficially owned by Trump in favor of the
approval and adoption of the Merger Agreement.
Taj Associates has entered into a lease with The Trump-Equitable Fifth
Avenue Co., a corporation wholly owned by Trump, for the lease of office space
in The Trump Tower in New York City, which Taj Associates uses as a marketing
office. The monthly payments under the lease had been $1,000, and the premises
were leased at such rent for four months in 1992, the full twelve months in
1993 and 1994 and eight months in 1995. On September 1, 1995, the lease was
renewed for a term of five years with an option for Taj Associates to cancel
the lease on September 1 of each year, upon six months' notice and payment of
six months' rent. Under the renewed lease, the monthly payments are $2,184.
Taj Associates currently leases the Specified Parcels from Realty Corp.,
consisting of land adjacent to the site of the Taj Mahal, which is being used
primarily for a bus terminal, surface parking and the Taj Entertainment
Complex, as well as the Steel Pier, and a warehouse complex. During 1993, 1994
and 1995, lease obligations to Realty Corp. for these facilities were
approximately $3.3 million per year. Upon consummation of the Merger
Transaction, Taj Associates will purchase the Specified Parcels from Realty
Corp. See "The Merger Transaction."
On October 4, 1991, Taj Associates entered into the Taj Associates-First
Fidelity Guarantee to guarantee performance by Realty Corp. of its obligations
under the First Fidelity Loan. The Taj Associates-First Fidelity Guarantee is
limited to any deficiency in the amount owed under the First Fidelity Loan
when due, up to a maximum of $30 million. In connection with the purchase of
the Specified Parcels, First Fidelity will, among other things, release Taj
Associates from the Taj Associates-First Fidelity Guarantee. See "Business of
Taj Holding--Certain Indebtedness--First Fidelity Loan/Specified Parcels."
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During 1992 and prior years, Taj Associates had an arrangement with the
Trump Shuttle, Inc. (the "Trump Shuttle"), which at the time was beneficially
owned by Trump, for the provision of airline services to Atlantic City on
behalf of Taj Associates patrons. During 1992, Taj Associates incurred $29,000
in charges from the Trump Shuttle, all of which was paid.
Taj Associates and Trump have entered into the Taj Services Agreement, which
became effective in April 1991, and which provides that Trump will render to
Taj Associates marketing, advertising, promotional and related services with
respect to the business operations of Taj Associates through December 31,
1999. In consideration for the services to be rendered, Taj Associates pays an
annual fee (the "Annual Fee") equal to 1 1/2% of Taj Associates' earnings
before interest, taxes and depreciation less capital expenditures for such
year, with a minimum base fee of $500,000 per annum. The base fee is payable
monthly with the balance due April 15 of the following year. During 1993, 1994
and 1995, Trump earned approximately $1.6 million, $1.4 million and $1.7
million, respectively, in respect of the Annual Fee, including amounts paid to
a third party pursuant to an assignment agreement. In addition to the Annual
Fee, Taj Associates reimburses Trump on a monthly basis for all reasonable
out-of-pocket expenses up to certain aggregate amounts incurred by Trump in
performing his obligations under the Taj Services Agreement. During 1993, 1994
and 1995, Taj Associates reimbursed Trump $232,000, $224,000 and $261,000,
respectively, for expenses pursuant to the Taj Services Agreement, of which
$127,000, $148,000 and $164,000, respectively, was incurred to an affiliate
for air transportation. Taj Associates has agreed to indemnify Trump from and
against any licensing fees arising out of his performance of the Taj Services
Agreement, and against any liability arising out of his performance of the Taj
Services Agreement, other than that due to his gross negligence or willful
misconduct. In connection with the Merger, the Taj Services Agreement will be
terminated.
On April 1, 1991, in connection with the Taj Services Agreement, Taj
Associates and Trump entered into an Amended and Restated License Agreement
(the "Taj License Agreement") which amended and restated an earlier license
agreement between the parties. Pursuant to the Taj License Agreement, Taj
Associates has the non-exclusive right to use the name and likeness of Trump,
and the exclusive right to use the name and related marks and designs of the
Trump Taj Mahal Casino Resort (collectively, the "Taj Marks"), in its
advertising, marketing and promotional activities through December 31, 1999.
All uses by Taj Associates of the names, marks, licenses and designs under the
Taj License Agreement are subject to the prior written approval of Trump.
Trump has agreed to indemnify Taj Associates against any liability for
trademark or copyright infringement (in connection with the use by Taj
Associates of the Taj Marks in accordance with the Taj License Agreement)
arising solely by reason of any license agreement or other agreement entered
into by Trump with respect to the Taj Marks. Taj Associates has collaterally
assigned its right under the Taj License Agreement to the Taj Bond Trustee.
Upon consummation of the Merger the Taj License Agreement is expected to be
terminated and the Taj Marks licensed to THCR Holdings under the terms of its
existing license 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 Taj
Associates.
Other Relationships. The SEC requires registrants to disclose the existence
of any other corporation in which both (i) an executive officer of the
registrant serves on the board of directors and/or compensation committee, and
(ii) a director of the registrant serves as an executive officer. Mr. Ribis,
an executive officer of Taj Associates, is a member of the Board of Directors
of other entities in which members of the Board of Directors of TM/GP, the
managing general partner of Taj Associates (namely, Messrs. Trump, Ribis and
Burke), are executive officers. Mr. Trump, an executive officer of Taj
Holding, is a member of the Board of Directors of other entities in which
members of the Board of Directors of Taj Holding (namely, Messrs. Trump, Ribis
and Burke) are executive officers. Mr. Ribis, an executive officer of Taj
Funding and TTMI, serves on the Board of Directors of other entities in which
the sole Director of Taj Funding and TTMI (namely, Trump) serves as an
executive officer. In addition, Trump or entities owned by him receive
management or services fees pursuant to fixed formulas provided for in
agreements with Taj Associates, Plaza Associates, THCR and TCA, of which Mr.
Ribis is a director or a director of the managing general partner.
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Mr. Ribis serves on the Board of Directors of Taj Holding, which is the 100%
beneficial owner of TM/GP, of which Trump is an executive officer. Messrs.
Trump and Ribis serve on the Board of Directors of TM/GP, which is the
managing general partner of Taj Associates, of which Messrs. Ribis and Burke
are executive officers. Trump, however, does not receive any compensation for
serving as an executive officer of TM/GP or Taj Holding. Messrs. Trump and
Ribis also serve on the Board of Directors of Realty Corp., which leases
certain real property to Taj Associates, of which Messrs. Trump and Ribis are
executive officers. Messrs. Trump and Ribis, however, do not receive any
compensation for serving as executive officers of Realty Corp. Trump is also a
director of TTMI, TTMC and Taj Funding; Mr. Ribis serves as an executive
officer of one or more of such entities; however, he does not receive any
compensation for serving in such capacities.
Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
Inc., the managing general partner of Plaza Associates, 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.
Trump serves on the Boards of Directors of THCR and TC/GP, Inc., of which
Messrs. Ribis and Burke are executive officers. Trump is not compensated by
such entities for serving as an executive officer; however, a corporation
controlled by him has entered into a services agreement with TCA. Messrs.
Ribis and Burke are not compensated by the foregoing entities; however, they
are compensated by TCA for their service as executive officers.
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 Taj Associates and
certain of its affiliated entities.
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CERTAIN TRANSACTIONS
Payments to affiliates in connection with any such transactions are governed
by the provisions of the First Mortgage Note Indenture, which provisions will
generally require that such transactions be on terms as favorable as would be
obtainable from an unaffiliated party, and require the approval of a majority
of the independent directors of Trump Atlantic City Funding for certain
affiliated transactions.
THCR AND PLAZA ASSOCIATES
Trump and certain affiliates have engaged in certain related party
transactions with respect to THCR and Plaza Associates. See "Management--
Compensation Committee Interlocks and Insider Participation: THCR and Plaza
Associates--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 has 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.
TAJ ASSOCIATES AND AFFILIATES
Trump and certain affiliates have engaged in certain related party
transactions with respect to Taj Associates. See "Management--Compensation
Committee Interlocks and Insider Participation: Taj Associates--Certain
Related Party Transactions of Trump" and "--Other Relationships."
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During the fiscal years ended December 31, 1993, 1994 and 1995, Taj
Associates reimbursed Taj Holding $1,733,000, $2,171,000 and $1,554,000,
respectively, for all amounts necessary to permit TM/GP or Taj Holding (a) to
make payments that TM/GP or Taj Holding was required to make pursuant to the
terms of the TM/GP Certificate of Incorporation and the Taj Holding
Certificate of Incorporation (generally for indemnification of officers and
directors), (b) to pay fees to directors (including fees for serving on a
committee), (c) to pay all other expenses of TM/GP and Taj Holding and (d) to
permit Taj Holding to redeem the Taj Holding Class B Common Stock when
required to make such redemption pursuant to the terms of the Taj Holding
Certificate of Incorporation. Taj Holding did not engage in any other
transactions with its affiliates during the fiscal years ended December 31,
1993, 1994 and 1995.
Taj Funding has not engaged in any transactions with its affiliates, except
for the loan of funds made to Taj Associates in exchange for an intercompany
note secured by a mortgage. Both the note and the mortgage were amended in
1991 pursuant to the 1991 Taj Restructuring.
In April 1991, Taj Associates purchased from TCA for $1,687,000 two adjacent
parcels of land on the Pleasantville-Egg Harbor Township border, constituting
approximately ten acres. The first parcel contains two buildings, certain
fleet maintenance facilities and an office building and warehouse facility,
portions of which were leased to Plaza Associates. The lease expired in March
1993 and Plaza Associates has vacated. Taj Associates currently leases the
space to commercial tenants. The second parcel is unimproved.
In December 1994, Taj Associates entered into a one-year agreement with TCA
pursuant to which TCA leases to Taj Associates 300 parking spaces (500 parking
spaces during the months of May to September) at a rate of 50 cents per space
per day, to be used for employee parking. The agreement expired in December
1995, however, TCA and Taj Associates are currently negotiating an extension
of the agreement and have agreed to continue the lease on a month-to-month
basis.
Taj Associates engages in various transactions with Trump Plaza and Trump's
Castle. These transactions are charged at cost or normal selling price in the
case of retail items and include certain shared payroll costs as well as
complimentary services offered to customers. Expenses incurred by Taj
Associates payable to TCA for the years ended December 31, 1993, 1994 and 1995
were approximately $1,100,000, $1,167,000 and $1,072,000, respectively, of
which all but $69,000, $30,000 and $164,000, respectively, was paid or offset
against amounts owed to Taj Associates by TCA. Expenses incurred by Taj
Associates payable to Plaza Associates for the years ended December 31, 1993,
1994 and 1995 were approximately $83,000, $149,000 and $445,000, respectively,
all of which were offset against amounts owed to Taj Associates by Plaza
Associates, with the exception of $167,000 at December 31, 1995.
Indemnification Agreements. In addition to the indemnification provisions in
Taj Associates' employment agreements, the Merger Agreement provides for
indemnification of any present or former director, officer, employee or agent
of Taj Holding and TM/GP, arising from his services as such, within six years
of the Effective Time. See "Summary--The Merger Transaction."
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DESCRIPTION OF THE FIRST MORTGAGE NOTES
Set forth below is a summary of certain provisions of the First Mortgage
Notes. The First Mortgage Notes will be issued pursuant to an indenture (the
"First Mortgage Note Indenture"), to be dated as of the Effective Time, by and
among Trump Atlantic City Associates ("Trump Atlantic City"), and Trump
Atlantic City Funding, Inc. ("Trump Atlantic City Funding"), as joint and
several obligors (the "Issuers"); Trump Taj Mahal Associates ("Taj
Associates"), Trump Plaza Associates ("Plaza Associates") and The Trump Taj
Mahal Corporation ("TTMC"), as guarantors; and First Bank National
Association, as trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
terms of the First Mortgage Note Indenture are also governed by certain
provisions contained in the Trust Indenture Act. The following summaries of
certain provisions of the First Mortgage Note Indenture and related documents
are summaries only, do not purport to be complete and are subject to, and
qualified in their entirety by reference to, all of the provisions of the
First Mortgage Note Indenture and exhibits thereto, including those terms made
a part of the First Mortgage Note Indenture by reference to the Trust
Indenture Act as in effect on the date of the First Mortgage Note Indenture.
Wherever particular provisions of the First Mortgage Note Indenture or related
documents are referred to in this summary, such provisions are incorporated by
reference as a part of the statements made and such statements are qualified
in their entirety by such reference.
GENERAL
The First Mortgage Notes will be senior obligations of the Issuers, limited
in aggregate principal amount to $1.1 billion and secured as set forth under
"--Security for the First Mortgage Notes" below. The First Mortgage Notes will
be guaranteed on a senior secured basis by Trump Atlantic City's existing
Subsidiaries, Plaza Associates, Taj Associates, TTMC, and by each future
Subsidiary of Trump Atlantic City (collectively, the "Guarantors"), other than
Trump Atlantic City Funding, which is one of the Issuers. The term
"Subsidiary," however, does not include Unrestricted Subsidiaries. The First
Mortgage Notes will be issued only in fully registered form, without coupons,
in denominations of $l,000 and integral multiples thereof. The First Mortgage
Notes are non-recourse to the Partners of Trump Atlantic City. See "--No
Personal Liability of Partners, Stockholders, Officers, Directors; Non-
recourse" below.
The First Mortgage Notes will mature on , 2006. The First Mortgage
Notes will bear interest at the rate per annum stated on the cover page hereof
from the date of issuance or from the most recent Interest Payment Date to
which interest has been paid or provided for, payable semi-annually in arrears
on and of each year, commencing , 1996, to the persons in
whose names such First Mortgage Notes are registered at the close of business
on the or immediately preceding such Interest Payment Date.
Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
The Trustee will initially act as Paying Agent and Registrar. The Issuers
may change the Paying Agent or Registrar without prior notice to holders of
the First Mortgage Notes. The Issuers or any of their Subsidiaries may act as
Paying Agent or Registrar.
Principal of, premium, if any, and interest on the First Mortgage Notes will
be payable, and the First Mortgage Notes may be presented for registration of
transfer or exchange, at the office or agency of the Issuers maintained for
such purpose, which office or agency shall be maintained in the Borough of
Manhattan, The City of New York. At the option of the Issuers, payment of
interest may be made by check mailed to the Holders of the First Mortgage
Notes at the addresses set forth upon the First Mortgage Note registry books.
No service charge will be made for any registration of transfer, exchange or
redemption of First Mortgage Notes, but the Issuers may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Until otherwise designated by the Issuers, the Issuers'
office or agency will be the corporate trust office of the Trustee presently
located in the Borough of Manhattan, The City of New York.
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SECURITY FOR THE FIRST MORTGAGE NOTES
The obligations of the Issuers with respect to the First Mortgage Notes will
be secured by mortgages and assignments of leases and rents and of operating
assets (collectively, the "Mortgage"), which will encumber Plaza Associates'
and Taj Associates' respective interests in the Casino Hotels, including the
Specified Parcels (see "Business--Properties--Taj Mahal") and certain other
facilities owned or leased by Plaza Associates or Taj Associates, any
additions and improvements constructed thereon and the interest of Plaza
Associates and Taj Associates in furniture, furnishings, fixtures, machinery
and equipment at any time forming a part thereof, or used in connection
therewith, and substantially all of the other assets of Plaza Associates and
Taj Associates, except as described below (collectively the "Collateral"). The
Mortgage represents a first lien and security interest on the Casino Hotels
and such other assets (subject to certain Superior Mortgages, the associated
Indebtedness of which aggregated approximately $3.0 million principal amount
as of December 31, 1995). See "--The Mortgage" below. Certain of the assets
not covered by the Mortgage have also been assigned to the Trustee as security
of the First Mortgage Notes pursuant to security and other agreements. The
Working Capital Facility will have a security interest in the Collateral on an
equal and ratable basis with the First Mortgage Notes. In addition, subject to
certain limited exceptions, all Equity Interests owned by the Issuers and
their Subsidiaries, including without limitation 100% of the Equity Interests
of Trump Atlantic City Funding, TTMC, Plaza Associates and Taj Associates, are
required to be pledged exclusively as security for THCR Holdings' obligations
under the Senior Note Indenture and therefore are not included in the
Collateral.
The First Mortgage Note Indenture will contain certain covenants limiting
the ability of Trump Atlantic City and its Subsidiaries to incur Indebtedness.
Subject to certain limitations, the First Mortgage Note Indenture permits the
creation of additional mortgages on the Casino Hotels in connection with
expansions thereof, the liens of which may be equal in priority to the lien of
the Mortgage and that securing the Working Capital Facility. See clauses (c)
and (e) of the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock" below. The lien and security interest of the
Mortgage will also be subordinated to security interests in furniture,
fixtures and equipment acquired by Plaza Associates or Taj Associates that may
be granted in connection with the acquisition of such assets. If any agreement
granting such security interest in respect of acquired furniture, fixtures and
equipment prohibits subordinate liens, the property in question will not be
included in the Collateral. As a result, such assets will be available to pay
Obligations in respect of the First Mortgage Notes, if at all, only after such
secured Indebtedness has been paid in full. Cash and Cash Equivalents held by
Plaza Associates or Taj Associates (other than proceeds from Collateral) are
generally not included within the Collateral. In addition, certain of Plaza
Associates' and Taj Associates' intangible assets that may be significant to
its operations, such as computer software licenses, are by their terms not
assignable and, accordingly, are not included in the property subject to the
Mortgage.
Following an Event of Default, the Trustee, on behalf of the Holders of the
First Mortgage Notes, in addition to any rights or remedies available to it
under the First Mortgage Note Indenture, may take such action as it deems
advisable to protect and enforce its rights in the Collateral, including the
institution of foreclosure proceedings. The ability of the Holders of the
First Mortgage Notes to operate the casino facilities of the Casino Hotels
after any foreclosure on the Collateral is subject to (x) restrictions under
the Casino Control Act, including the approval of the CCC and (y) such other
restrictions as may be applicable under the laws of other jurisdictions. See
"Regulatory Matters." If the Trustee takes possession of or otherwise acquires
either of the Casino Hotels, the Trustee would be required to obtain a license
under the Casino Control Act to operate the casino facilities of the Casino
Hotels and an entity licensed under the Casino Control Act would be required
to be retained to operate such casino facilities. Because potential bidders
must satisfy licensing requirements, the number of potential bidders in a
foreclosure sale will be less than in foreclosure of other types of facilities
and such requirements may delay the sale of, and may adversely affect the
sales price for, the Casino Hotels and other Collateral. In addition, the
ability of the holders of First Mortgage Notes to realize upon the Collateral
may be subject to certain bankruptcy law limitations in the event of a
bankruptcy. See "--Certain Bankruptcy Limitations" below.
FIRST MORTGAGE NOTE GUARANTEES
The Issuers' obligations under the First Mortgage Notes, the First Mortgage
Note Indenture and the Mortgage Documents will be jointly and severally
irrevocably and unconditionally guaranteed by the Guarantors.
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Each guarantee will be a senior obligation of the respective Guarantor and
secured by any Collateral owned by such Guarantor, subject to certain
exceptions. See "--Security for the First Mortgage Notes" above. The
obligations of each Guarantor under its guarantee will be limited in a manner
intended to avoid it being deemed a fraudulent conveyance under applicable
law. See "--Certain Bankruptcy Limitations" below.
The First Mortgage Note Indenture will provide that no Guarantor shall
consolidate or merge with or into (whether or not such Guarantor is the
surviving Person) another Person unless (i) subject to the provisions of the
following paragraph and certain other provisions of the First Mortgage Note
Indenture, the Person formed by or surviving any such consolidation or merger
(if other than such Guarantor) assumes all the obligations of such Guarantor
pursuant to a supplemental indenture and supplemental Mortgage Documents in
form reasonably satisfactory to the Trustee, pursuant to which such Person
shall unconditionally guarantee, on a senior secured basis, all of such
Guarantor's obligations under such Guarantor's guarantee, the First Mortgage
Note Indenture and the Mortgage Documents on the terms set forth in the First
Mortgage Note Indenture; (ii) immediately before and immediately after giving
effect to such transaction on a pro forma basis, no Default or Event of
Default shall have occurred or be continuing; and (iii) immediately after such
transaction, the surviving Person holds all Permits required for operation of
the business of, and such entity is controlled by a Person or entity (or has
retained a Person or entity which is) experienced in, operating casino hotels
or otherwise holds all Permits (including those required from Gaming
Authorities) to operate its business.
The First Mortgage Note Indenture will further provide that in the event of
a sale or other disposition of all of the Equity Interests of any Guarantor
(including pursuant to a merger or consolidation) to any person other than a
Subsidiary Guarantor, then such Guarantor may be released and relieved of any
obligation under its guarantee; provided, that (x) immediately after giving
effect to such transaction, no Default or Event of Default shall haver
occurred and be continuing and (y) such Asset Sale and the application of the
Net Cash Proceeds therefrom are in accordance with the applicable provisions
of the Indenture, including without limitation the covenants "Limitation on
Sale of Assets and Subsidiary Stock; Event of Loss" and "Limitation on Merger,
Sale or Consolidation."
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee to foreclose on the Collateral upon the occurrence
of an Event of Default will likely be significantly impaired if a bankruptcy
case under Title 11 of the United States Code (the "Bankruptcy Code") is
commenced by or against any of the Issuers or Guarantors prior to such
foreclosure. Once such a case is commenced, the Bankruptcy Code prohibits a
secured creditor, such as the Trustee, from foreclosing on its collateral
without bankruptcy court approval. Moreover, the bankruptcy court may decline
to grant such approval, even if the debtor is in default under the applicable
debt instruments, if it concludes that there exists or that the debtor can
provide "adequate protection" for the interest of such secured creditor. The
meaning of the term "adequate protection" may vary according to circumstances,
but it is intended in general to protect the value of the secured creditor's
interest in the collateral, as of the commencement of the case, and may
include cash payments or the granting of additional security, if and at such
times as the court in its discretion determines, for any diminution in the
value of the collateral as a result of the stay of foreclosure during the
pendency of the bankruptcy case. In view of the lack of a precise definition
of the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict, in the event of the bankruptcy
of an Issuer or Guarantor, whether and for how long payments under the First
Mortgage Notes would be delayed, whether or when the Trustee would be
permitted to foreclose on the Collateral or whether or to what extent holders
of the First Mortgage Notes would be compensated for any delay in payment or
loss of value of the Collateral through the requirement of "adequate
protection." See "Risk Factors--Fraudulent Transfer Considerations."
Trump Atlantic City is a holding company, conducting all of its business
through Subsidiaries, which have guaranteed or will guarantee the Issuers'
Obligations with respect to the First Mortgage Notes. See "Risk Factors."
Holders of the First Mortgage Notes will be direct creditors of each Guarantor
by virtue of its guarantee. Nonetheless, in the event of the bankruptcy or
financial difficulty of a Guarantor, such Guarantor's obligations under its
guarantee, and any security interest granted to secure such guarantee, may be
subject to review and avoidance under state or federal fraudulent transfer
laws. Among other things, such obligations may
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be avoided if a court concludes that such obligations were incurred and such
security interests granted for less than reasonably equivalent value or fair
consideration at a time when the Guarantor was insolvent, was rendered
insolvent, or was left with inadequate capital to conduct its business. A
court would likely conclude that a Guarantor did not receive reasonably
equivalent value or fair consideration to the extent that the aggregate amount
of its liability on its guarantee exceeds the economic benefits it realizes in
the Merger Transaction. See "Risk Factors--Fraudulent Transfer Considerations"
and "Business--Properties--Trump Plaza."
If the obligations of a Guarantor under its guarantee and the security
interests granted to secure such guarantee were avoided, Holders of First
Mortgage Notes would have to look to the assets of any remaining Guarantors
for payment. There can be no assurance in that event that such assets would
suffice to pay the outstanding principal and interest on the First Mortgage
Notes. Equity Interests in Subsidiaries and certain other assets will not be
included in the Collateral. See "--Security for the First Mortgage Notes"
above.
OPTIONAL REDEMPTION
Except as indicated in the next succeeding paragraph, the Issuers will not
have the right to redeem any First Mortgage Notes prior to , 2001. The
First Mortgage Notes will be redeemable at the option of the Issuers, in whole
or in part, at any time on or after , 2001, upon not less than 30 nor
more than 60 days' notice, in amounts of $1,000 or an integral multiple of
$1,000, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period commencing of
the years indicated below, in each case (subject to the right of holders of
record on a record date to receive interest due on an interest payment date
that is on or prior to such redemption date) together with accrued and unpaid
interest thereon to the redemption date:
<TABLE>
<CAPTION>
REDEMPTION
12-MONTH PERIOD BEGINNING PRICE
------------------------- ----------
<S> <C>
2001........................................................... %
2002........................................................... %
2003........................................................... %
2004 and thereafter............................................ 100.000%
</TABLE>
The First Mortgage Notes will also be redeemable, in whole or in part, at
any time upon not less than 30 nor more than 60 days' prior notice (or such
earlier date as may be required by any Gaming Authority) at 100% of the
principal amount thereof, together with accrued and unpaid interest through
the date on which the holder receives notice of disqualification, pursuant to
a Required Regulatory Redemption. See "--Gaming Laws."
In the event of a redemption of less than all of the First Mortgage Notes
issued pursuant to the First Mortgage Note Indenture (other than a Required
Regulatory Redemption), First Mortgage Notes will be chosen for redemption by
the Trustee as provided in the First Mortgage Note Indenture, but, in general,
pro rata or by lot. On and after the redemption date, interest ceases to
accrue on such First Mortgage Notes or portions thereof called for redemption
unless the Issuers default in the payment therefor. If a First Mortgage Note
is redeemed subsequent to an interest record date but on or prior to the
related interest payment date, then any accrued interest will be paid to the
person in whose name such First Mortgage Note is registered at the close of
business on such record date.
The First Mortgage Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the holder
of each First Mortgage Note to be redeemed to such holder's last address as
then shown upon the registry books of the Registrar. Any notice which relates
to a First Mortgage Note to be redeemed in part only must state the portion of
the principal amount equal to the unredeemed portion thereof and must state
that on and after the date of redemption, upon surrender of such First
Mortgage Note, a new First Mortgage Note or Notes in a principal amount equal
to the unredeemed portion thereof will be issued.
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CERTAIN COVENANTS
REPURCHASE OF FIRST MORTGAGE NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE
OF CONTROL
The First Mortgage Note Indenture will provide that in the event that a
Change of Control has occurred, each holder of First Mortgage Notes will have
the right, at such holder's option, pursuant to an irrevocable and
unconditional offer by the Issuers (the "Change of Control Offer"), to require
the Issuers to repurchase all or any part of such holder's First Mortgage
Notes (provided, that the principal amount of such First Mortgage Notes must
be $1,000 or an integral multiple thereof) on a date (the "Change of Control
Purchase Date") that is no later than 75 days after the occurrence of such
Change of Control, at a cash price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof, together with accrued interest
to the Change of Control Purchase Date. The Change of Control Offer shall be
made within 30 days following a Change of Control and shall remain open for 20
Business Days following its commencement (the "Change of Control Offer
Period"). Upon expiration of the Change of Control Offer Period, the Issuers
shall purchase all First Mortgage Notes properly tendered in response to the
Change of Control Offer. If required by applicable law, the Change of Control
Purchase Date and the Change of Control Offer Period may be extended as so
required; however, if so extended, it shall nevertheless constitute an Event
of Default if the Change of Control Purchase Date does not occur within 90
days of the Change of Control.
As used herein, a "Change of Control" means any of the following events:
(i) THCR Holdings ceases to be the "beneficial owner," directly or
indirectly, of 100% of the Equity Interests of Trump Atlantic City;
(ii) any sale, transfer or other conveyance, whether direct or indirect,
of all or substantially all of the assets of THCR Holdings or THCR, on a
consolidated basis, in one transaction or a series of related transactions,
if, immediately after giving effect to such transaction, (A) any "person"
or "group" (as such terms are used for purposes of Sections 13(d) and 14(d)
of the Exchange Act, whether or not applicable), other than the Permitted
Holder, or if applicable in the case of THCR Holdings, THCR, becomes the
"beneficial owner (as defined)," directly or indirectly, of more than 35%
of the total voting power of the Voting Stock of the transferee and (B) the
Permitted Holder "beneficially owns" (as so defined), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of the transferee than such other person or group and
does not have the right or ability by voting power, contract or otherwise
to elect or designate a majority of the Board of Directors;
(iii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than the Permitted Holder, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and l3d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of THCR, or any successor thereto by merger, consolidation or otherwise,
unless the Permitted Holder "beneficially owns" (as so defined), directly
or indirectly, in the aggregate a greater percentage of the total voting
power of the Voting Stock of THCR than such other person or group and still
has the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors (for purposes
of this definition, such other person shall be deemed to beneficially own
any Voting Stock of a specified corporation held by a parent corporation,
if such other person "beneficially owns" (as so defined), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holder "beneficially owns" (as so
defined), directly or indirectly, in the aggregate, a lesser percentage of
the voting power of the Voting Stock of such parent corporation and does
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of
such parent corporation); or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of THCR or
Trump Atlantic City Funding (together with any new directors whose election
by such Board of Directors or whose nomination for election by the
stockholders of THCR or THCR Atlantic City Funding, as applicable, is
approved by the Permitted Holder or by a vote
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of the 66 2/3% of the directors of THCR or THCR Atlantic City Funding, as
applicable, then still in office who are either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) have ceased for any reason to constitute a majority of the
Board of Directors of THCR or THCR Atlantic City Funding, as applicable,
then in office.
On or before the Change of Control Purchase Date, Trump Atlantic City will
(i) accept for payment First Mortgage Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent cash sufficient to pay the Change of Control Purchase Price (together
with accrued and unpaid interest) of all First Mortgage Notes so tendered and
(iii) deliver to the Trustee First Mortgage Notes so accepted together with an
Officers' Certificate listing the First Mortgage Notes or portions thereof
being purchased. The Paying Agent will promptly mail to the holders of First
Mortgage Notes so accepted payment in an amount equal to the Change of Control
Purchase Price (together with accrued and unpaid interest), and the Trustee
will promptly authenticate and mail or deliver to such holders a new First
Mortgage Note or Notes equal in principal amount to any unpurchased portion of
the First Mortgage Note or Notes surrendered. Any First Mortgage Notes not so
accepted will be promptly mailed or delivered to the holder thereof. The
Issuers will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Purchase Date.
The Change of Control purchase feature of the First Mortgage Notes may make
more difficult or discourage a takeover of THCR or THCR Holdings and, thus,
the removal of incumbent management.
The phrase "all or substantially all" of the assets will likely be
interpreted under applicable state law and will be dependent upon particular
facts and circumstances. As a result, there may be a degree of uncertainty in
ascertaining whether a sale or transfer of "all or substantially all" of the
assets of THCR Holdings or THCR has occurred. In addition, no assurances can
be given that Trump Atlantic City will have adequate financial resources to
acquire First Mortgage Notes tendered upon the occurrence of a Change of
Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable federal and
state securities laws.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
The First Mortgage Note Indenture will provide that, except as set forth
below in this covenant, Trump Atlantic City will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, issue, assume,
guaranty, incur, become directly or indirectly liable with respect to
(including as a result of an Acquisition), or otherwise become responsible
for, contingently or otherwise (individually and collectively, to "incur" or,
as appropriate, an "incurrence"), any Indebtedness or any Disqualified Capital
Stock (including Acquired Indebtedness). Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness or Disqualified Capital
Stock and (ii) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of Trump Atlantic City for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro
forma basis to such incurrence of such Indebtedness or Disqualified Capital
Stock and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be at least 2.0 to 1 for
incurrences on or prior to , 1998 and at least 2.25 to 1 for
incurrences thereafter (the "Debt Incurrence Ratio"), then Trump Atlantic
City may incur such Indebtedness or Disqualified Capital Stock, provided,
that except in the case of Permitted Indebtedness and Acquired
Indebtedness, such Indebtedness incurred pursuant to this clause (a) has an
Average Life to Stated Maturity that exceeds the remaining Average Life to
Stated Maturity of the First Mortgage Notes and has a Stated Maturity for
its final scheduled principal or (in the case of Disqualified Capital
Stock) redemption payment, as applicable, later than the Stated Maturity
for the final scheduled principal payment of the First Mortgage Notes;
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(b) Trump Atlantic City and the Guarantors may incur Indebtedness
evidenced by the First Mortgage Notes and represented by the First Mortgage
Note Indenture up to the amounts specified therein as of the date thereof;
(c) Trump Atlantic City may incur Indebtedness not to exceed $75.0
million in aggregate principal amount outstanding at any time pursuant to
this clause (c) the proceeds of which are used for further acquisitions,
demolitions, renovations or constructions of Improvements with respect to,
or related to, the Casino Hotels or the financing of equipment to be used
therein, provided, that no Indebtedness shall be incurred pursuant to this
clause (c) in an aggregate principal amount which exceeds 75% of the cost
of the assets or Improvements, as the case may be, financed thereby, and
provided further, that except in the case of Permitted Indebtedness and
Acquired Indebtedness, such Indebtedness incurred pursuant to this clause
(c) has an Average Life to Stated Maturity that equals or exceeds the
remaining Average Life to Stated Maturity of the First Mortgage Notes and
has a Stated Maturity for its final scheduled principal or (in the case of
Disqualified Capital Stock) redemption payment, as applicable, on or later
than the Stated Maturity for the final scheduled principal payment of the
First Mortgage Notes;
(d) Plaza Associates and Taj Associates may incur Indebtedness
represented by F,F&E Financing Agreements and/or Capitalized Lease
Obligations relating to after-acquired gaming or related equipment (or
other after-acquired equipment necessary to conduct a Related Business and
consistent in amount and nature with industry practices) of (or, in the
case of Capitalized Lease Obligations, leased by) Plaza Associates or Taj
Associates, as applicable, not to exceed (for Plaza Associates and Taj
Associates, collectively) $50.0 million in aggregate principal amount
outstanding at any time pursuant to this clause (d) (including any
Indebtedness issued to refinance, refund or replace such Indebtedness);
(e) Trump Atlantic City may incur Indebtedness pursuant to the Working
Capital Facility up to an aggregate amount outstanding (including any
Indebtedness issued to refinance, refund or replace such Indebtedness) at
any time of $25.0 million;
(f) Trump Atlantic City, Plaza Associates and Taj Associates, as
applicable, may incur Refinancing Indebtedness with respect to any
Indebtedness or Disqualified Capital Stock, as applicable, described in
clauses (a), (b) and (c) of this covenant or which is outstanding on the
Issue Date so long as such Refinancing Indebtedness is secured only by the
assets (if any) that secured the Indebtedness so refinanced;
(g) Trump Atlantic City, Plaza Associates, Taj Associates and their
Subsidiaries may incur Permitted Indebtedness; and
(h) Trump Atlantic City may incur Indebtedness in an aggregate amount
outstanding at any time pursuant to this clause (h) (including any
Indebtedness issued to refinance, replace, or refund such Indebtedness) of
up to $30.0 million.
Indebtedness of any Person which is outstanding at the time such Person
becomes a Subsidiary of Trump Atlantic City, including by designation, or is
merged with or into or consolidated with Trump Atlantic City or a Subsidiary
of Trump Atlantic City shall be deemed to have been incurred at the time such
Person becomes such a Subsidiary of Trump Atlantic City or is merged with or
into or consolidated with Trump Atlantic City or a Subsidiary of Trump
Atlantic City, as applicable. Any Guarantor may guarantee Indebtedness of
Trump Atlantic City or another Guarantor to the extent and at the time Trump
Atlantic City or such other Guarantor incurs such Indebtedness in compliance
with this covenant.
LIMITATION ON RESTRICTED PAYMENTS
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
make any Restricted Payment if, after giving effect to such Restricted Payment
on a pro forma basis, (1) a Default or an Event of Default shall have occurred
and be continuing, (2) Trump Atlantic City is not permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt
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Incurrence Ratio in paragraph (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," or (3) the aggregate
amount of all Restricted Payments made by Trump Atlantic City and its
Subsidiaries, including after giving effect to such proposed Restricted
Payment, from and after the Issue Date, would exceed the sum of (a) 50% of the
aggregate Consolidated Net Income of Trump Atlantic City and its Consolidated
Subsidiaries for the period (taken as one accounting period), commencing on
the first day of the first full fiscal quarter commencing after the Issue
Date, to and including the last day of the fiscal quarter ended immediately
prior to the date of each such calculation (or, in the event Consolidated Net
Income for such period is a deficit, then minus 100% of such deficit), plus
(b) the aggregate Net Cash Proceeds received by Trump Atlantic City after the
Issue Date and on or prior to the date of such proposed Restricted Payment
from (i) the sale of its Qualified Equity Interests (other than (x) to a
Subsidiary of Trump Atlantic City and (y) to the extent applied in connection
with a Qualified Exchange) or (ii) other Capital Contributions.
The foregoing clauses (2) and (3) of the immediately preceding paragraph,
however, will not prohibit (v) (I) distributions by Trump Atlantic City
pursuant to the terms of the Partnership Agreement as in effect on the Issue
Date to THCR Holdings to the extent promptly distributed to and applied by
THCR Holdings or THCR (A) to pay up to 80% of reasonable general and
administrative expenses of such persons, including directors' fees and
premiums for directors' and officers' liability insurance, not to exceed $5.0
million in any consecutive four-quarter period, (B) to make up to 80% of any
indemnification payments as required by the Certificate of Incorporation of
THCR as in effect on the Issue Date or (C) to effect up to 80% of any
redemption of any Equity Interest of THCR if (x) counsel to THCR delivers an
opinion that failure to so redeem would subject THCR to an adverse action by a
Gaming Authority (or, if applicable, a failure to act by a Gaming Authority
that is adverse to THCR) and (y) THCR determines (as evidenced by a resolution
of its Board of Directors delivered to the Trustee) that such adverse action
(or, if applicable, such failure to act) would be likely to have a material
adverse effect on THCR, and (II) distributions by Trump Atlantic City to THCR
Holdings to the extent promptly distributed to and applied by THCR to pay any
tax liability resulting from the distributions provided for in (I) above, as
required by the Partnership Agreement, (w) distributions by Trump Atlantic
City in an amount not to exceed $50.0 million in the aggregate to the extent
applied by THCR Holdings, within five Business Days of receiving such
distribution, to the next scheduled interest payment on the Senior Notes or
any Refinancing Indebtedness with respect thereto (provided, that solely in
the case of this clause (w), clause (1) of the immediately preceding paragraph
will not prohibit a distribution hereunder except in the case of an Event of
Default under clause (i) or (ii) thereof), (x) a Qualified Exchange, (y) for
so long as Trump Atlantic City is a partnership or substantially similar pass-
through entity for Federal income tax purposes, cash distributions made by
Trump Atlantic City to its Partners from time to time in amounts not to exceed
the Permitted Tax Distributions, so long as the payments are made at the time
permitted by the second sentence of the definition of Permitted Tax
Distributions contained herein, or (z) the payment of any dividend within 60
days after the date of its declaration if such dividend could have been made
on the date of such declaration in compliance with the foregoing provisions.
The full amount of any Restricted Payment made pursuant to the foregoing
clauses (v), (w), (y) and (z) (but not pursuant to clause (x)) of the
immediately preceding sentence, however, will be deducted in the calculation
of the aggregate amount of Restricted Payments available to be made referred
to in clause (3) of the immediately preceding paragraph.
LIMITATION ON LEASES
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not, nor will any of its Subsidiaries be permitted to, lease as tenant or
subtenant real or personal property (except Permitted Leases), unless Trump
Atlantic City's Consolidated Coverage Ratio for the four full fiscal quarters
immediately preceding such event, taken as one period (and also after giving
pro forma effect to any such lease as if such lease was entered into at the
beginning of such four-quarter period), would have been at least equal to the
ratios set forth below for the applicable period during which such
determination is being made:
<TABLE>
<CAPTION>
PERIOD RATIO
------ ---------
<S> <C>
First 24 months from and including the Issuance Date............ 2.00 to 1
Thereafter...................................................... 2.25 to 1
</TABLE>
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In giving effect to the lease as of such four full fiscal quarters, it will be
assumed that the rent for such prior four fiscal quarters was the greater of
the (i) average annualized rent over the term of such lease and (ii) rent
payable for the first four fiscal quarters of such lease.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
create, assume or otherwise cause or suffer to exist any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary of
Trump Atlantic City to pay dividends or make other distributions to or on
behalf of, or to pay any obligation to or on behalf of, or otherwise to
transfer assets or property to or on behalf of, or make or pay loans or
advances to or on behalf of, Trump Atlantic City or any Subsidiary of Trump
Atlantic City, except (a) any restrictions, with respect to a Subsidiary that
is not a Subsidiary on the date of the Indenture, in existence at the time
such Person becomes a Subsidiary of Trump Atlantic City (but not created in
connection with or in contemplation of such Person becoming a Subsidiary and
not applicable to any Person, or property, asset or business, other than the
Person, property, asset or business so acquired), (b) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary (which restrictions shall be for
the benefit of the purchaser thereof and no other Person and apply only to the
assets of the Subsidiary to be sold), (c) restrictions imposed by a Permitted
Lien on the transfer of the respective assets subject thereto, (d)
restrictions contained in the First Mortgage Note Indenture and the Mortgage
Documents, as the same may be amended from time to time in accordance with the
terms thereof and (e) any restrictions existing under any agreement which
refinances or replaces the agreements containing the restrictions in clause
(a), provided, that the terms and conditions of any such agreement are not
more restrictive than those under or pursuant to the agreement evidencing the
Indebtedness refinanced.
LIMITATION ON LIENS
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not, and will not permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Lien of any kind, other than Permitted Liens, upon any of
their respective assets now owned or acquired after the date of the First
Mortgage Note Indenture or upon any income or profits therefrom.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK; EVENT OF LOSS
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not, and will not permit any of its Subsidiaries to, in one or a series of
related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of its property, business or assets, including,
without limitation, upon any sale or other transfer or issuance of any Equity
Interests of any Subsidiary or any sale and leaseback transaction, whether by
Trump Atlantic City or a Subsidiary of Trump Atlantic City or through the
issuance, sale or transfer of Equity Interests by a Subsidiary of Trump
Atlantic City (an "Asset Sale"), unless (1)(a) within 210 days after the date
of such Asset Sale, the Net Cash Proceeds therefrom (the "Asset Sale Offer
Amount") are applied to the optional redemption of the First Mortgage Notes in
accordance with the terms of the First Mortgage Note Indenture or to the
repurchase of the First Mortgage Notes pursuant to an irrevocable,
unconditional cash offer by Trump Atlantic City (the "Asset Sale Offer") to
repurchase First Mortgage Notes at a purchase price (the "Asset Sale Offer
Price") of 100% of principal amount, plus accrued interest to the date of
payment, made within 180 days of such Asset Sale and/or (b) within 180 days
following such Asset Sale, the Asset Sale Offer Amount (less that portion of
the Asset Sale Offer Amount applied as provided in clause (a) above) is
reinvested by Trump Atlantic City or its Subsidiaries to make replacements,
improvements or additions to existing properties or new properties directly
related to a Related Business and such reinvestment is made or committed to be
made (such commitment to be established by (A) the purchase of a new property,
the ground-breaking or the commencement of construction, in each case within
180 days of such Asset Sale or (B) promptly placing the Net Cash Proceeds in a
Restricted Funds Account, provided, that such Net Cash Proceeds are invested
as aforesaid in existing properties or new properties within 365 days of being
placed in such Restricted Funds Account) and provided further, that in the
case of any Asset Sale involving all or substantially all of (x) the
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Capital Stock of a Subsidiary, the assets of which constitute all or
substantially all of either Casino Hotel (or both) or (y) the assets of either
Casino Hotel (or both) (a "Casino Sale"), such Net Cash Proceeds must be used
to make an Asset Sale Offer in accordance with clause 1(a), and not reinvested
under clause 1(b), (2) with respect to any Asset Sale or related series of
Asset Sales involving securities, property or assets with an aggregate fair
market value in excess of $5.0 million, at least 75% (or 90%, in the case of a
Casino Sale) of the consideration for such Asset Sale or series of related
Asset Sales consists of cash or Cash Equivalents (treating for this purpose as
cash or Cash Equivalents (A) property that promptly after such Asset Sale is
converted into cash or Cash Equivalents and (B) except in the case of a Casino
Sale, any senior Indebtedness that secured the subject assets that are assumed
by the transferee in such Asset Sale), (3) no Default or Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect, on a pro forma basis, to, such Asset Sale, and (4) Trump
Atlantic City determines in good faith that Trump Atlantic City or such
Subsidiary, as applicable, receives fair market value for such Asset Sale. For
purposes of this covenant with respect to the application of the Net Cash
Proceeds thereof, the receipt by Trump Atlantic City or any of its
Subsidiaries of proceeds due to an Event of Loss shall constitute an Asset
Sale. All Net Cash Proceeds from an Event of Loss shall be reinvested or used
to repurchase First Mortgage Notes, all within the period and as otherwise
provided above in clause (1)(a) of the first paragraph of this covenant.
The First Mortgage Note Indenture will provide that an Asset Sale Offer may
be deferred until the accumulated Net Cash Proceeds from Asset Sales not
applied to the uses set forth in (1) above (the "Excess Proceeds") exceeds
$15.0 million and that each Asset Sale Offer shall remain open for 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Asset Sale Offer Period").
Upon expiration of the Asset Sale Offer Period, Trump Atlantic City shall
apply the Asset Sale Offer Amount plus an amount equal to accrued interest to
the purchase of all First Mortgage Notes tendered (on a pro rata basis if the
Asset Sale Offer Amount is insufficient to purchase all First Mortgage Notes
so tendered) at the Asset Sale Offer Price (together with accrued interest).
Notwithstanding the foregoing, if an Asset Sale Offer is commenced and
securities of Trump Atlantic City ranking pari passu in right of payment with
the First Mortgage Notes and incurred pursuant to clauses (c) and/or (e) of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" are outstanding at the date of commencement
thereof, the terms of which provide that a substantially similar offer must be
made with respect thereto, then the Asset Sale Offer shall be made
concurrently with such other offer, and securities of each issue which the
holders of securities of such issue elect to have purchased will be accepted
pro rata in proportion to the aggregate principal amount thereof, provided,
that in so repurchasing such other securities Trump Atlantic City is in
compliance with the provisions of "Limitation on Restricted Payments."
Notwithstanding the foregoing:
(i) Trump Atlantic City and its Subsidiaries may, in the ordinary course
of business for the casino industry, convey, sell, lease, transfer, assign
or otherwise dispose of assets acquired and held for resale in the ordinary
course of business;
(ii) Trump Atlantic City and its Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture;
(iii) Trump Atlantic City and its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of such Person;
(iv) Trump Atlantic City and its Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of three designated warehouses and
related facilities in exchange for any consideration so long as Trump
Atlantic City determines in good faith that Trump Atlantic City or such
Subsidiary, as applicable, receives fair market value for such Asset Sale;
and
(v) Subsidiaries of Trump Atlantic City may convey, sell, transfer,
assign or otherwise dispose of assets to Trump Atlantic City or any Wholly-
owned Subsidiaries of Trump Atlantic City.
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Notwithstanding the foregoing, Trump Atlantic City will not, and will not
permit any Subsidiary to, directly or indirectly make any Asset Sale of any of
the Equity Interests of such Subsidiary except pursuant to an Asset Sale of
all the Equity Interests of such Subsidiary.
In addition, if the amount required to acquire all First Mortgage Notes
tendered by holders pursuant to the Asset Sale Offer (the "Acceptance Amount")
is less than the Asset Sale Offer Amount, the excess of the Asset Sale Offer
Amount over the Acceptance Amount may be used by Trump Atlantic City and its
Subsidiaries for general corporate or partnership purposes without
restriction, other than dividends, repurchases or other distributions in
respect of Equity Interests, and unless otherwise restricted by the other
provisions of the Indenture. Upon consummation of any Asset Sale Offer, the
Asset Sale Offer Amount will be reduced to zero.
Any Asset Sale Offer will be made in compliance with all applicable laws,
rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable federal and
state securities laws.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
enter into or suffer to exist any contract, agreement, arrangement,
understanding or transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property
or services) with any Affiliate of Trump Atlantic City (other than a Wholly-
owned Subsidiary of Trump Atlantic City) unless (a) such transaction or series
of related transactions is on terms that are no less favorable to Trump
Atlantic City or such Subsidiary, as the case may be, than would be available
at the time of such transaction or transactions in a comparable transaction in
arm's-length dealings with an unaffiliated third party and, with respect to a
transaction or series of related transactions involving aggregate payments
equal to or greater than (x) $2.0 million, such transaction or series of
related transactions is approved by a majority of the Independent Directors of
the Board of Directors of Trump Atlantic City Funding, or (y) $10.0 million,
prior to the consummation of such transaction or series of related
transactions, Trump Atlantic City also obtains a written favorable opinion as
to the fairness thereof to Trump Atlantic City from a financial point of view
from an independent investment banking firm of national reputation, and (b)
Trump Atlantic City delivers an officers' certificate to the Trustee
certifying that such transaction or transactions comply with clause (a) above.
The foregoing restriction will not apply to (1) pro rata dividends or
distributions paid in cash on any class of Equity Interests and not prohibited
under "Limitation on Restricted Payments," (2) the Partnership Agreement as in
effect on the Issue Date, (3) the Affiliated Ground Leases as in effect on the
Issue Date or (4) certain existing arrangements described under "Certain
Transactions," as in effect on the Issue Date.
Trump Atlantic City Funding will maintain at least two Independent Directors
on its Board of Directors.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The First Mortgage Note Indenture will provide that neither of the Issuers
may consolidate with, merge with or into any other Person or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of
its properties and assets (as an entirety or substantially as an entirety in
one transaction or series of related transactions) to any Person or group of
affiliated Persons or permit any of Trump Atlantic City's Subsidiaries to
enter into any such transaction or transactions if such transaction or
transactions, in the aggregate, would result in a transfer of all or
substantially all of the assets of Trump Atlantic City on a Consolidated basis
or Trump Atlantic City Funding, as applicable, to any other Person, unless,
among other things: (a) Trump Atlantic City or Trump Atlantic City Funding, as
applicable, shall be the continuing Person, or the Person (if other than Trump
Atlantic City or Trump Atlantic City Funding) formed by such consolidation or
into which Trump Atlantic City or Trump Atlantic City Funding is merged or to
which the properties and assets of Trump Atlantic City or Trump Atlantic City
Funding are transferred (the "Surviving Entity") shall be a partnership or
corporation, in the case of Trump Atlantic City, and a corporation, in the
case of Trump Atlantic City Funding, duly organized and validly existing under
the laws of the United States or any state thereof or the District of Columbia
and shall expressly assume, by a supplemental indenture, all of the
obligations of Trump Atlantic City or Trump Atlantic City Funding, as
applicable, under the First Mortgage Notes and the First Mortgage Note
Indenture, and the First Mortgage Note Indenture shall remain in full force
and effect; (b) immediately before and immediately after
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giving effect to such transaction on a pro forma basis, no Event of Default or
Default shall have occurred and be continuing; (c) immediately after giving
effect to such transaction on a pro forma basis, the Consolidated Net Worth of
Trump Atlantic City or the Surviving Entity, as applicable, is at least equal
to the Consolidated Net Worth of Trump Atlantic City immediately prior to such
transaction or series of transactions; (d) immediately before and after giving
effect to such transaction on a pro forma basis, Trump Atlantic City or the
Surviving Entity, as the case may be, could incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio set forth in paragraph (a)
of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock;" and (e) immediately after such transaction, such
Issuer or the Surviving Entity, as applicable, holds all Permits required for
operation of the business of, and such entity is controlled by a Person or
entity (or has retained a Person or entity which is) experienced in, operating
casino hotels or otherwise holds all Permits (including those required from
Gaming Authorities) to operate its business. Trump Atlantic City Funding shall
also deliver to the Trustee an officers' certificate and an opinion of
counsel, each stating that (a) such consolidation, merger, sale, assignment,
conveyance, transfer, lease or disposition and such supplemental indenture
comply with the First Mortgage Note Indenture and (b) the transaction shall
not impair the rights and powers of the Trustee and holders of the First
Mortgage Notes thereunder.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which Trump Atlantic City or Trump Atlantic City Funding, as applicable, is
not the continuing Person, the successor Person formed or remaining shall
succeed to, and be substituted for, and may exercise every right and power of,
provisions of Trump Atlantic City or Trump Atlantic City Funding, as
applicable, and Trump Atlantic City or Trump Atlantic City Funding shall in
such case be discharged from all obligations and covenants under the First
Mortgage Note Indenture, the First Mortgage Notes and the Mortgage Documents.
LIMITATION ON LINES OF BUSINESS
The First Mortgage Note Indenture will provide that neither Trump Atlantic
City nor any of its Subsidiaries shall directly or indirectly engage to any
substantial extent in any line or lines of business activity other than that
which, in the reasonable good faith judgment of the Board of Directors of
Trump Atlantic City Funding is a Related Business.
LIMITATION ON ACTIVITIES OF TRUMP ATLANTIC CITY FUNDING.
Trump Atlantic City Funding will not conduct any business (including having
any Subsidiary) whatsoever, other than to comply with its obligations under
the First Mortgage Note Indenture and the First Mortgage Notes. Trump Atlantic
City Funding will not incur or otherwise become liable for any Indebtedness
(other than the First Mortgage Notes and any renewal, extension, substitution,
refunding, refinancing or replacement thereof in accordance with the First
Mortgage Note Indenture) or make any Restricted Payments.
RESTRICTION ON CERTAIN AGREEMENTS
The First Mortgage Note Indenture will provide that other than employment
agreements in the ordinary course of business consistent with industry
practice and approved by the compensation committee of Trump Atlantic City
Funding, Trump Atlantic City will not, and will not permit any of its
Subsidiaries to, enter into any management, services or consulting agreement
with Trump or any Affiliate of Trump, other than the TPM Services Agreement;
provided, that no Services Fee thereunder shall be paid (i) to any person
other than Trump Atlantic City or a Subsidiary if the TPM Services Agreement
is assigned or transferred by Trump Plaza Management Corp. and (ii) to Trump
Plaza Management Corp. after expiration of the Super Puma Helicopter Lease.
Trump Atlantic City will not, and will not permit its Subsidiaries to, pay any
Services Fee under the TPM Services Agreement to Trump Plaza Management Corp.
or pay or reimburse any expenses relating thereto if a Default or Event of
Default has occurred and is continuing. The terms of the TPM Services
Agreement shall not be amended to increase the amounts to be paid thereunder
in the aggregate or on any particular date, or in any other manner which would
be adverse to Trump Atlantic City or its Subsidiaries.
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MAINTENANCE OF INSURANCE
The First Mortgage Note Indenture will provide that, from and at all times
after the Issue Date until the First Mortgage Notes have been paid in full,
Trump Atlantic City will, and will cause its Subsidiaries to, (a) obtain,
prior to the Issue Date, a mortgagee title insurance policy insuring a first
mortgage lien on the Collateral, subject to certain exceptions, in the
principal amount of the First Mortgage Notes and (b) have and maintain in
effect such additional insurance with responsible carriers against such risks
and in such amounts as is customarily carried by similar businesses with such
deductibles, retentions, self insured amounts and coinsurance provisions as
are customarily carried by similar businesses of similar size, including,
without limitation, property and casualty, and, with respect to insurance on
the Collateral, shall have provided insurance certificates evidencing such
insurance to the Trustee prior to the Issue Date and shall thereafter provide
such certificates prior to the anniversary or renewal date of each such policy
referred to in this clause (b), which certificate shall expressly state the
expiration date for each policy listed. All insurance with respect to the
Collateral required under the Indenture (except worker's compensation) shall
name the Issuers and the Trustee as additional insureds or loss payees, as the
case may be, with losses in excess of $10.0 million payable jointly to the
Issuers and the Trustee (unless a Default or Event of Default has occurred and
is then continuing, in which case all losses are payable solely to the
Trustee), with no recourse against the Trustee for the payment of premiums,
deductibles, commissions or club calls, and for at least 30 days notice of
cancellation. All such insurance policies will be issued by carriers having an
A.M. Best & Company, Inc. rating of A- or higher and a financial size category
of not less than X, or if such carrier is not rated by A.M. Best & Company,
Inc., having the financial stability and size deemed appropriate by an opinion
from a reputable insurance broker.
RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK
The First Mortgage Note Indenture will provide that Trump Atlantic City will
not sell, and will not permit any of its Subsidiaries to issue or sell, any
shares of Equity Interests of any Subsidiary of Trump Atlantic City to any
Person other than Trump Atlantic City or a Wholly-owned Subsidiary of Trump
Atlantic City, except that all of the Equity Interests of a Subsidiary may be
sold if such Asset Sale complies with the other provisions of the First
Mortgage Note Indenture, including the covenants "Limitation on Sale of Assets
and Subsidiary Stock; Event of Loss" and "Limitation on Merger, Sale or
Consolidation." See "--First Mortgage Note Guarantees" above.
FUTURE SUBSIDIARY GUARANTORS
The First Mortgage Note Indenture will provide that all present and future
Subsidiaries of Trump Atlantic City (other than Trump Atlantic City Funding,
which is one of the Issuers) jointly and severally will guarantee irrevocably
and unconditionally all principal, premium, if any, and interest on the First
Mortgage Notes on a senior basis.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The First Mortgage Note Indenture will prohibit Trump Atlantic City and its
Subsidiaries from being required to register as an "investment company" (as
that term is defined in the Investment Company Act of 1940, as amended), or
from otherwise becoming subject to regulation under the Investment Company
Act.
REPORTS
The First Mortgage Note Indenture will provide that whether or not Trump
Atlantic City or Trump Atlantic City Funding is subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act, each of Trump
Atlantic City and Trump Atlantic City Funding will, to the extent permitted
under the Exchange Act, file with the SEC the annual reports, quarterly
reports and other documents which each such Person would have been required to
file with the SEC (to the extent permitted by applicable law) pursuant to such
Section 13(a) or 15(d) if such Person were so subject, such documents to be
filed with the SEC on or prior to the respective dates (the
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"Required Filing Dates") by which such Person would have been required so to
file such documents if such Person were so subject. Each such Person will also
in any event (x) within 15 days of each Required Filing Date (i) transmit by
mail to all Holders, as their names and addresses appear in the First Mortgage
Note Register, without cost to such Holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which each
such Person would have been required to file with the SEC pursuant to Section
13(a) or 15(d) of the Exchange Act if such Person were subject to such
Sections, together with supplemental information in respect of summary
financial data for each of the Casino Hotels (solely in the case of annual
reports), and (y) if filing such documents by such Person with the SEC is not
permitted, promptly upon written request, supply copies of such documents to
any Holder or prospective holder of the First Mortgage Notes at Trump Atlantic
City's cost.
EVENTS OF DEFAULT AND REMEDIES
The First Mortgage Note Indenture will define an Event of Default as (i) the
failure by the Issuers to pay any installment of interest on the First
Mortgage Notes as and when the same becomes due and payable and the
continuance of any such failure for 30 days, (ii) the failure by the Issuers
to pay all or any part of the principal, or premium, if any, on the First
Mortgage Notes when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
payment of the Change of Control Purchase Price or the Asset Sale Offer Price,
or otherwise, (iii) the failure by the Issuers or any Subsidiary to observe or
perform any other covenant or agreement contained in the First Mortgage Notes
or the First Mortgage Note Indenture and, subject to certain exceptions, the
continuance of such failure for a period of 30 days after written notice is
given to the Issuers by the Trustee or to the Issuers and the Trustee by the
Holders of at least 25% in aggregate principal amount of the First Mortgage
Notes outstanding, (iv) certain events of bankruptcy, insolvency or
reorganization in respect of either or both of the Issuers or any of their
Significant Subsidiaries, (v) a default in Indebtedness of either or both of
the Issuers or any of their Subsidiaries with an aggregate principal amount in
excess of $20.0 million, (vi) final unsatisfied judgments not covered by
insurance aggregating in excess of $20.0 million, at any one time rendered
against either or both of the Issuers or any of their Subsidiaries and not
stayed, bonded or discharged within 60 days, (vii) the revocation, suspension
or involuntary loss of any Permit which results in the cessation of a
substantial portion of the operations of either Casino Hotel for a period of
more than 90 consecutive days, (viii) except as permitted by the First
Mortgage Note Indenture and the First Mortgage Notes, the cessation of
effectiveness of any guarantee of the Obligations in any material respect or
the finding by any judicial proceeding that any such guarantee is
unenforceable or invalid in any material respect or the denial or
disaffirmation by any Guarantor in writing of its obligations under its
guarantee or (ix) an event of default under any of the Mortgage Documents. The
First Mortgage Note Indenture provides that if a Default occurs and is
continuing, the Trustee must, within 90 days after the occurrence of such
default, give to the Holders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above), then in every such case, unless the
principal of all of the First Mortgage Notes shall have already become due and
payable, either the Trustee or the Holders of 25% in aggregate principal
amount of the First Mortgage Notes then outstanding, by notice in writing to
the Issuers (and to the Trustee if given by Holders) (an "Acceleration
Notice"), may declare all principal, determined as set forth below, and
accrued interest thereon to be due and payable immediately. If an Event of
Default specified in clause (iv), above, occurs, all principal and accrued
interest thereon will be immediately due and payable on all outstanding First
Mortgage Notes without any declaration or other act on the part of Trustee or
the Holders. The Holders of a majority in aggregate principal amount of First
Mortgage Notes (or such higher percentage as would be required to amend such
provision) generally are authorized to rescind such acceleration if all
existing Events of Default, other than the non-payment of the principal of,
premium, if any, and interest on the First Mortgage Notes which have become
due solely by such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the First
Mortgage Notes, the holders of not less than specified percentages in
aggregate principal amount of the First Mortgage Notes at the time outstanding
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may waive on behalf of all the holders any default, except a default in the
payment of principal of or interest on any First Mortgage Note not yet cured
or a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding Note
affected. Subject to the provisions of the First Mortgage Note Indenture
relating to the duties of the Trustee, the Trustee will be under no obligation
to exercise any of its rights or powers under the First Mortgage Note
Indenture at the request, order or direction of any of the holders, unless
such holders have offered to the Trustee reasonable security or indemnity.
Subject to all provisions of the First Mortgage Note Indenture and applicable
law, the holders of not less than a majority in aggregate principal amount of
the First Mortgage Notes at the time outstanding will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee.
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
in other transactions, provided, that if it acquires any conflicting interest
it must eliminate such conflict upon the occurrence of an Event of Default or
else resign.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The First Mortgage Note Indenture will provide that the Issuers may, at
their option and at any time within one year of the final Stated Maturity of
the First Mortgage Notes, elect to have their Obligations and the Obligations
of the Guarantors discharged with respect to the outstanding First Mortgage
Notes ("Legal Defeasance"). Such Legal Defeasance means that the Issuers shall
be deemed to have paid and discharged the entire indebtedness represented, the
Collateral will be released from the Liens in favor of the First Mortgage
Notes and the Indenture shall cease to be of further effect as to all
outstanding First Mortgage Notes and guarantees thereof, except as to (i)
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on such First Mortgage Notes when such payments are due
from the trust funds; (ii) the Issuers' obligations with respect to such First
Mortgage Notes concerning issuing temporary First Mortgage Notes, registration
of First Mortgage Notes, mutilated, destroyed, lost or stolen First Mortgage
Notes, and the maintenance of an office or agency for payment and money for
security payments held in trust; (iii) the rights, powers, trust, duties and
immunities of the Trustee, and the Issuers' obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the First Mortgage Note
Indenture. In addition, the Issuers may, at their option and at any time,
elect to have the Obligations of the Issuers and the Guarantors released with
respect to certain covenants that are described in the First Mortgage Note
Indenture ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with
respect to the First Mortgage Notes. In the event Covenant Defeasance occurs,
the Collateral will be released from the Liens in favor of the First Mortgage
Notes and certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the First Mortgage
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the First Mortgage Notes, U.S. legal tender, non-callable
government securities or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
such First Mortgage Notes on the stated date for payment thereof or on the
redemption date of such principal or installment of principal of, premium, if
any, or interest on such First Mortgage Notes, and the holders of First
Mortgage Notes must have a valid, perfected, exclusive security interest in
such trust; (ii) in the case of the Legal Defeasance, the Issuers shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to Trustee confirming that (A) the Issuers have received from, or
there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the First Mortgage Note Indenture, there has been a change
in the applicable federal income tax law, in either case to the effect that,
and based thereon, such opinion of counsel shall confirm that, the holders of
such First Mortgage Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject
to federal income
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tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Issuers shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to such
Trustee confirming that the holders of such First Mortgage Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under the First Mortgage
Note Indenture or any other material agreement or instrument to which Trump
Atlantic City or any of its Subsidiaries is a party or by which Trump Atlantic
City or any of its Subsidiaries is bound; (vi) the Issuers shall have
delivered to the Trustee an Officers' Certificate stating that the deposit was
not made by the Issuers with the intent of preferring the holders of such
First Mortgage Notes over any other creditors of Trump Atlantic City or any of
its Subsidiaries or with the intent of defeating, hindering, delaying or
defrauding any other creditors of Trump Atlantic City, its Subsidiaries or
others; and (vii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that the conditions
precedent provided for in, in the case of the officers' certificate, (i)
through (vi) and, in the case of the opinion of counsel, clauses (i), (with
respect to the validity and perfection of the security interest) (ii), (iii)
and (v) of this paragraph have been complied with.
If the funds deposited with the Trustee to effect the Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of, premium, if any,
and interest on the First Mortgage Notes when due, then the obligations of the
Issuers under the First Mortgage Note Indenture will be revived, and no such
Legal Defeasance or Covenant Defeasance will be deemed to have occurred.
AMENDMENTS AND SUPPLEMENTS
The First Mortgage Note Indenture will contain provisions permitting the
Issuers, the Guarantors and the Trustee to enter into a supplemental indenture
for certain limited purposes without the consent of the holders. With the
consent of the holders of not less than a majority in aggregate principal
amount of the First Mortgage Notes at the time outstanding, the Issuers, the
Guarantors and the Trustee are permitted to amend or supplement the First
Mortgage Note Indenture or any supplemental indenture or modify the rights of
the holders; provided, that no such modification may, without the consent of
each holder affected thereby: (i) change the Stated Maturity on any First
Mortgage Note, or reduce the principal amount thereof or the rate (or extend
the time for payment) of interest thereon or reduce or extend the time for
payment of any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any First Mortgage
Note or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or reduce the Change of Control Purchase Price or the Asset Sale Offer
Price or alter the provisions of "Optional Redemption" above in a manner
adverse to the holders, or (ii) reduce the percentage in principal amount of
the outstanding First Mortgage Notes, the consent of whose holders is required
for any such amendment, supplemental indenture or waiver provided for in the
First Mortgage Note Indenture or (iii) release any Collateral from the Liens
created by the Mortgage Documents, except in accordance with the First
Mortgage Note Indenture and such documents, or modify any of the waiver
provisions (except to increase any required percentage or to provide that
certain other provisions of the First Mortgage Note Indenture cannot be
modified or waived), without the consent of the Holder of each outstanding
First Mortgage Note affected thereby; and provided further, that only the
holders of not less than two-thirds in aggregate principal amount of the
outstanding First Mortgage Notes affected thereby (except as set forth in the
immediately preceding proviso clause) may modify the obligations of the
Issuers to make and consummate a Change of Control Offer or modify any of the
provisions or definitions with respect thereto.
The holders of the percentages of aggregate principal amount of the First
Mortgage Notes outstanding specified in the preceding paragraph may waive
compliance with certain restrictive covenants and provisions of the First
Mortgage Note Indenture and the Mortgage Documents.
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GAMING LAWS
In certain circumstances, holders of the First Mortgage Notes may be
required to qualify under the Casino Control Act as a financial source to
Plaza Associates or Taj Associates and as holders of securities of the
Issuers. See "Regulatory Matters." The First Mortgage Note Indenture provides
that if the CCC requires that a First Mortgage Noteholder (whether the record
or beneficial owner) qualify under the Casino Control Act and if such holder
does not so qualify, then such holder must dispose of his interest in the
First Mortgage Notes within 30 days after receipt of notice of such finding,
or within such earlier time as the CCC may require, or the Issuers may redeem
such First Mortgage Notes. If any holder is found unqualified by the CCC, it
is unlawful for the holder (i) to receive any interest upon the First Mortgage
Notes, (ii) to exercise, directly or through any trustee or nominee, any right
conferred by the First Mortgage Notes or (iii) to receive any remuneration, in
any form from any "Regulated Company" (including the Issuers, the Guarantors
or the Trustee) for services rendered or otherwise. See "--Optional
Redemption."
The First Mortgage Note Indenture further requires the Trustee to report the
names of all record holders of the First Mortgage Notes to certain Gaming
Authorities promptly after the initial issuance of the First Mortgage Notes
and prior to the scheduled expiration date of the applicable casino license.
The First Mortgage Note Indenture also requires the Trustee to provide to such
Gaming Authorities copies of all written communications from the Trustee to
the holders, notice of any default under the First Mortgage Notes, certain
other information concerning the Trustee's enforcement of rights under the
First Mortgage Note Indenture and other matters respecting the security for
the First Mortgage Notes.
TRUSTEE
The Trustee will be First Bank National Association, a national banking
association. First Bank National Association also serves as trustee for the
respective indentures governing the Senior Notes and the Plaza Notes.
The First Mortgage Note Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Indenture. During the existence of an
Event of Default, the Trustee will exercise such of the rights and powers
vested in it under the First Mortgage Note Indenture and will use the same
degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS; NON-
RECOURSE
The First Mortgage Note Indenture will provide that no direct or indirect
stockholder, partner, employee, officer or director, as such, past, present or
future of the Issuers, any Guarantor or any successor entity shall have any
personal liability in respect of the obligations of the Issuers or any
Guarantor under the First Mortgage Note Indenture or the First Mortgage Notes
or the guarantees thereof by reason of his or its status as such stockholder,
partner, employee, officer or director.
THE MORTGAGE
The First Mortgage Notes will be secured by the Mortgage in favor of the
Trustee for the benefit of the holders of the First Mortgage Notes. The
Mortgage shall encumber Plaza Associates' and Taj Associates' (Taj Associates
and Plaza Associates collectively, the "Mortgagor") respective fee and
leasehold interests in the Casino Hotels, including the Specified Parcels and
certain other facilities owned or leased by Plaza Associates or Taj
Associates, any additions and improvements constructed thereon and the
interest of Plaza Associates and Taj Associates in furniture, furnishings,
fixtures, machinery and equipment at any time forming a part thereof, or used
in connection therewith, and substantially all of the other assets of Plaza
Associates and Taj Associates, except as described herein. The Mortgagor will
have the right to sell, free and clear from the Lien of the Mortgage
Documents, certain tangible personal property which has become obsolete or
unfit for use or which is no longer necessary in the conduct of its businesses
or the operation of the Collateral. See "Security for the First Mortgage
Notes."
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Enforceability of certain provisions of the First Mortgage Note Indenture,
the guarantees in respect thereof and the Mortgage Documents may be limited by
general principles of equity. In general, courts will not allow acceleration
of mortgage indebtedness by reason of defaults or other circumstances which
are not deemed material to the security of the holder of such indebtedness.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any Person (a) existing at the time such person becomes a Subsidiary of Trump
Atlantic City or is merged or consolidated into or with Trump Atlantic City or
one of its Subsidiaries or (b) assumed in connection with the acquisition of
assets from such Person, in each case, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary or
such acquisition, consolidation or merger. Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary, including by designation,
or the date of such merger or consolidation, as applicable.
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person
that owns, directly or indirectly, 5% or more of such Person's Equity
Interests or any officer or director of any such Person or other person or
with respect to any natural Person, any person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Affiliated Ground Leases" means the TSA Lease and the SFA Lease.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of (a)
the product of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of
such security or instrument and (b) the amount of each such respective
principal (or redemption) payment by (ii) the sum of all such principal (or
redemption) payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control has the meaning attributed to it in Rules l3d-3 and l3d-5
under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Contribution" shall mean, with respect to any Person, that amount
of money or the Fair Market Value of any Property (net of liabilities to which
such Property is subject) irrevocably and unconditionally contributed to such
Person in exchange for Qualified Equity Interests of such Person.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
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"Capitalized Lease Obligation" of any Person means any obligation of such
Person or its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as
a capitalized lease obligation.
"Cash Equivalent" means (a) any evidence of Indebtedness, maturing not more
than one year after the date of acquisition, issued by the United States of
America, or an instrumentality or agency thereof and guaranteed fully as to
principal, premium, if any, and interest by the United States of America, (b)
any certificate of deposit, maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital
and surplus and undivided profits of not less than $300.0 million and whose
debt has a rating, at the time as of which any investment therein is made, of
"P-1" (or higher) according to Moody's Investors Service, Inc. or any
successor rating agency, or "A-1" (or higher) according to Standard & Poor's
Corporation or any successor rating agency, (c) commercial paper, maturing not
more than one year after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of Holding Associates) organized and
existing under the laws of the United States of America with a rating, at the
time as of which any investment therein is made, of "P-1" (or higher)
according to Moody's Investors Service, Inc. or any successor rating agency,
or "A-1" (or higher) according to Standard & Poor's Corporation or any
successor rating agency and (d) any money market deposit accounts issued or
offered by a domestic commercial bank having capital and surplus in excess of
$300.0 million.
"Casino Hotels" means the respective casino and hotel complexes currently
known as the "Trump Plaza Hotel and Casino" (including Trump Plaza East and
Trump World's Fair) and the "Trump Taj Mahal Casino Resort" in Atlantic City,
New Jersey and ancillary structures and facilities and all furniture, fixtures
and equipment at any time contained therein, in each case owned by or leased
to Plaza Associates or Taj Associates, respectively.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such person's Consolidated Fixed Charges
subsequent to the Transaction Date) during the Reference Period; provided,
that for purposes of such calculation, (i) Acquisitions which occurred during
the Reference Period or subsequent to the Reference Period and on or prior to
the Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (iii) the incurrence of any Indebtedness or issuance
of any Disqualified Capital Stock during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date (and the
application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness) shall be assumed to have occurred on the first day
of such Reference Period, and (iv) the Consolidated Fixed Charges of such
person attributable to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or dividend) rate
shall be computed on a pro forma basis as if the average rate in effect from
the beginning of the Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap and Hedging Obligation (which
shall remain in effect for the 12-month period immediately following the
Transaction Date) that has the effect of fixing the interest rate on the date
of computation, in which case such rate (whether higher or lower) shall be
used.
"Consolidated EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period (determined, for
purposes of this definition only, without taking into effect clause
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(x) of the last sentence of the definition thereof) adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of (i) Consolidated income tax expense,
(ii) Consolidated depreciation and amortization expense, provided, that
consolidated depreciation and amortization of a Subsidiary that is a less than
Wholly-owned Subsidiary shall only be added to the extent of the equity
interest of such person in such Subsidiary and (iii) Consolidated Fixed
Charges, less the amount of all cash payments made by such person or any of
its Subsidiaries during such period to the extent such payments relate to non-
cash charges that were added back in determining Consolidated EBITDA for such
period or any prior period.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease Obligations) of
such person and its Consolidated Subsidiaries during such period, including
(i) original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations
and (iii) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, (b) one-third of Consolidated Rental Payments for
such period attributable to operating leases of such person and its
Consolidated Subsidiaries, and (c) the amount of dividends accrued or payable
by such person or any of its Consolidated Subsidiaries in respect of Preferred
Stock (other than by Subsidiaries of such person to such person or such
person's Wholly- owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Issuers to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (y)
interest expense attributable to any Indebtedness represented by the guarantee
by such person or a Subsidiary of such person of an obligation of another
person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not losses) which are
either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any capital stock), less all fees and expenses relating thereto, (b) the
net income, if positive, of any person, other than a Consolidated Wholly-owned
Subsidiary, in which such person or any of its Consolidated Subsidiaries has
an interest, except to the extent of the amount of any dividends or
distributions actually paid in cash to such person or a Wholly-owned
Consolidated Subsidiary of such person during such period, but in any case not
in excess of such person's pro rata share of such person's net income for such
period, (c) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition,
(d) the net income, if positive, of any of such person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms
of its charter or bylaws or any other agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Consolidated Subsidiary. To the extent not already reduced thereby,
Consolidated Net Income of Trump Atlantic City for any period shall be reduced
by the aggregate amount of (x) all Permitted Tax Distributions made during, or
distributable in respect of, such period and (y) all payments made during such
period pursuant to the TPM Services Agreement.
"Consolidated Net Worth" of any person at any date means, in the case of a
partnership, the partners' capital and, in the case of a corporation, the
aggregate Consolidated stockholders' equity of such person (plus amounts of
equity attributable to preferred stock) and its Consolidated Subsidiaries, as
would be shown on the consolidated balance sheet of such person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity), (a) the amount of any such stockholders' equity
attributable to Disqualified Capital Stock or treasury stock of such person
and its Consolidated Subsidiaries, (b) all upward revaluations and
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other write-ups in the book value of any asset of such person or a
Consolidated Subsidiary of such person subsequent to the Issue Date, and (c)
all investments in Subsidiaries that are not Consolidated Subsidiaries and in
persons that are not Subsidiaries.
"Consolidated Rental Payments" of any Person means the aggregate rental
obligations of such Person and its Consolidated Subsidiaries (not including
taxes, insurance, maintenance and similar expenses that the lessee is
obligated to pay under the terms of the relevant leases), determined on a
Consolidated basis in conformity with GAAP, payable in respect of such period
under leases of real or personal property (net of income from subleases
thereof, not including taxes, insurance, maintenance and similar expenses that
the sublessee is obligated to pay under the terms of such sublease), whether
or not such obligations are reflected as liabilities or commitments on a
Consolidated balance sheet of such Person and its Subsidiaries or in the notes
thereto, excluding, however, in any event, that portion of Consolidated Fixed
Charges of such Person representing payments by such Person or any of its
Consolidated Subsidiaries in respect of Capitalized Lease Obligations.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired), the financial
statements of which are consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its Subsidiaries if and to the extent the
accounts of such Person and each of its Subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP
consistently applied. The term "Consolidated" shall have a similar meaning.
"CRDA" means the New Jersey Casino Reinvestment Development Authority or any
successor entity thereto.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any person, an Equity
Interest of such person that, by its terms or by the terms of any security
into which it is convertible, exercisable or exchangeable, is, or upon the
happening of an event (other than the disqualification of the holder thereof
by a Gaming Authority) or the passage of time would be, required to be
redeemed or repurchased (including at the option of the holder thereof) in
whole or in part, on or prior to the final Stated Maturity of the First
Mortgage Notes.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall
in any event include any Capital Stock issued by, or partnership interests in,
such Person.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"F, F&E Financing Agreement" means an agreement which creates a Lien upon
any after-acquired tangible personal property and/or other items constituting
operating assets, which are financed, purchased or leased for the purpose of
engaging in or developing a Related Business.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy and, with respect to any redemption
of First Mortgage Notes pursuant to the applicable gaming laws, means (a) the
last sales price regular way on the last trading day prior to the date of
determination of such value on the largest national securities exchange (or,
if said security is not
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listed on a national securities exchange, on the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ")) on which such First Mortgage Notes shall have traded on such
trading day, or (b) if no such sales of such First Mortgage Notes occurred on
such trading day, the mean between the "bid" and "asked" prices on such
national securities exchange or as quoted on the National Market System of
NASDAQ, as the case may be, on such last trading day, or (c) if the First
Mortgage Notes are not listed or quoted on any national securities exchange or
the National Market System of NASDAQ, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by NASDAQ or, if
bid and asked prices for the First Mortgage Notes have not been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any New York Stock Exchange member firm regularly making a market
in the First Mortgage Notes, selected for such purpose by Trump Atlantic City
Funding or (d) if none of clauses (a) through (c) are applicable, the fair
market value of such First Mortgage Notes as of the date of determination as
determined in such manner as shall be satisfactory to Trump Atlantic City
Funding, which shall be entitled to rely for such purpose on the advice of any
firm of investment bankers or securities dealers having familiarity with the
First Mortgage Notes.
"Gaming Authority" means the New Jersey Casino Control Commission, New
Jersey Division of Gaming Enforcement or any other governmental agency which
regulates gaming in a jurisdiction in which Trump Atlantic City or any of its
Subsidiaries conducts gaming activities.
"Gaming Licenses" means every material license, material franchise, or other
material authorization required to own, lease, operate or otherwise conduct or
manage riverboat, dockside or land-based gaming in any state or jurisdiction
where Trump Atlantic City or any of its Subsidiaries conduct business, and any
applicable liquor licenses.
"Generally Accepted Accounting Principles" or "GAAP" means United States
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as approved by a significant segment of the accounting profession as in
effect on the Issue Date.
"Ground Leases" means the ground leases, as amended or supplemented in
accordance with the Mortgage Documents, each of which expires on December 31,
2078, pursuant to which Plaza Associates is the current lessee, and each of
Trump Seashore Associates (the "TSA Lease"), Seashore Four Associates (the
"SFA Lease") and Plaza Hotel Management Company is the current respective
lessor.
"Guaranteed Debt" of any Person means, without duplication, all indebtedness
of any other Person referred to in the definition of Indebtedness contained in
this section guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement (a) to pay or purchase such Indebtedness or to advance or supply
funds for the payment or purchase of such Indebtedness, (b) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (c) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (d) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (e) otherwise to assure a
creditor against loss; provided, that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course
of business, and provided, further, that the obligations of Plaza Associates
pursuant to the TPM Services Agreement or the Ground Leases, in each case in
effect on the Issue Date or as amended pursuant to terms substantially similar
to the terms in effect on the Issue Date, shall not be deemed to be Guaranteed
Debt of Plaza Associates.
"Improvements" shall mean, with respect to either or both of the Casino
Hotels, all improvements thereto, including any alteration thereof and the
construction of any additions related thereto or renovations thereof,
including without limitation the construction or renovation of additional
gaming space or facilities, hotel and restaurant facilities and parking
facilities, with all landscaping and other off- and on-site work related
thereto.
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"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities and obligations, contingent and otherwise, of such Person for
borrowed money or representing the balance deferred and unpaid of the purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person
in connection with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities or in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Equity Interest of such Person, or any warrants, rights or
options to acquire such Equity Interest, now or hereafter outstanding, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) every obligation of such Person issued as payment in
consideration of the purchase by such Person or an Affiliate of such Person of
the Equity Interest or all or substantially all of the assets of another
Person or in consideration for the merger or consolidation with respect to
which such Person or an Affiliate of such Person was a party, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables and other accrued current liabilities arising in the
ordinary course of business, (e) all obligations under Interest Swap and
Hedging Obligations of such Person, (f) all Capitalized Lease Obligations of
such Person, (g) all Indebtedness referred to in clauses (a) through (f) above
of other Persons and all dividends of other Persons, the payment of which are
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien, upon or in
property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness, (h) all Guaranteed Debt of such Person and
(i) all Disqualified Capital Stock of such Person (valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends). For purposes hereof, the "maximum fixed repurchase price"
of any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Disqualified Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer (or managing
general partner of the issuer) of such Disqualified Capital Stock.
"Independent Directors" shall mean directors who are not officers or
employees of THCR or any of its Subsidiaries and who are not Affiliates of
Trump or any of his Affiliates.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" means, with respect to any Person, directly or indirectly, (a)
any advance, loan or other extension of credit or Capital Contribution to any
other Person (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), (b)
any purchase or other acquisition by such Person of any Equity Interest,
bonds, notes, debentures or other securities issued or owned by, any other
Person or (c) other than guarantees of Indebtedness of the Issuers or any
Subsidiary to the extent permitted by the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock," the entering into
by such Person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of any other
Person.
"Issue Date" means the date of first issuance of the First Mortgage Notes
under the First Mortgage Note Indenture.
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"Legal Requirements" shall mean all applicable laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of all
governments, departments, commissions, boards, courts, authorities, agencies,
officials and officers of governments, federal, state and municipal.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Mortgage Documents" shall have the meaning provided in the Indenture as in
effect on the Issue Date.
"Net Cash Proceeds" (x) of an issuance of Indebtedness or Equity Interests
means the cash proceeds of such issuance, net of attorneys' fees, accountants'
fees, brokerage, consultant, underwriting and other fees and expenses actually
incurred in connection with such issuance, sale, conversion or exchange and
net of any taxes paid or payable as a result thereof by the entity making such
sale and (y) of an Asset Sale means the aggregate amount of cash and Cash
Equivalents received by Trump Atlantic City and its Subsidiaries in respect of
such Asset Sale less the sum of all fees, commissions and other expenses
incurred in connection with such Asset Sale less, in the case of an Asset Sale
only, the amount (estimated reasonably and in good faith by Trump Atlantic
City) of income, franchise, sales and other applicable taxes required to be
paid by Trump Atlantic City (or by its Partners or Upper Tier Owners as a
result thereof) or any of its Subsidiaries in connection with such Asset Sale.
"Net Proceeds" means the aggregate Net Cash Proceeds and fair market value
of property and assets (valued at the fair market value thereof at the time of
receipt in good faith by Trump Atlantic City).
"Obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by the Issuers under the terms of the First Mortgage
Notes or the First Mortgage Note Indenture.
"Partners" shall mean each of THCR Holdings and Plaza Holding Inc. or any
additional or substitute partners admitted under the Partnership Agreement so
long as (i) each is a partner under the Partnership Agreement, unless removed
as a partner in accordance with the Partnership Agreement and (ii) no Default
or Event of Default occurs as a result thereof.
"Partnership Agreement" shall mean the Amended and Restated Agreement of
General Partnership of Trump Atlantic City, dated the Issue Date, as the same
may be amended from time to time in accordance with its terms.
"Permit" means any license (including, without limitation, all Gaming
Licenses), franchise, authorization, statement of compliance, certificate of
operation, certificate of occupancy and permit required for the lawful
ownership, occupancy, operation and use of all or a material portion of either
of the Casino Hotels, whether held by Plaza Associates, Taj Associates or any
other Person (which may be temporary or permanent) (including, without
limitation, those required for the use of either of the Casino Hotels as a
licensed casino facility), in accordance with all applicable Legal
Requirements.
"Permitted Holder" means Trump and the spouse and descendants of Trump
(including any related grantor trusts controlled by, and established and
maintained for the sole benefit of, Trump or such spouse or descendants), and
the estate of any of the foregoing, but no other Person.
"Permitted Indebtedness" means any of the following:
(a) Trump Atlantic City may incur Indebtedness to any Wholly-owned
Subsidiary Guarantor, and any Wholly-owned Subsidiary Guarantor may incur
Indebtedness to any other Wholly-owned Subsidiary Guarantor of Trump
Atlantic City or to Trump Atlantic City, provided, that, in the case of
Indebtedness of Trump Atlantic City such obligations shall be unsecured and
expressly subordinated in right of payment to Trump Atlantic City's
Obligations pursuant to the First Mortgage Notes, and that the date of any
event that
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causes such Subsidiary Guarantor to no longer be a Wholly-owned Subsidiary
Guarantor shall be an Incurrence Date; and
(b) the Super Puma Helicopter Lease, but only to the extent no Services
Fees are thereafter paid under the TPM Services Agreement.
"Permitted Investment" means (a) Investments in any of the First Mortgage
Notes; (b) Cash Equivalents; (c) intercompany notes to the extent permitted
under clause (b) of the definition of "Permitted Indebtedness"; (d) loans,
advances or investments in existence on the Issue Date; (e) any Investment in
any Wholly-owned Subsidiary of Trump Atlantic City; and (f) any Investment
consisting of the extension of gaming credit to customers consistent with
industry practice in the ordinary course of business.
"Permitted Leases" means the following:
(a) any Capital Lease Obligation of Trump Atlantic City or any Subsidiary
incurred in accordance with the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock";
(b) any lease of Plaza Associates or Taj Associates, as tenant or
subtenant, existing on the date of the Indenture and listed on a schedule
thereto, including any modifications, amendments, renewals or supplements
thereof, provided, that the aggregate annual rent and other costs
thereunder are not increased thereby, except as such rent or costs may be
increased during any renewed lease term pursuant to the terms of such
leases as they exist on the date of the Indenture;
(c) any operating leases of Trump Atlantic City or any of its
Subsidiaries, other than the leases set forth above, provided, that the
aggregate average annual rent and other payments required thereunder over
the terms of such leases shall not exceed $10.0 million.
"Permitted Lien" means
(a) Liens existing on the Issue Date, and Liens securing Refinancing
Indebtedness in respect of secured Indebtedness existing on the Issue Date;
(b) the Lien of the Trustee as provided for in the Indenture and the
Mortgage Documents;
(c) Indebtedness incurred in accordance with clause (d) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock" may be secured by the assets acquired pursuant to the
respective capital lease (in the case of Capitalized Lease Obligations) or
with the proceeds of the respective F, F&E Financing Agreements, so long as
such Liens do not extend to any other assets;
(d) Indebtedness of Trump Atlantic City incurred pursuant to clause (e)
of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" (and refinancings thereof pursuant to clause
(f) of such covenant) may be secured by the assets of Plaza Associates or
Taj Associates, as applicable, provided, that the First Mortgage Notes are
secured by the assets securing such Indebtedness on a senior or an equal
and ratable basis;
(e) Indebtedness of Plaza Associates or Taj Associates incurred pursuant
to clause (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" (and refinancings thereof
pursuant to clause (f) of such covenant) may be secured by the assets of
Plaza Associates or Taj Associates, as applicable, provided, that the
Mortgage Notes are secured by the assets securing such Indebtedness on a
senior or an equal and ratable basis;
(f) any Lien arising by reason of (i) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (ii) security for payment of workmen's compensation or other
insurance; (iii) good faith deposits in connection with tenders, leases and
contracts (other than contracts for the payment of money); and (iv)
deposits to secure public or statutory obligations, or in lieu of surety or
appeal bonds;
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(g) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith and by appropriate
proceedings by Trump Atlantic City or any of its Subsidiaries if adequate
reserves with respect thereto are maintained on the books of Trump Atlantic
City or any Subsidiary, as the case may be, in accordance with GAAP;
(h) statutory Liens of carriers, warehousemen, mechanics, landlords,
laborers, materialmen, repairmen or other like Liens arising by operation
of law in the ordinary course of business and consistent with industry
practices and Liens on deposits made to obtain the release of such Liens if
(i) the underlying obligations are not overdue for a period of more than 60
days or (ii) such Liens are being contested in good faith and by
appropriate proceedings by Trump Atlantic City or any of its Subsidiaries
and adequate reserves with respect thereto are maintained on the books of
Trump Atlantic City or any of its Subsidiaries, as the case may be, in
accordance with GAAP;
(i) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary course of
business and consistent with industry practices which, in the aggregate,
are not substantial in amount, and which do not in any case materially
detract from the value of the property subject thereto (as such property is
used or proposed to be used by Trump Atlantic City or any of its
Subsidiaries) or interfere with the ordinary conduct of the business of
Trump Atlantic City or any of its Subsidiaries; provided, that any such
Liens are not incurred in connection with any borrowing of money or any
commitment to loan any money or to extend any credit;
(j) Liens that secure Acquired Indebtedness, provided, in each case, that
such Liens do not secure any property or assets other than the property or
assets so acquired and were not put in place in connection with or in
anticipation of such acquisition, merger or consolidation;
(k) leases or subleases granted to other persons in the ordinary course
of business not materially interfering with the conduct of the business of
Trump Atlantic City or any of its Subsidiaries or materially detracting
from the value of the relative assets of Trump Atlantic City or such
Subsidiary; and
(l) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by Trump Atlantic
City or any of its Subsidiaries in the ordinary course of business.
"Permitted Tax Distributions" means for each tax year that Trump Atlantic
City qualifies as a partnership or substantially similar pass-through entity
under the Code or any similar provision of state or local law, distributions
of Tax Amounts in respect of the jurisdictions in which Trump Atlantic City so
qualifies as a partnership or substantially similar pass-through entity;
provided, that (A) prior to any Permitted Tax Distribution a knowledgeable and
duly authorized officer of Trump Atlantic City shall certify, and counsel
reasonably acceptable to the Trustee shall opine, that Trump Atlantic City
qualifies as a partnership or substantially similar pass-through entity for
federal income tax purposes and under similar laws of the states in respect of
which such distributions are being made and (B) at the time of such
distributions, the most recent audited financial statements of Trump Atlantic
City provide that Trump Atlantic City was treated as a partnership for federal
income tax purposes for the period of such financial statements. Distributions
of Tax Amounts may be made between the tenth and twentieth day of each January
(provided, that payments in respect of estimated state or local taxes due in
January may instead, at the option of Trump Atlantic City, be paid during the
last five days of the immediately preceding December), April, June and
September, based upon the minimum estimated tax payments in respect of Tax
Amounts which would then be due and payable, and during the tenth through
twentieth day of April or within ten days of the reconciliation described in
the immediately succeeding sentence, with respect to any additional tax
payments owing in respect of the prior fiscal year. Within 60 days of Trump
Atlantic City's filing of the Internal Revenue Service Form 1065 for the
applicable tax year, a reconciliation shall be made of the Permitted Tax
Distributions actually paid versus the amount permitted to be paid as
Permitted Tax Distributions based upon the final results of the applicable tax
year. In addition, prior to any Permitted Tax Distributions, each Partner
shall have entered into a binding agreement promptly to reimburse
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Trump Atlantic City for any positive difference between the distributed amount
and the Tax Amount as finally determined; provided, that, if the Partners of
Trump Atlantic City do not promptly reimburse Trump Atlantic City for any
positive difference between the distributed amount and the Tax Amount, then
the Permitted Tax Distributions during the year in which such reimbursement
should have been made shall be reduced by the unreimbursed amount until the
Permitted Tax Distributions for such year are zero and, thereafter, Permitted
Tax Distributions shall be reduced in the succeeding years until the
unreimbursed amount not used to reduce Permitted Tax Distributions is zero.
"Person" or "person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Qualified Capital Stock" means any Equity Interest of Trump Atlantic City
that is not Disqualified Capital Stock.
"Qualified Exchange" means (a) any repurchase, redemption or other
acquisition or retirement of any shares of any class of Equity Interests of
Trump Atlantic City on or after the Issue Date in exchange for (including any
such exchange pursuant to the exercise of a conversion right or privilege in
connection with which cash is paid in lieu of the issuance of fractional
shares, interests or scrip), or out of the Net Cash Proceeds of a
substantially concurrent issuance and sale (other than to a Subsidiary of
Trump Atlantic City) of, Qualified Equity Interests of Trump Atlantic City; or
(b) the redemption, repayment, defeasance, repurchase or other acquisition or
retirement for value of any Indebtedness of, or guaranteed by, Trump Atlantic
City on or after the Issue Date in exchange for, or out of the Net Cash
Proceeds of a substantially concurrent issuance and sale of, Qualified Equity
Interests of Trump Atlantic City.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination
is to be made pursuant to the terms of the First Mortgage Notes or the First
Mortgage Note Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of (i) the principal amount or, in
the case of Disqualified Capital Stock, liquidation preference, of the
Indebtedness or Disqualified Capital Stock so Refinanced and (ii) if such
Indebtedness being Refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, that (A) such Refinancing Indebtedness of any
Subsidiary shall only be used to Refinance outstanding Indebtedness or
Disqualified Capital Stock of such Subsidiary, (B) Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness or
Disqualified Capital Stock to be so refinanced at the time of such Refinancing
and (y) in all respects, be no less subordinated or junior, if applicable, to
the rights of Holders of the First Mortgage Notes than was the Indebtedness or
Disqualified Capital Stock to be so refinanced, (C) such Refinancing
Indebtedness shall be secured only by the assets (if any) securing the
Indebtedness to be so refinanced and (D) such Refinancing Indebtedness shall
have no installment of principal (or redemption payment) scheduled to come due
earlier than the scheduled maturity of the corresponding installment of
principal of the Indebtedness or Disqualified Capital Stock to be so
refinanced which was scheduled to come due prior to the Stated Maturity.
"Related Business" means the business conducted (or proposed to be
conducted) by Plaza Associates or Taj Associates as of the Issue Date and any
and all businesses that in the good faith judgment of the Board of Directors
of Trump Atlantic City Funding are related businesses in Atlantic City, New
Jersey.
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"Required Regulatory Redemption" means a redemption by the Issuers of any of
such holder's First Mortgage Notes pursuant to, and in accordance with, any
order of any Governmental Authority with appropriate jurisdiction and
authority relating to a Gaming License, or to the extent necessary in the
reasonable, good faith judgment of the Issuers to prevent the loss, failure to
obtain or material impairment or to secure the reinstatement of, any material
Gaming License, where such redemption or acquisition is required because the
holder or beneficial owner of such First Mortgage Note is required to be found
suitable or to otherwise qualify under any gaming laws and is not found
suitable or so qualified within a reasonable period of time.
"Restricted Funds Account" means a segregated bank under the control of
Trump Atlantic City or any of its Subsidiaries, the proceeds of which are
invested in cash or Cash Equivalents pending any use pursuant to the covenant
"Limitation on the Sale of Assets and Subsidiary Stock; Event of Loss."
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than investments in Cash Equivalents.
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity
Interests of such person or any parent of such person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for
value of Equity Interests of such person or any parent of such person, (c) any
purchase, redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance of, any
Indebtedness of, or guaranteed by, such Person, any parent of such Person or
any Subsidiary prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case may be, of such
Indebtedness (including any payment in respect of any amendment of the terms
of any such Indebtedness, which amendment is sought in connection with any
such acquisition of such Indebtedness or seeks to shorten any such due date),
(d) in connection with the designation of a Person as an Unrestricted
Subsidiary, a Restricted Payment shall be deemed to exist in the amount
provided in the definition of Unrestricted Subsidiary contained herein and (e)
any Restricted Investment by such person; provided, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other payment on
or with respect to Equity Interests of an issuer to the extent payable solely
in shares of Qualified Capital Stock of such issuer; or (ii) any dividend,
distribution or other payment to Trump Atlantic City or to any of its Wholly-
owned Subsidiaries.
"Services Fee" means, for any period, the amount of the fee payable by Plaza
Associates under the TPM Services Agreement for such period.
"Significant Subsidiary" shall have the meaning provided under Regulation S-
X of the Securities Act, as in effect on the Issue Date.
"Stated Maturity," when used with respect to any First Mortgage Note, means
, 2006, and when used with respect to any other Indebtedness or any
installment of interest thereon means the dates specified in such other
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
"Subsidiary" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, (ii) any other Person (other than a corporation)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the
date of determination thereof has a majority ownership interest, or (iii) a
partnership in which such Person or a Subsidiary of such Person is, at the
time, a general partner and has a majority ownership interest. Notwithstanding
the foregoing, no Unrestricted Subsidiary shall be considered a Subsidiary of
Trump Atlantic City or any of its other Subsidiaries for purposes of the First
Mortgage Notes and the Indenture. Unless the context otherwise requires, all
references herein to "Subsidiaries" shall be to the direct and indirect
Subsidiaries of THCR Atlatantic City for purposes of the First Mortgage Notes
and the First Mortgage Note Indenture.
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"Superior Mortgages" means those certain mortgages, each as in effect on the
Issue Date, known as the "Rothenberg" and "Mutual Benefit" mortgages.
"Tax Amounts" with respect to any year shall not exceed an amount equal to
(a) the higher of (i) the product of (A) the taxable income of Trump Atlantic
City for such year as determined in good faith by the Board of Directors of
Trump Atlantic City Funding and (B) the Tax Percentage and (ii) the product of
(A) the alternative minimum taxable income attributable to Trump Atlantic City
for such year as determined in good faith by Board of Directors of Trump
Atlantic City Funding and (B) the Tax Percentage, reduced by (b) to the extent
not previously taken into account, any income tax benefit attributable to THCR
Atlatnic City which could be realized (without regard to the actual
realization) by its Partners in the current or any prior taxable year, or
portion thereof, commencing on or after the Issue Date (including any tax
losses or tax credits), computed at the applicable Tax Percentage for the year
that such benefit is taken into account for purposes of this computation. Any
part of the Tax Amount not distributed in respect of a tax period for which it
is calculated shall be available for distribution in subsequent tax periods.
"Tax Percentage" is the highest, aggregate effective marginal rate of
Federal, state and local income tax or, when applicable, alternative minimum
tax, to which any Partner of Trump Atlantic City would be subject in the
relevant year of determination (as certified to the Trustee by a nationally
recognized tax accounting firm); provided, that in no event shall the Tax
Percentage be greater than the sum of (x) the highest, aggregate effective
marginal rate of federal, state, and local income tax or, when applicable,
alternative minimum tax, to which Trump Atlantic City would have been subject
if it were a C corporation, for Federal income tax purposes, and (y) 5
percentage points. If any Partner or Upper Tier Owner of Trump Atlantic City
is an S corporation, partnership or similar pass-through entity for federal
income tax purposes, the Tax Percentage shall be computed based upon the tax
rates applicable to the shareholder or partner of such Partner or Upper Tier
Owner, as the case may be.
"TPM Services Agreement" shall mean the Amended and Restated Services
Agreement, dated June 24, 1993, between Plaza Associates and Trump Plaza
Management Corp.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means any Subsidiary of Trump Atlantic City that,
at the time of determination, shall be an Unrestricted Subsidiary (as
designated by Trump Atlantic City, as provided below) provided that such
Subsidiary does not and shall not engage, to any substantial extent, in any
line or lines of business activity other than a Related Business. Trump
Atlantic City may designate any Person (other than Plaza Associates, Taj
Associates, TTMC, Trump Atlantic City Funding and any direct or indirect
holder of Equity Interest therein) to be an Unrestricted Subsidiary if (a) no
Default or Event of Default is existing or will occur as a consequence
thereof, (b) either (x) such Subsidiary, at the time of designation thereof,
has no assets, (y) such Subsidiary is designated an "Unrestricted Subsidiary"
at the time of acquisition by Trump Atlantic City, in the case of Subsidiaries
acquired after the Issue Date or (z) immediately after giving effect to such
designation, on a pro forma basis, Trump Atlantic City could incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio in
paragraph (a) of the covenants "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" and (c) such Subsidiary does not
own any Equity Interests in, or own or hold any Lien on any property of, Trump
Atlantic City or any other Subsidiary (excluding other Unrestricted
Subsidiaries). Any such designation also constitutes a Restricted Payment in
an amount equal to the sum of (x) net assets of such Subsidiary at the time of
the designation, unless in the case of this clause (x) the designation is made
pursuant to clause (b)(y) of the first sentence of this definition, in which
case the amount of consideration paid by Trump Atlantic City and its
Subsidiaries to effect such Acquisition (excluding Qualified Equity Interests
of THCR issued in connection therewith) shall be included in lieu thereof and
(y) the maximum amount of Guaranteed Debt of Trump Atlantic City and its
Subsidiaries in respect of the designated Subsidiary which is to be
outstanding immediately after such designation, in each case for purposes of
the covenant "Limitation on Restricted Payments." Subject to the foregoing,
Trump Atlantic City may designate any Unrestricted Subsidiary to be a
Subsidiary, provided, that (i) no Default or Event of Default is existing or
will occur as a consequence
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thereof and (ii) immediately after giving effect to such designation, on a pro
forma basis, Trump Atlantic City could incur at least $1.00 of Indebtedness
pursuant to the Debt Incurrence Ratio test in paragraph (a) of the covenants
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock." Each such designation shall be evidenced by filing with the Trustee a
certified copy of the resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing conditions.
"Upper Tier Owner" means (i) if a Partner is an S corporation, partnership
or similar pass-through entity for federal income tax purposes, any
shareholder or partner of such Partner and (ii) if any such shareholder or
partner referred to in (i) above is an S corporation, partnership or similar
pass-through entity for federal income tax purposes, any shareholder or
partner of such person.
"Voting Stock" with respect to any Person means all classes of Equity
Interests of such Person then outstanding and normally entitled to vote in
elections of directors of such Person.
"Wholly-owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by Trump Atlantic City or one or more Wholly-owned
Subsidiaries of Trump Atlantic City.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 1996 (without giving effect
to the transactions contemplated by the Merger Transaction), certain
information regarding the beneficial ownership of THCR Common Stock by (i)
each of THCR's executive officers, (ii) each director of THCR, (iii) each
person who is known to THCR to own beneficially more than 5% of the THCR
Common Stock and (iv) all officers and directors of THCR as a group. Such
information is based, in part, upon information provided by certain
stockholders of THCR. In the case of persons other than members of the
officers and directors of THCR, such information is based solely on a review
of Schedules 13G filed with the SEC.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
----------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Donald J. Trump.......................................... 6,667,217(/1/) 39.8%
Nicholas L. Ribis........................................ 72,487(/2/) *
John P. Burke............................................ 400(/3/) *
Robert M. Pickus......................................... 200 *
Wallace B. Askins........................................ 3,000 *
Don M. Thomas............................................ 200 *
Peter M. Ryan............................................ -- --
INVESCO PLC.............................................. 527,300(/4/) 5.2
The Goldman Sachs Group, L.P............................. 771,300(/5/) 7.7
Hellman, Jordan Management Co., Inc. .................... 882,700(/6/) 8.8
The Capital Group Companies, Inc. ....................... 1,064,000(/7/) 10.6
State Street Research & Management Company............... 1,270,300(/8/) 12.6
Oppenheimer Group, Inc. ................................. 1,470,075(/9/) 14.8
All officers and directors of THCR (7 persons)........... 6,743,504 40.2
</TABLE>
The above persons have sole voting and investment power, unless otherwise
indicated.
- ---------------------
* Less than 1%.
(1) These shares include 6,666,667 shares of THCR Common Stock, into which
Trump's limited partnership interest in THCR Holdings is convertible,
subject to certain adjustments. These shares do not include 300 shares of
THCR Common Stock held by his wife, Mrs. Marla M. Trump, of which shares
Trump disclaims beneficial ownership. Trump is also the beneficial owner
of the outstanding shares of the THCR Class B Common Stock (1,000 shares).
The THCR Class B Common Stock has voting power equivalent to the voting
power of the Common Stock into which Trump's limited partnership interest
is convertible. Upon conversion of all or any portion of the THCR Holdings
limited partnership interest into shares of THCR Common Stock, the
corresponding voting power of the THCR Class B Common Stock will be
proportionately diminished.
(2) Represents the vested portion of a stock bonus awarded to the President of
THCR pursuant to the 1995 Stock Plan. See "Management--Executive
Compensation." These shares include 3,081 shares and 2,739 shares held by
Mr. Ribis as custodian for his son, Nicholas L. Ribis, Jr., and his
daughter, Alexandria Ribis, respectively, of which shares Mr. Ribis
disclaims beneficial ownership.
(3) Mr. Burke shares voting and dispositive power of 100 of these shares with
his wife. These shares include 100 shares beneficially owned solely by his
wife, of which shares Mr. Burke disclaims beneficial ownership.
(4) 11 Devonshire Square, London EC2M 4YR, England. INVESCO PLC ("Invesco"),
the parent holding company, shares voting and dispositive power over these
shares (with four of its subsidiaries). Invesco and its subsidiaries
disclaim beneficial ownership of these shares, which are held by them on
behalf of other persons who have the right to receive (or direct the
receipt) of dividends and proceeds from the sale of such shares.
(5) 85 Broad Street, New York, New York 10004. The Goldman Sachs Group L.P.,
the parent holding company, shares voting and dispositive power over these
shares with Goldman Sachs & Co., a registered broker dealer and investment
adviser and over 504,100 of these shares with Goldman Sachs Small Equity
Fund.
(6) 75 State Street, Suite 2420, Boston, Massachusetts 02109. Hellman, Jordan
Management Co., Inc. ("Hellman") is an investment adviser who has sole
dispositive power over all of these shares and sole voting power over
817,700 of these shares. Hellman's clients have the power to revoke
Hellman's dispositive power upon 30 days' written notice.
(7) 333 South Hope Street, Los Angeles, California 90071. The Capital Group
Companies, Inc. ("Capital Group") has sole dispositive power over these
shares and sole voting power over 256,000 of these shares. These shares
include 654,000 shares beneficially owned by Capital Guardian Trust
Company ("Capital Guardian"), respectively. Capital Group is the parent
holding company of Capital Guardian. Capital Group and Capital Guardian
disclaim beneficial ownership of these shares.
(8) One Financial Center, 30th Floor, Boston, Massachusetts 02111. State
Street Research and Management Company ("State Street") is an investment
adviser and disclaims beneficial ownership of these shares. Metropolitan
Life Insurance Company, One Madison Avenue, New York, New York 10010, is
the parent holding company of State Street.
(9) Oppenheimer Tower, World Financial Center, New York, New York 10281.
Oppenheimer Group, Inc. ("Oppenheimer") has shared voting and dispositive
power over these shares. These shares include 886,400 shares beneficially
owned by Oppenheimer Capital, an investment adviser, of which Oppenheimer
is the parent holding company.
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DESCRIPTION OF THE TRUMP ATLANTIC CITY PARTNERSHIP AGREEMENT
The following summary of the General Partnership Agreement of Trump Atlantic
City, as amended to date (the "Trump Atlantic City Partnership Agreement"),
and the description of certain provisions set forth elsewhere in this
Prospectus, are qualified in their entirety by reference to such partnership
agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Trump Atlantic City was formed on February 17, 1993
under the laws of the State of New Jersey. The partners of Trump Atlantic City
(each, a "Partner") amended the Trump Atlantic City Partnership Agreement on
March 4, 1996 to change the name of the partnership from Trump Plaza Holding
Associates to Trump Atlantic City Associates.
DISTRIBUTIONS AND ALLOCATIONS OF PROFITS AND LOSSES
The Partners are entitled to receive a share of the profits, losses and
distributions of cash or property at such times as determined by the unanimous
consent of the partners as follows: (i) 99% to THCR Holdings and (ii) 1% to
Plaza Holding Inc.
TERM
The term of Trump Atlantic City's partnership continues until December 31,
2030. A Partner may terminate his membership in Trump Atlantic City (a
"Withdrawing Partner") only upon the written consent of all the other Partners
in Trump Atlantic City. The distribution of the interest of the Withdrawing
Partner will be determined by the unanimous consent of all the other Partners
at the time of the withdrawal of the Withdrawing Partner. Trump Atlantic City
shall be dissolved and its affairs wound up only upon the unanimous consent of
all the Partners or as otherwise required by law.
MANAGEMENT
All decisions affecting the business and affairs of Trump Atlantic City,
including, but not limited to, the financing, refinancing, sale, management or
leasing of any partnership property, or any part thereof, the acquisition,
development, financing, sale or leasing of other property, and all matters
arising under the Trump Atlantic City Partnership Agreement shall be decided
by Plaza Holding Inc., the Managing General Partner of Trump Atlantic City.
PARTNER CONTRIBUTIONS
The contributions of all Partners to Trump Atlantic City shall be returned
only upon dissolution or termination of Trump Atlantic City and after payment
of all debts of Trump Atlantic City and only out of net assets or net proceeds
remaining thereafter.
ADMISSION OF THCR HOLDINGS
In connection with the June 1995 Offerings, the Partners amended the Trump
Atlantic City Partnership Agreement to provide for (i)(A) Trump's contribution
of his 99% general partnership interest in Trump Atlantic City to THCR
Holdings, and (B) Trump's withdrawal as a general partner of Trump Atlantic
City, and (ii) the admittance of THCR Holdings general partner in Trump
Atlantic City. The amendment provided for the indemnification of Trump by
Trump Atlantic City for all expenses incurred in connection with any
threatened, pending or completed action, suit or proceeding in connection with
the business or internal affairs of Trump Atlantic City or any act of omission
of Trump as a general partner of Plaza Holding (as predecessor to Trump
Atlantic City).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain federal income tax
consequences of acquiring, owning and disposing of the First Mortgage Notes.
This discussion is based upon the provisions of the federal income tax law now
in effect which is subject to change, possibly with retroactive effect. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular investor in the First Mortgage Notes in light of his
personal investment circumstances or to certain types of investors subject to
special treatment under the federal income tax laws (for example, banks,
insurance companies, tax-exempt organizations, dealers in securities or
currencies, and except to the extent described below, foreign investors) and
does not discuss any aspect of state, local or foreign taxation. This
discussion is limited to those initial investors who will hold the First
Mortgage Notes as "capital assets" (generally, property held for investment)
within the meaning of the Code.
Each prospective investor is urged to consult his or its own tax advisor
regarding the federal, state, local and other tax consequences attendant upon
the acquisition, ownership and disposition of the First Mortgage Notes.
INTEREST
A holder of the First Mortgage Notes will be required to include in ordinary
income, for federal income tax purposes, stated interest received or accrued
on the First Mortgage Notes in accordance with the holder's regular method of
accounting.
SALE, EXCHANGE OR REDEMPTION OF THE FIRST MORTGAGE NOTES
The sale, exchange or redemption of the First Mortgage Notes will result in
capital gain or loss equal to the difference between the amount realized
(other than an amount attributable to accrued and unpaid interest) and the
holder's adjusted tax basis in the First Mortgage Notes immediately before
such disposition. Such gain or loss will generally be long-term if the holding
period for the First Mortgage Notes is more than one year.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS APPLICABLE TO FOREIGN HOLDERS
The following discussion summarizes certain United States federal tax
consequences of the acquisition, ownership and disposition of First Mortgage
Notes by an initial purchaser of First Mortgage Notes that, for United States
federal income tax purposes, is not a "United States person" (a "Non-United
States Holder"). For purposes of this discussion, a "United States person"
means a citizen or resident of the United States; a corporation, partnership
or other entity created or organized in the United States or under the laws of
the United States or of any political subdivision thereof; or an estate or
trust whose income is includible in gross income for United States federal
income tax purposes regardless of its source. This discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-United States Holder. Prospective investors are urged to consult their tax
advisors regarding the United States federal tax consequences of acquiring,
holding, and disposing of First Mortgage Notes, as well as any tax
consequences that may arise under the laws of any foreign, state, local or
other taxing jurisdiction.
INTEREST
Interest paid by the Issuers to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and (i) the Non-United States
Holder does not actually or constructively own a 10% or more interest in Taj
Funding and is not a controlled foreign corporation with respect to which the
Issuers are a "related person" within the meaning of the Code and (ii) the
beneficial owner of the First Mortgage Notes certifies, under penalties of
perjury, that the beneficial owner is not a United States person and provides
the beneficial owner's name and address.
139
<PAGE>
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other
disposition of a First Mortgage Note unless (i) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-United States Holder or (ii) in the case of a Non-United States Holder
who is a non-resident alien individual and holds the First Mortgage Note as a
capital asset, such holder is present in the United States for 183 or more
days in the taxable year and certain other requirements are met.
FEDERAL ESTATE TAXES
If interest on the First Mortgage Notes is exempt from withholding of United
States federal income tax under the rules described above, the First Mortgage
Notes will not be included in the estate of a deceased Non-United States
Holder for United States federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Issuers will, where required, report to the holders of First Mortgage
Notes and the Internal Revenue Service the amount of any interest paid on the
First Mortgage Notes in each calendar year and the amounts of tax withheld, if
any, with respect to such payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or
an exemption has otherwise been established; provided that neither the Issuers
nor their payment agents have actual knowledge that the holder is a United
States person or that the conditions of any other exemption are not in fact
satisfied. Under temporary Treasury regulations, these information reporting
and backup withholding requirements will apply, however, to the gross proceeds
paid to a Non-United States Holder on the disposition of the First Mortgage
Notes by or through a United States office of a United States or foreign
broker, unless the holder certifies to the broker under penalties of perjury
as to its name, address and status as a foreign person or the holder otherwise
establishes an exemption. Information reporting requirements, but not backup
withholding, will also apply to a payment of the proceeds of a disposition of
the First Mortgage Notes by or through a foreign office of a United States
broker or foreign brokers with certain types of relationships to the United
States. Neither information reporting nor backup withholding generally will
apply to a payment of the proceeds of a disposition of the First Mortgage
Notes by or through a foreign office of a foreign broker not subject to the
preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Service.
These information reporting and backup withholding rules are under review by
the United States Treasury and their application to the First Mortgage Notes
could be changed by future regulations.
140
<PAGE>
UNDERWRITING
Subject to certain conditions contained in the Underwriting Agreement,
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Salomon Brothers
Inc ("Salomon") and BT Securities Corporation ("BT Securities") (together with
DLJ, Salomon and BT Securities, the "Underwriters") have severally agreed to
purchase from the Issuers and the Guarantors $1,100,000,000 aggregate principal
amount of First Mortgage Notes. The principal amount of First Mortgage Notes
that each Underwriter has agreed to purchase is set forth opposite its name
below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF FIRST MORTGAGE
UNDERWRITERS NOTES
------------ -----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........
Salomon Brothers Inc ......................................
BT Securities Corporation..................................
--------------
Total.................................................... $1,100,000,000
==============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of First Mortgage
Notes offered hereby are subject to approval of certain legal matters by
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all the First Mortgage Notes offered hereby if any are taken.
The Underwriters have advised the Issuers and the Guarantors that the
Underwriters propose to offer the First Mortgage Notes directly to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of % of the principal amount. Any Underwriter may allow, and such dealers may
reallow, a discount not in excess of % of the principal amount to any other
Underwriter and to certain other dealers. After the initial public offering of
the First Mortgage Notes, the public offering price and other selling terms may
be changed by the Underwriters.
Prior to this offering, there has been no public market for the First
Mortgage Notes. The Issuers do not intend to list any of the First Mortgage
Notes on a national securities exchange or to seek the admission thereof for
trading in the National Association of Securities Dealers Automated Quotation
System. The Underwriters have advised the Issuers that they currently intend to
make a market in the First Mortgage Notes, but are not obligated to do so and
may discontinue any such market-making at any time without notice. Accordingly,
there can be no assurance as to the liquidity of, or that an active trading
market will develop for, the First Mortgage Notes.
Trump Atlantic City and its Subsidiaries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act or to contribute to payments the Underwriters may be required to
make in respect thereof.
Each of the Underwriters from time to time performs investment banking and
other financial services for THCR and its affiliates for which they receive
advisory or transaction fees, as applicable, plus out-of-pocket expenses, of
the nature and in amounts customary in the industry for such services. The
Underwriters are also acting as lead underwriters for the Stock Offering. In
addition, DLJ has acted as THCR's financial advisor in connection with the
Merger Transaction, for which services THCR has agreed to pay DLJ a customary
fee for rendering a fairness opinion and a fee upon consummation of the Merger.
Following consummation of the Merger Transaction, it is expected that an
affiliate of DLJ will become a secured creditor of Trump and certain of his
affiliates (other than THCR) in connection with a loan proposed to be made to
Trump by such DLJ affiliate, for which it will receive a customary fee and
reimbursement of its expenses. See "Risk Factors--
141
<PAGE>
Control and Involvement of Trump." Bankers Trust, an affiliate of BT
Securities, is a significant secured creditor of Trump and certain of his
affiliates other than THCR. See "Risk Factors--Conflicts of Interest." Bankers
Trust held a $500,000 unsecured demand note owed by Trump Indiana, a
subsidiary of THCR Holdings. Following demand by that lender, such amount was
paid in full by Trump on June 6, 1995, and is now owed by Trump Indiana to
Trump. In connection with the Merger Transaction, Bankers Trust will receive
$10 million in respect of certain of the Trump Indebtedness. In exchange for
such payment, Bankers Trust will consent to the Merger Transaction and release
certain liens on Trump's direct and indirect equity interests in Taj
Associates and related guarantees and the pledge of TTMI Note.
LEGAL MATTERS
Certain legal matters, including certain tax matters, in connection with the
securities offered hereby are being passed upon for the Issuers by Willkie
Farr & Gallagher, New York, New York. Certain legal matters in connection with
the securities offered hereby are being passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California.
The statements as to matters of law and legal conclusions concerning New
Jersey gaming laws included under the captions "Risk Factors--Strict
Regulation by Gaming Authorities," and "Regulatory Matters" (other than the
subcaption "Other Laws and Regulations") have been prepared by Sterns &
Weinroth, Trenton, New Jersey, gaming counsel for the Issuers. Sterns &
Weinroth offers no opinion and does not purport to opine on the application of
federal securities laws and regulations or the securities laws and regulations
of any state with respect to the securities offered hereby.
EXPERTS
The audited financial statements and schedules of Trump Atlantic City
Associates and Trump Plaza Associates, Trump Taj Mahal Associates and
Subsidiary and Trump Atlantic City Funding, Inc. included in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports.
AVAILABLE INFORMATION
Trump Atlantic City, Trump Atlantic City Funding and Plaza Associates have
filed with the office of the SEC in Washington, DC a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act, with respect
to the securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC. Such
additional information can be inspected at, and obtained from, the SEC in the
manner set forth below. For further information pertaining to the securities
offered hereby and to Trump Atlantic City, Trump Atlantic City Funding, Plaza
Associates and Taj Associates, reference is made to the Registration
Statement, including the exhibits filed as parts thereof.
THCR, THCR Holdings, Trump Atlantic City, Trump Atlantic City Funding, Plaza
Associates, Taj Holding, Taj Funding and Taj Associates are subject to the
informational reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, accordingly, have filed reports and
other information with the SEC. Reports, proxy statements and other
information of THCR, THCR Holdings, Trump Atlantic City, Trump Atlantic City
Funding, Plaza Associates, Taj Holding, Taj Funding and Taj Associates filed
with the SEC, as well as the Registration Statement, are available for
inspection and copying at the public
142
<PAGE>
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, DC 20549 and at certain regional offices of the SEC located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511 and 7 World Trade Center, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the SEC,
450 Fifth Street, N.W., Washington, DC 20549 at prescribed rates. It is
expected that upon consummation of the Merger Transaction, Plaza Associates,
Taj Holding, Taj Funding and Taj Associates will not be subject to the
informational reporting requirements of the Exchange Act. Until the
consummation of the Merger, units, each of which consists of $1,000 principal
amount of Taj Bonds and one share of Taj Holding Class B Common Stock, will be
listed on the American Stock Exchange, and reports and other information
concerning Taj Holding, Taj Funding and Taj Associates can be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006.
143
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Trump Atlantic City Funding, Inc.
Report of Independent Accountants....................................... F-2
Balance Sheet as of January 30, 1996.................................... F-3
Notes to Balance Sheet (unaudited)...................................... F-4
Trump Atlantic City Associates and Trump Plaza Associates
Report of Independent Public Accountants................................ F-5
Consolidated Balance Sheet as of December 31, 1994 and 1995............. F-6
Consolidated Statements of Operations for the years ended December 31,
1993, 1994
and 1995............................................................... F-7
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1993, 1994
and 1995............................................................... F-8
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994
and 1995............................................................... F-9
Notes to Financial Statements........................................... F-10
Trump Taj Mahal Associates and Subsidiary
Report of Independent Public Accountants................................ F-21
Consolidated Balance Sheet as of December 31, 1994 and 1995............. F-22
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995.................................................... F-23
Consolidated Statements of Capital (Deficit) for the years ended Decem-
ber 31, 1993, 1994
and 1995............................................................... F-24
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994
and 1995............................................................... F-25
Notes to Consolidated Financial Statements.............................. F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Atlantic City Funding, Inc.
We have audited the accompanying balance sheet of Trump Atlantic City
Funding, Inc. (a Delaware Corporation) as of January 30, 1996. This balance
sheet is the responsibility of the management of Trump Atlantic City Funding,
Inc. Our responsibility is to express an opinion on this balance sheet based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Trump Atlantic City Funding, Inc.
as of January 30, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey January 31, 1996
F-2
<PAGE>
TRUMP ATLANTIC CITY FUNDING, INC.
BALANCE SHEET
JANUARY 30, 1996
ASSETS
<TABLE>
<S> <C>
Cash...................................................................... $100
----
Total Assets............................................................ $100
====
LIABILITIES AND SHAREHOLDER'S EQUITY
Commitments and Contingencies
Common Stock, $.01 par value, 1,000 shares authorized, 100 shares issued
and outstanding.......................................................... $100
----
Total Shareholder's Equity.............................................. 100
----
Total Liabilities and Shareholder's Equity.............................. $100
====
</TABLE>
The accompanying notes to balance sheet are an integral part of this balance
sheet.
F-3
<PAGE>
TRUMP ATLANTIC CITY FUNDING, INC.
NOTES TO BALANCE SHEET
JANUARY 30, 1996
(1) ORGANIZATION AND OPERATIONS
Trump Atlantic City Funding, Inc. ("Trump Atlantic City Funding"), which is
wholly owned by Trump Atlantic City Associates ("Trump Atlantic City"), was
formed on January 30, 1996 to raise funds through the issuance and sale of debt
securities for the benefit of Trump Taj Mahal Associates ("Taj Associates") and
Trump Plaza Associates ("Plaza Associates").
As Trump Atlantic City Funding has no operations, its ability to service its
debt is dependent upon the successful operations of Taj Associates and Plaza
Associates.
(2) PROPOSED ISSUANCE OF FIRST MORTGAGE NOTES
Trump Atlantic City, Trump Atlantic City Funding, Plaza Associates and Taj
Associates have filed registration statements for the issuance and sale of
$1,100,000 of mortgage notes due 2006. The proceeds of the mortgage notes are
to be used, among other things, to purchase Trump Taj Mahal Funding, Inc.'s
outstanding 11.35% Mortgage Bonds, Series A due 1999 and Trump Plaza Funding,
Inc.'s 10 7/8% First Mortgage Notes due 2001.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of Trump Hotels & Casino Resorts, Inc.
("THCR") and Taj Mahal Holding Corp.; (ii) the risk in refinancing and
repayment of indebtedness and the need for additional financing; (iii) the
restrictions imposed on certain activities by certain debt instruments; (iv)
the recent results of Trump Plaza Hotel and Casino ("Trump Plaza") and the
Trump Taj Mahal Casino Resort (the "Taj Mahal"); and (v) risks associated with
the expansion of Trump Plaza ("Trump Plaza Expansion"), the expansion of the
Taj Mahal (the "Taj Mahal Expansion") and the riverboat gaming project
approximately 25 miles from downtown Chicago (the "Indiana Riverboat"). There
can be no assurance that the Trump Plaza Expansion or the Taj Mahal Expansion
will be completed or that the Indiana Riverboat or any other gaming venture,
will open or that any of THCR's or the Taj Mahal's operations will be
successful. See "Risk Factors" included elsewhere in this Prospectus for a
discussion of these and other factors.
F-4
<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
F-5
<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........................ -- 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):
Partner's 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.
F-6
<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.
F-7
<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 re-
pay certain personal indebtedness.... (52,500,000) -- (52,500,000)
Distribution to Donald J. Trump to re-
deem Trump Plaza Funding, Inc. Pre-
ferred Stock Units................... (35,000,000) -- (35,000,000)
Conversion of Preferred Plaza Associ-
ates Interest into General Plaza As-
sociates 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.
F-8
<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 FLOW FROM OPERATING
ACTIVITIES:
Net income (loss)................. $ 9,338,000 $ (8,870,000) $ 1,533,000
Adjustments to reconcile net
income (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
indebtedness.................... 862,000 1,916,000 1,130,000
Provision for losses on
receivables..................... 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
investments..................... 1,047,000 394,000 (1,098,000)
------------- ------------ -------------
25,500,000 9,686,000 28,473,000
Decrease (increase) in
receivables..................... 823,000 (236,000) (8,318,000)
Increase in inventories.......... (498,000) (91,000) 371,000
Increase in prepaid expenses and
other current assets............ (199,000) (1,385,000) (765,000)
(Increase) decrease in other
assets.......................... 2,530,000 1,504,000 8,074,000
Increase in amounts due to
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
operating activities........... $ 21,820,000 $ 19,950,000 $ 26,923,000
------------- ------------ -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment........................ $ (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
ACTIVITIES:
Deferred financing costs.......... (17,342,000) -- --
Distributions to Donald J. Trump.. (87,500,000) -- --
Distributions to Plaza Funding.... (40,000,000) -- --
Preferred Plaza Associates
Interest 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
Holdings, 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
BEGINNING 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.
F-9
<PAGE>
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 Atlantic City"), a New Jersey general partnership, and its
99% owned subsidiary, Trump Plaza Associates ("Plaza Associates"), 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 Atlantic City's sole source of liquidity is
distributions in respect of its interest in Plaza Associates. Trump Atlantic
City is 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 Atlantic City 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 Atlantic City's stock units.
Trump Atlantic City was formed in February, 1993 for the purpose of raising
funds for Plaza Associates. On June 25, 1993, Trump Atlantic City 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 Atlantic City 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 Atlantic City, and Plaza Funding and
Trump Atlantic City, 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, THCR Holdings, and 60% of the Company, 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 Atlantic City.
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 beneficial interest in Plaza Associates
(consisting of all of the outstanding capital stock of Plaza Funding, a 99%
equity interest in Trump Atlantic City and all of the outstanding capital stock
of Trump Plaza Holding Inc. which owns the remaining 1% equity interest in
Trump Atlantic City). Trump also contributed to THCR
F-10
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 allowance 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>
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.
F-11
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
Income Taxes
Plaza Funding, Trump Atlantic City 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 Atlantic City 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.
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 Atlantic City 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 Atlantic City 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.
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
F-12
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
whenever changes in circumstances indicate that the carrying amount of an asset
may not be fully recoverable. Impairment of long-lived assets exists if, a
minimum, the future expected cash flows (undiscounted and with 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.
Statements of Cash Flows
For purposes of the statements of cash flows, Trump Atlantic City 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 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.
F-13
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 Atlantic City 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 Warrants were exercised prior to
June 12, 1995 and were subsequently redeemed with a portion of the
proceeds contributed to Trump Atlantic City 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).
(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.
F-14
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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, 1993, 1994, and 1995 was $4,338,000, $3,613,000 and $3,609,000,
respectively, of which $2,127,000, $2,513,000 and $1,900,000, 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............................................. 3,233,000 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 Warrants on June 12,
1995. (See Note 3)
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 New
Jersey Casino Control Act (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
1995, is not transferable and will include a
F-15
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
review 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.
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, $1,838,000 and $1,098,000, 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. 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
F-16
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 Trump Plaza East. On June 24, 1993, in
connection with the 1993 refinancing of Trump Plaza, (i) Trump transferred
title of Trump Plaza East to Missouri Boardwalk Inc. ("Boardwalk"), a
subsidiary of Atlantic National Bank, 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 to be made to Boardwalk by
Trump under Trump Plaza East Lease (as defined); (ii) Boardwalk leased Trump
Plaza East to Trump for a term of five years, which expires on June 30, 1998,
during which time Trump is obligated to pay the lender $260,000 per month in
lease payments 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.
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, Plaza Associates incurred $3,800,000 of
such expenses, which are included in. 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 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. Pursuant to the terms of
certain personal indebtedness of Trump, Plaza Associates is restricted from
expending more than $15,000,000 less any CRDA tax credits for improvements at
Trump Plaza East prior to such time as it exercises the Trump Plaza East
Purchase Option. Plaza Associates has
F-17
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 (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 First Mortgage Note Indenture and
the consent of certain of Trump's personal creditors. Plaza Associates ability
to develop 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 addition, exercise of the Trump Plaza
East Purchase Option or the right of first offer requires the consent of
certain of Trump's personal creditors, and there can be no assurance that such
consent will be obtained at the time Plaza Associates desires to exercise the
Trump Plaza East Purchase Option or such right.
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.
Plaza Associates leased office space from Trump Taj Mahal Associates ("Taj
Associates"), which terminated on March 19, 1993. Lease payments of $30,000
were paid to Taj Associates in 1993, respectively.
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 $1.0
million in equal monthly installments, and reimburses TPM on a monthly basis
for all reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under the Services Agreement, up to certain amounts. Under this
Agreement, approximately $1.3 million was charged to expense for the years
ended December 31, 1994, and 1995.
F-18
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Trump World's Fair
Under an option agreement with Chemical Bank ("Chemical") (the "Option
Agreement") Trump had an option to purchase (i) the Trump Regency Hotel
(including the land, improvements and personal property used in the operation
of the hotel) ("Trump World's Fair") 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 the Option Agreement, Trump assigned his rights to Plaza
Associates and on January 5, 1994, Plaza Associates made the $1,000,000
payment.
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,
(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>
The fair values of the PIK Notes and 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 EVENTS
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
F-19
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) and the consummation of the offering by Trump Atlantic
City and its wholly owned finance subsidiary Trump Atlantic City Funding,
Inc. of up to $1,100,000 aggregate principal amount of first mortgage notes,
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 Atlantic City of all of his direct
and indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to Trump Atlantic City of all of its indirect
ownership interests in Taj Associates acquired in the Merger.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of Trump Atlantic City (following the
consummation of the Merger Transaction); (ii) the risk in refinancing and
repayment of indebtedness and the need for additional financing; (iii) the
restrictions imposed on certain activities by certain debt instruments; (iv)
the recent results of Trump Plaza and the Taj Mahal; and (v) risks associated
with the expansions at the Trump Plaza and the Taj Mahal. There can be no
assurance that the expansions at the Trump Plaza or the Taj Mahal will be
completed or that any other gaming venture will open or that any of Trump
Plaza's or the Taj Mahal's operations will be successful. See "Risk Factors"
included elsewhere in this Prospectus for a discussion of these and other
factors.
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Taj Mahal Associates and Subsidiary:
We have audited the accompanying consolidated balance sheets of Trump Taj
Mahal Associates (a New Jersey general partnership) and Subsidiary 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 Trump Taj Mahal Associates management. 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 Taj Mahal Associates and
Subsidiary 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.
Roseland, New /s/ Arthur Andersen LLP
Jersey
February 16, 1996
F-21
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash investments.............................. $ 61,196 $ 88,941
Receivables, net of allowance of $4,059 and $5,042 for
doubtful accounts (Note 1)............................ 15,443 17,215
Inventory.............................................. 6,431 7,161
Prepaid expenses and other current assets.............. 7,806 3,864
--------- ---------
Total Current Assets................................. 90,876 117,181
--------- ---------
PROPERTY AND EQUIPMENT (Notes 1, 2, and 5):
Land................................................... 37,843 37,843
Building............................................... 656,702 665,161
Furniture, fixtures and equipment...................... 160,372 174,693
Leasehold improvements................................. 31,243 31,253
--------- ---------
886,160 908,950
Less: Accumulated depreciation and amortization...... (179,375) (217,963)
--------- ---------
706,785 690,987
--------- ---------
OTHER ASSETS............................................. 9,951 13,625
--------- ---------
Total Assets......................................... $ 807,612 $ 821,793
========= =========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Long-term debt due currently (Note 2).................. $ 743 $ 920
Accounts payable....................................... 3,256 8,335
Accrued interest payable............................... 8,977 9,154
Due to affiliates, net (Note 3)........................ 152 974
Other current liabilities (Note 4)..................... 37,059 35,210
--------- ---------
Total Current Liabilities............................ 50,187 54,593
--------- ---------
OTHER LIABILITIES (Notes 2 and 3)........................ 32,912 33,373
--------- ---------
LONG-TERM DEBT NET OF UNAMORTIZED DISCOUNT OF $153,597
AND $131,103 (Notes 2 and 9)............................ 656,701 694,192
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 5)
CAPITAL (Notes 6 and 9):
Contributed capital.................................... 123,765 123,765
Accumulated deficit.................................... (55,953) (84,130)
--------- ---------
Total Capital........................................ 67,812 39,635
--------- ---------
Total Liabilities and Capital........................ $ 807,612 $ 821,793
========= =========
</TABLE>
The accompanying notes to financial statements are an integralpart of these
consolidated financial statements.
F-22
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
REVENUES (Note 1):
Gaming...................................... $ 442,064 $ 461,622 $ 501,378
Rooms....................................... 40,682 41,815 43,309
Food and beverage........................... 55,953 58,029 57,195
Other....................................... 16,656 17,894 15,864
--------- --------- ---------
Gross revenues............................ 555,355 579,360 617,746
Less--Promotional allowances (Note 1)....... 56,444 62,178 63,998
--------- --------- ---------
Net revenues.............................. 498,911 517,182 553,748
--------- --------- ---------
COST AND EXPENSES:
Gaming...................................... 237,566 260,472 283,786
Rooms....................................... 15,525 15,662 15,230
Food and beverage........................... 25,080 25,035 24,612
General and administrative.................. 99,424 99,629 96,843
Depreciation and amortization............... 36,858 39,750 43,387
--------- --------- ---------
414,453 440,548 463,858
--------- --------- ---------
Income from operations........................ 84,458 76,634 89,890
Interest income............................... 1,382 2,019 3,922
Interest expense.............................. (108,379) (115,311) (120,435)
--------- --------- ---------
Net loss...................................... $ (22,539) $ (36,658) $ (26,623)
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integralpart of these
consolidated financial statements.
F-23
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
CONTRIBUTED SURPLUS CAPITAL
CAPITAL (DEFICIT) (DEFICIT)
----------- ----------- ---------
<S> <C> <C> <C>
Balance, January 1, 1993..................... $123,765 $ 7,148 $130,913
Net loss..................................... -- (22,539) (22,539)
Partnership distribution (Note 6)............ -- (1,733) (1,733)
-------- -------- --------
Balance, December 31, 1993................... 123,765 (17,124) 106,641
Net loss..................................... -- (36,658) (36,658)
Partnership distribution (Note 6)............ -- (2,171) (2,171)
-------- -------- --------
Balance, December 31, 1994................... 123,765 (55,953) 67,812
Net loss..................................... -- (26,623) (26,623)
Partnership distribution (Note 6)............ -- (1,554) (1,554)
-------- -------- --------
Balance, December 31, 1995................... $123,765 $(84,130) $ 39,635
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integralpart of these
consolidated financial statements.
F-24
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $(22,539) $(36,658) $(26,623)
Adjustments to reconcile net loss to net cash
flows provided by
operating activities--
Depreciation and amortization.................. 36,858 39,750 43,387
Charges related to lease guarantee............. 1,763 2,047 2,375
Accretion of discount on Bond indebtedness..... 15,745 18,820 22,494
Other adjustments to reduce the carrying value
of non-current
assets........................................ 2,764 2,134 3,090
Utilization of CRDA credits.................... -- 1,500 --
Provision for doubtful accounts................ 3,472 2,974 4,508
-------- -------- --------
38,063 30,567 49,231
Changes in operating assets and liabilities:
Receivables, net............................... (2,281) (5,383) (6,280)
Inventory...................................... (1,612) (1,746) (730)
Other current assets........................... (39) (3,552) 3,603
Other assets................................... (766) (392) (584)
Due to affiliates, net......................... 98 (381) 822
Accounts payable............................... (2,225) (678) 5,079
Accrued interest payable....................... 14,900 12,537 16,175
Other liabilities.............................. 2,496 2,450 (4,417)
-------- -------- --------
Net cash flows provided by operating
activities................................... 48,634 33,422 62,899
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............. (16,752) (23,030) (26,498)
Investment in CRDA obligations.................. (5,408) (4,201) (6,073)
-------- -------- --------
Net cash flows used in investing activities... (22,160) (27,231) (32,571)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings........................ (759) (868) (1,029)
Partnership distribution........................ (1,733) (2,171) (1,554)
-------- -------- --------
Net cash flows used in financing activities... (2,492) (3,039) (2,583)
-------- -------- --------
NET INCREASE IN CASH AND CASH INVESTMENTS........ 23,982 3,152 27,745
CASH AND CASH INVESTMENTS BEGINNING OF YEAR...... 34,062 58,044 61,196
-------- -------- --------
CASH AND CASH INVESTMENTS END OF YEAR............ $ 58,044 $ 61,196 $ 88,941
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest.......... $ 75,972 $ 79,121 $ 79,389
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS:
Issuance of PIK bonds in lieu of cash interest.. $ 14,579 $ 12,249 $ 15,112
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integralpart of these
consolidated financial statements.
F-25
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump Taj
Mahal Associates ("Taj Associates"), and its wholly owned subsidiary, Trump Taj
Mahal Funding, Inc. ("Taj Funding"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
Taj Associates was formed on June 23, 1988 as a New Jersey limited
partnership. Taj Associates was converted to a general partnership in December
1990. The current partners and their respective ownership interests are Trump
Taj Mahal, Inc. ("TTMI"), 49.995%, The Trump Taj Mahal Corporation ("TTMC"),
.01%, and TM/GP Corporation ("TM/GP"), the managing general partner, and a
wholly owned subsidiary of Taj Mahal Holding Corp. ("Taj Holding"), 49.995%.
Taj Associates was formed for the purpose of acquiring, constructing and
operating the Trump Taj Mahal Casino Resort (the "Taj Mahal"), an Atlantic City
hotel, casino and convention center complex. On April 2, 1990, Taj Associates
opened the Taj Mahal to the public. The industry in which the Taj Mahal
operates is subject to intense competition and regulatory review (See Note 5).
Taj Funding was incorporated on June 3, 1988 for the purpose of raising funds
through the issuance of its 14% First Mortgage Bonds, Series A, due 1998 (the
"Old Bonds"), the proceeds of which were loaned to Taj Associates for
construction of the Taj Mahal. During 1991, as a result of a plan of
reorganization (the "1991 Taj Restructuring"), these were subsequently
exchanged for Taj Funding's 11.35% Mortgage Bonds, Series A, due 1999 (the "Taj
Bonds"). Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Taj Bonds is completely dependent on the
operations of Taj Associates.
Donald J. Trump ("Trump") beneficially owns 50% of Taj Associates and has
pledged his total ownership interest as collateral under various debt
agreements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues from hotel and other
services are recognized at the time the related service is performed.
Taj Associates provides an allowance for doubtful accounts arising from
casino, hotel and other services. The allowance is based upon a specific review
of outstanding receivables as well as historical collection information. In
providing this allowance, management is required to make certain estimates and
assumptions regarding the timing and amount of account collections. Actual
results could differ from those estimates.
PROMOTIONAL ALLOWANCES
Gross revenues includes the retail value of complimentary rooms, food,
beverages, and other services furnished to patrons. The retail value of these
promotional allowances is deducted from gross revenues to arrive at net
revenues. The cost of promotional allowances is charged to operations.
F-26
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The cost of promotional allowances consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Rooms................................................ $ 8,733 $ 9,921 $ 9,913
Food and Beverage.................................... 28,973 29,653 30,458
Other................................................ 4,678 6,735 6,994
------- ------- -------
$42,384 $46,309 $47,365
======= ======= =======
</TABLE>
INCOME TAXES
The accompanying financial statements do not include a provision for Federal
income taxes of Taj Associates, since any income or losses allocated to the
partners are reportable for Federal income tax purposes by the partners.
Under the New Jersey Casino Control Commission (the "CCC") regulations, Taj
Associates is required to file a New Jersey corporation business tax return. As
of December 31, 1995, Taj Associates had a net operating loss carry-forward of
approximately $150,000 for New Jersey State Income Tax purposes. Net tax
benefit has been reflected in the accompanying financial statements for those
losses until such time that they are actually utilized.
INVENTORIES
Inventories are carried at cost on a weighted average basis.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated on the
straight-line method over the estimated useful lives of assets. Estimated
useful lives range from three to seven years for furniture, fixtures and
equipment and 40 years for buildings and building improvements. Leasehold
improvements are amortized over the term of the related lease commencing in the
period these assets are placed in service.
The interest expense associated with borrowings used to fund the purchase and
construction of the Taj Mahal has been capitalized and is being amortized over
the estimated useful life of the facility.
During 1995, Taj Associates adopted the provisions of Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of long-lived
assets" ("SFAS 121"). SFAS 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstance 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 with interest
charges), from an entity's operations are less than the carrying value of these
assets. As a result of its review, Taj Associates does not believe that any
impairment exists in the recoverability of its long-lived assets as of December
31, 1995.
CASH AND CASH INVESTMENTS
Cash and cash investments include hotel and casino funds, funds on deposit
with banks and temporary investments having a maturity of three months or less.
F-27
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Bonds (a)............................... $ 765,130 $ 780,242
Unamortized discount................................... (153,597) (131,103)
--------- ---------
Net.................................................... 611,533 649,139
Bank term loan (b)..................................... 45,138 44,944
Other.................................................. 773 1,029
--------- ---------
Total................................................ 657,444 695,112
Less: Current portion................................ (743) (920)
--------- ---------
$ 656,701 $ 694,192
========= =========
</TABLE>
- ---------------------
(a) Taj Bonds bear interest of 11.35% and are due November 15, 1999. Each Taj
Bond, together with one share of Taj Holding's Class B redeemable common
stock, trade together as a unit ("Units"), and may not be transferred
separately. Interest on the Taj Bonds is due semi-annually on each
November 15 and May 15. Interest on the Taj Bonds must be paid in cash on
each interest payment date at the rate of 9.375% per annum (the "Mandatory
Cash Interest Amount"). In addition to the Mandatory Cash Interest Amount,
effective May 15, 1992 and annually thereafter, an additional amount of
interest (the "Additional Amount") in cash or additional Taj Bonds or a
combination thereof, is payable equal to the difference between 11.35% of
the outstanding principal amount of the Taj Bonds and the Mandatory Cash
Interest Amount previously paid. To the extent that there is excess
available cash flow ("EACF") of Taj Associates, as defined in the related
indenture, for the immediately preceding calendar year, Taj Funding will
pay the Additional Amount in cash up to 10.28% and the balance thereof may
be paid at the option of Taj Funding in cash or additional Units, provided
that an equivalent amount of cash is used to purchase or redeem Units.
Additional Taj Bonds issued on October 4, 1991 amounted to approximately
$7,208,000. For the period from the issuance of the Taj Bonds, October 4,
1991, through December 31, 1992, there was no EACF. Accordingly, Taj
Funding paid the Additional Amounts on May 15, 1993 and May 15, 1992
through the issuance of approximately $14,579,000 and $8,844,000,
respectively, in additional Taj Bonds. Of the $14,870,000 Additional
Amount due May 15, 1994, $2,621,000 was paid in cash and the $12,249,000
balance in Taj Bonds. Of the $15,112,000 Additional Amount due May 15,
1995, Taj Associates satisfied the entire obligation through the issuance
of Taj Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Bonds is completely dependent on the
operations of Taj Associates. The Taj Bonds are guaranteed as to payment of
principal and interest by Taj Associates and are collateralized by
substantially all Taj Associates' property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting
By Entities in Reorganization Under the Bankruptcy Code," the Taj Bonds
when issued were stated at the present value of amounts to be paid,
determined at current interest rates (effective rate of approximately 18%).
The effective interest rate of the Taj Bonds was determined based on the
trading price of the Taj Bonds for a specific period. Stating the debt at
its approximate present value resulted in a reduction of approximately
$204,276,000 in the carrying amount of the Taj Bonds. This gain is being
offset by increased interest costs over the period of the Taj Bonds to
accrete such bonds to their face value at maturity. At December 31, 1995,
the unaccreted balance of this discount approximated $131,103,000. The
current interest rates of other borrowings approximated their stated
interest rates as of the effective date. The accretion amounted to
approximately $15,745,000 in 1993, $18,820,000 in 1994 and $22,494,000 in
1995, and is included in interest expense.
F-28
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) On November 3, 1989, Taj Associates entered into a loan agreement with
National Westminster Bank USA (the "NatWest Loan") which provided financing
up to $50,000,000 for certain items of furniture, fixtures and equipment
installed in the Taj Mahal. The terms of the NatWest Loan were modified in
1991 as part of the 1991 Taj Restructuring. The restructured NatWest Loan
bears interest at 9 3/8% per annum. Principal and interest is payable
monthly in the fixed amount of $373,000 to be applied first to accrued
interest and the balance to the extent available, to principal, through
maturity, November 15, 1999. Additionally, on May 15 of each year (May 15,
1992 through May 15, 1999), to the extent principal is still outstanding,
NatWest will receive 16.5% of the EACF of the preceding calendar year in
excess of the Additional Amount, to be applied first to accrued but unpaid
interest, and then to principal.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus
any after acquired furniture, fixtures and equipment that replaces such
property, or of the same type, provided, however, that the NatWest Loan may
be subordinated to a lien to secure purchase money financing of such after
acquired property up to 50% of the value of such after acquired property.
In November 1991, Taj Associates obtained a working capital line of credit
in the amount of $25,000,000 with a maturity of five years. In September
1994, Taj Associates extended the maturity to November 1999, in
consideration of modifications of the terms of the facility. Interest on
advances under the line are at prime plus 3% with a minimum of 7% per
month. The Agreement provides for a 3/4% annual fee and a 1/2% unused line
fee and contains various covenants. During 1993 and 1994, no amounts were
outstanding under the line. During 1994 and 1995, no amounts were
outstanding under the line.
Aggregate annual maturities of long-term debt at accreted value are as
follows:
<TABLE>
<S> <C>
1996............................. $ 920,000
1997............................. 529,000
1998............................. 268,000
1999............................. 824,498,000
2000............................. 0
Thereafter....................... 0
</TABLE>
The above maturity schedule does not reflect the proposed recapitalization
described in Note 9.
The ability of Taj Associates and Taj 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 will be sufficient and that repayment will
likely depend upon the ability to refinance such indebtedness. The future
operating performance and 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 Taj Associates and Taj Funding. There can be no assurances that
the future operating performance of Taj Associates will be sufficient to meet
these repayment obligations or that the general state of the economy, the
status of the capital markets generally or the receptiveness of the capital
markets to the gaming industry will be conducive to refinancing or other
attempts to raise capital.
F-29
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) TRANSACTIONS WITH AFFILIATES
Taj Associates has engaged in certain transactions with Trump and entities
that are wholly or partially owned by Trump. Amounts owed to (receivable from)
at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Donald J. Trump (a)......................................... $ 253 $ 643
Trump Taj Mahal Realty Corp. ("Realty Corp.") (b)........... -- --
Trump's Castle Associates (c)............................... 30 164
Trump Plaza Associates (c).................................. (131) 167
------- ------
$ 152 $ 974
======= ======
</TABLE>
- ---------------------
(a) Taj Associates has entered into a Services Agreement (the "Services
Agreement"), which provides that Trump will render to Taj Associates
marketing, advertising, promotional and related services with respect to
the business operations of Taj Associates. In consideration for the
services to be rendered, Taj Associates will pay an annual fee equal to
1.5% of Taj Associates earnings before interest, taxes and depreciation, as
defined, less capital expenditures and partnership distributions for such
year, with a minimum base fee of $500,000. The services fee is payable
monthly through November 15, 1999, although the agreement provides for
earlier termination under certain events. Portions of the fee have been
assigned to First Fidelity Bank ("First Fidelity") in connection with the
First Fidelity Loan (as defined) to Realty Corp. which has been guaranteed
by Trump. For the years ended December 31, 1993, 1994 and 1995, Taj
Associates incurred $1,566,000, $1,353,000 and $1,743,000, respectively,
under the Services Agreement. In addition, during 1993, 1994 and 1995, Taj
Associates reimbursed Mr. Trump $232,000, $224,000 and $261,000,
respectively, for expenses pursuant to the Services Agreement, of which
$127,000, $149,000 and $164,000, respectively, was incurred to an affiliate
for air transportation.
(b) The term of the lease between Taj Associates and Realty Corp. is through
2023 and provides for base rentals payable by Taj Associates, prior to the
time that the NatWest Loan is paid in full, of $2,725,000 per year, plus 3
1/2% of the EACF in excess of the Additional Amount and, upon payment in
full of the NatWest Loan, increasing to include the payments to which
NatWest is otherwise entitled under the amended NatWest Agreement (Note 2).
The amended lease was assigned by Realty to First Fidelity. The first
$3,300,000 received by First Fidelity each year will be applied to the
interest due on the Realty Corp. loan (the "First Fidelity Loan"). Any
additional sums paid will also reduce Taj Associates guarantee (see below)
and the principal amount of the First Fidelity Loan. The First Fidelity
Loan is secured by a first mortgage lien on the underlying parcels owned by
Realty Corp.
Pursuant to a limited subordinated guarantee Taj Associates will, under
certain circumstances, reimburse First Fidelity for any deficiency in the
amount owed to First Fidelity upon maturity of the First Fidelity Loan, up
to a maximum of $30,000,000, provided that First Fidelity first pursues its
first mortgage lien on the parcels, and provided further that the Taj Bonds
have been paid in full. Inasmuch as Taj Associates' lease payments are
Realty Corp's sole source of funds to satisfy the First Fidelity Loan and
the amount of the Loan exceeds the estimated fair market value of the land
by more than $30,000,000, Taj Associates recorded the present value of the
maximum guarantee amount as of October 4, 1991. Discounted at 15%, a
reasonable incremental cost of capital, the obligation amounted to
approximately $9,103,000. This obligation is being accreted as interest
expense over the life of the Taj Bonds and is included in Other Liabilities
in the accompanying consolidated balance sheets. The accretion amounted to
approximately $1,763,000, $2,047,000 and $2,375,000 for the years ended
December 31, 1993, 1994 and 1995, respectively.
(c) Taj Associates engages in various transactions with the two other Atlantic
City hotel/casinos owned by Trump. These transactions are charged at cost
or normal selling price in the case of retail items and
F-30
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
include the utilization of fleet maintenance and limousine services, certain
shared professional fees and payroll costs as well as complimentary services
offered to customers. During 1993, Taj Associates incurred approximately
$1,100,000 and $83,000 of costs for these services from Trump's Castle
Casino Resort ("Trump's Castle") and Trump Plaza, respectively. In addition,
Taj Associates charged $256,000 and $255,000 to Trump's Castle and Trump
Plaza, respectively, for similar services. During 1994, Taj Associates
incurred approximately $1,167,000 and $149,000 of costs for these services
from Trump's Castle and Trump Plaza, respectively. In addition, Taj
Associates charged $235,000 and $361,000 to Trump's Castle and Trump Plaza,
respectively, for similar services. During 1995, Taj Associates incurred
approximately $1,072,000 and $445,000 of costs for these services from
Trump's Castle and Trump Plaza, respectively. In addition, Taj Associates
charged $113,000 and $188,000 to Trump's Castle and Trump Plaza,
respectively, for similar services.
(4) OTHER CURRENT LIABILITIES
The components of other current liabilities at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Payroll and related costs.................................... $12,632 $13,533
Self-insurance reserves...................................... 6,800 5,697
Advertising/Marketing costs.................................. 3,242 1,621
Advance deposits............................................. 3,022 1,236
Unredeemed chip liability.................................... 2,725 3,148
Other........................................................ 8,638 9,975
------- -------
$37,059 $35,210
======= =======
</TABLE>
Self insurance reserves represent the estimated amounts of uninsured claims
settlements related to employee health medical costs, workmen's compensation
and other legal proceedings in the normal course of business. These reserves
are established by management based upon a specific review of open claims as of
the balance sheet date as well as historical claims settlement experience.
Actual results may differ from those reserve amounts.
(5) COMMITMENTS AND CONTINGENCIES
LEASES AND EMPLOYMENT AGREEMENTS
Taj Associates has entered into employment agreements with certain key
employees and lease agreements for land, office and warehouse space under
noncancelable operating leases expiring at various dates through 2023. At
December 31, 1995, minimum commitments under these arrangements are as follows:
<TABLE>
<S> <C>
1996............................................................. $ 8,639,000
1997............................................................. $ 5,867,000
1998............................................................. $ 3,534,000
1999............................................................. $ 2,865,000
2000............................................................. $ 2,725,000
Thereafter....................................................... $62,675,000
</TABLE>
Rent expense was approximately $4,520,000, $5,027,000 and $4,546,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.
F-31
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Taj Associates leases the pier extending from the Taj Mahal 1,000 feet into
the Atlantic Ocean (the "Steel Pier") from Realty Corp. A condition imposed on
Taj Associates' Coastal Area Facilities Review Act ("CAFRA") permit (which, in
turn, is a condition of Taj Associates' casino license) initially required that
Taj Associates begin construction of certain improvements on the Steel Pier by
October 1992, which improvements were to be completed within 18 months of
commencement. Taj Associates initially proposed a concept to improve the Steel
Pier, the estimated cost of which was $30,000,000. Such concept was approved by
the New Jersey Department of Environmental Protection, the agency which
administers CAFRA. In March 1993, Taj Associates obtained a modification of its
CAFRA permit providing for the extension of the required commencement and
completion dates of the improvements to the Steel Pier for one year based upon
an interim use of the Steel Pier for an amusement park. In 1994, 1995 and
February 1996, Taj Associates received an additional one-year extension (most
recently through October 1996) of the required commencement and completion
dates of the improvements of the Steel Pier based upon the same interim use of
the Steel Pier as an amusement park.
EMPLOYEE BENEFIT PLAN
Effective January 1, 1989, Taj Associates established the Taj Mahal
Retirement Savings Plan ("the Benefit Plan") for its employees over 21 years of
age who are not covered by a collective bargaining agreement. The Benefit Plan
is structured to qualify for favorable tax treatment under Section 401(k) of
the Internal Revenue Code and allows eligible participants to contribute up to
15% of their salary (certain limits apply, as defined) to the Benefit Plan with
a matching Partnership contribution of 50% of the first 4% of such employee
salary contribution. The funds are invested by a Benefit Plan trustee. Taj
Associates' contributions for the years ended December 31, 1993, 1994 and 1995
were $870,000, $938,000 and $1,069,000, respectively.
CASINO LICENSE RENEWAL
Taj Funding and Taj Associates are subject to regulation and licensing by the
CCC. Taj Associates' casino license must be renewed periodically, is not
transferable, is dependent upon the financial stability of Taj Associates and
can be revoked at anytime. Upon revocation, suspension for more than 120 days,
or failure to renew the casino license due to Taj Associates' financial
condition or for any other reason, the New Jersey Casino Control Act (the
"Casino Control Act") provides that the CCC may appoint a conservator to take
possession of and title to the hotel and casino's business and property,
subject to all valid liens, claims and encumbrances. On June 22, 1995, the CCC
extended Taj Associates' casino license for four years through March 31, 1999.
LEGAL PROCEEDINGS
Taj Associates, its partners, certain of its employees and Taj Funding are
involved in various legal proceedings incurred in the normal course of
business. In the opinion of management of Taj Associates, the expected
disposition of these proceedings would not have a material adverse affect on
Taj Associates or Taj Funding's financial condition or results of operations.
FEDERAL INCOME TAX EXAMINATIONS
Taj Associates is currently involved in an examination with the Internal
Revenue Service ("IRS") concerning Taj Associates' federal partnership income
tax returns for the tax years 1989 through 1991. While any adjustment which
results from this examination could affect Taj Associates' state income tax
return, Taj Associates does not believe the resolution of the matter will have
a material adverse effect on its financial condition or results of operations.
F-32
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVESTMENT OBLIGATION
The Casino Control Act requires Taj Associates to make qualified investments,
as defined, in New Jersey, or pay an investment alternative tax to the New
Jersey Casino Reinvestment Development Authority ("CRDA"). Commencing in 1991,
and for a period of thirty years thereafter, Taj Associates must either obtain
investment tax credits, as defined, 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. Investment tax credits may be obtained by making
qualified investments, by depositing funds which may be converted to bonds by
the CRDA or by donating previously deposited funds in exchange for future
credits against tax liability. Taj Associates intends to satisfy its investment
obligation primarily by depositing funds and donations of funds deposited.
During 1994, Taj Associates contributed $9,500,000 of previous CRDA deposits,
the carrying value of which was $4,750,000. Of the carrying value, $3,250,000
will become a leasehold improvement upon completion of the improvements during
1995, and $1,500,000 was a donation of previously deposited funds, which became
a credit utilized in 1994 as a reduction of current year obligations. The
deposits and bonds traditionally bear interest at below-market interest rates;
accordingly, Taj Associates has reduced its carrying value of the deposits by
50% and charged operations approximately $2,764,000, $2,134,000 and $3,090,000
in 1993, 1994 and 1995, respectively. Taj Associates is required to satisfy its
obligations to the CRDA through deposits on a quarterly basis. Taj Associates
periodically reviews the carrying value of these deposits and investments in
accordance with its policies for all long-lived assets as described in Note 1.
(6) TAJ ASSOCIATES DISTRIBUTION
Taj Associates is obligated to reimburse Taj Holding for its operating
expenses which consist of directors and officers liability insurance, board of
director fees and expenses, and administrative expenses. Total expenses for the
years ended December 31, 1993, 1994 and 1995 approximated $1,733,000,
$2,171,000 and $1,554,000, respectively.
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of Taj Funding and
Taj Associates approximates fair value, as follows: (a) cash and cash
equivalents and accrued interest payable are based on the short-term nature of
the financial instruments; and (b) CRDA deposits are based on the valuation
allowances to give effect to the below market interest rates (See Note 5).
The estimated fair values of the other financial instruments are as follows
(Note 2):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
11.35% Mortgage Bonds (a)
Carrying Amount......................................... $611,533 $649,139
Fair Value.............................................. 512,638 750,983
</TABLE>
- ---------------------
(a) The fair value of the Taj Bonds is based on quoted market prices as of
December 31, 1994 and 1995.
There are no quoted market prices for the NatWest Loan and other debt and a
reasonable estimate of their value could not be made without incurring
excessive costs.
See Note 9 regarding the proposed redemption of these borrowings.
F-33
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) FINANCIAL INFORMATION--TAJ FUNDING
Financial information relating to Taj Funding as of and for the years ended
December 31, 1994 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Total Assets (including First Mortgage Note Receivable of
$765,130 and $780,242 and related interest receivable)...... $783,562 $799,037
======== ========
Total Liabilities and Capital (including Taj Bonds payable of
$765,130 and $780,242 and related interest payable)......... $783,562 $799,037
======== ========
Interest Income.............................................. $ 86,322 $ 87,914
======== ========
Interest Expense............................................. $ 86,322 $ 87,914
======== ========
Net Income................................................... $ -- $ --
======== ========
</TABLE>
(9) PROPOSED RECAPITALIZATION
On January 8, 1996, Trump Hotels & Casino Resorts, Inc. ("THCR"), 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 (the "Taj
Holding Class A Common Stock") (other than Dissenting Shares (as defined in the
Prospectus) will be converted into the right to receive, at each 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) and the consummation of the offering by Trump Atlantic
City Associates ("Trump Atlantic City") and its wholly owned finance subsidiary
Trump Atlantic City Funding, Inc. of up to $1,100,000 aggregate principal
amount of first mortgage notes, 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
Taj Bonds, (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 10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding,
Inc., (v) satisfy the indebtedness of Taj Associates under the NatWest Loan,
(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 Hotel and Casino
("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 and (ix) pay
related fees and expenses and provide working capital;
(b) the contribution by Trump to Trump Atlantic City of all of his direct and
indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to Trump Atlantic City of all its indirect
ownership interests in Taj Associates acquired in the Merger.
The prospective transaction is subject to a number of conditions, including
stockholder approval. In addition, there are a number of risks that should be
considered, including, (1) the high leverage and fixed
F-34
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
charges of THCR; (ii) the risk to refinancing and repayment of indebtedness and
the need for additional financing; (iii) the restrictions imposed on certain
activities by certain debt instruments; (iv) the recent results of Trump Plaza
and the Taj Mahal; and (v) risks associated with the riverboat casino at
Buffington Harbor, Indiana, to be operated by a subsidiary of THCR (the
"Indiana Riverboat") and the expansions at Trump Plaza and the Taj Mahal. There
can be no assurance that the expansions at Trump Plaza or the Taj Mahal will be
completed or that the Indiana Riverboat or any other gaming venture will open
or that any of THCR's or the Taj Mahal's operations will be successful. See
"Risk Factors" included elsewhere in this Prospectus for a discussion of these
and other factors.
(10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1993
- ----
Net Revenues............................. $110,382 $126,364 $141,597 $120,568
Income from Operations................... 13,014 23,181 30,812 17,451
Net Income (Loss)........................ (13,003) (3,192) 4,212 (10,556)
1994
- ----
Net Revenues............................. $111,297 $127,254 $147,987 $130,644
Income from Operations................... 7,902 14,980 31,308 22,444
Net Income (Loss)........................ (20,761) (13,847) 3,286 (5,336)
1995
- ----
Net Revenues............................. $117,595 $141,893 $157,808 $136,452
Income from Operations................... 10,298 26,986 35,120 17,486
Net Income (Loss)........................ (18,511) (1,642) 6,445 (12,915)
</TABLE>
F-35
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
INDEX TO FORECASTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction............................................................ P-2
Statement of Operations
Trump Taj Mahal Associates............................................ P-4
Trump Plaza Associates................................................ P-9
Trump Atlantic City Associates and Subsidiaries....................... P-14
</TABLE>
P-1
<PAGE>
FORECASTED FINANCIAL INFORMATION
INTRODUCTION
General
The "Financial Forecast" represents, to the best of management's knowledge
and belief, the expected results of operations for Plaza Associates, Taj
Associates and Trump Atlantic City for the fiscal years ending December 31,
1996 and December 31, 1997. The Financial Forecast, which consists of forward
looking statements, was prepared by management of Trump Atlantic City and is
qualified by, and subject to, the assumptions set forth below and the other
information contained in this Prospectus. These assumptions are inherently
uncertain and, though considered reasonable by Trump Atlantic City, are
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 Trump Atlantic City.
Accordingly, there can be no assurance that the Financial Forecast will be
realized or that actual results will not be significantly higher or lower.
Trump Atlantic City was the sole preparer of the Financial Forecast, which was
prepared in accordance with standards established by the American Institute of
Certified Public Accountants, except that it omits the effects of non-
operating items, income taxes, extraordinary items and the calculation of net
income. The Financial Forecast has not been audited by, examined by, compiled
by or subjected to agreed-upon procedures by independent accountants, and no
third-party (including the Underwriters) has independently verified or
reviewed the Financial Forecast. Prospective investors in the First Mortgage
Notes should consider this fact in evaluating the information contained in
this Prospectus.
The assumptions disclosed herein are those that Trump Atlantic City believes
are significant to the Financial Forecast and reflects management's subjective
judgment as of the date hereof (which is subject to change). However, not all
assumptions used in the preparation of the Financial Forecast have been set
forth. There will be differences between the values used by management in
deriving the key assumptions and the actual results, causing differences
between forecasted and actual results. Events and circumstances usually do not
occur as expected, and the differences between actual and expected results may
be material. In addition, as disclosed elsewhere in this Prospectus under
"Risk Factors," the business and operations of Trump Atlantic City are subject
to substantial risks which increase the uncertainty inherent in the Financial
Forecast. Many of the factors disclosed under "Risk Factors" in this
Prospectus could cause actual results to differ materially from those
expressed in the Financial Forecast. Trump Atlantic City does not intend to
update or otherwise revise the Financial Forecast to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The inclusion of the Financial Forecast herein should
not be regarded as a representation by Trump Atlantic City or any other person
(including the Underwriters) that the Financial Forecast will be achieved. In
light of the foregoing, prospective investors in the First Mortgage Notes are
cautioned not to place undue reliance on the Financial Forecast.
The following Financial Forecast presents the stand-alone projections for
the 1996 and 1997 fiscal years for each of Taj Associates and Plaza Associates
without giving effect to the Merger Transaction. For comparative purposes,
historical results of operations for Taj Associates and Plaza Associates have
also been included. In addition, the Financial Forecast also presents
forecasts for the 1996 and 1997 fiscal years for Trump Atlantic City, which
combines the forecasted results of operations for Taj Associates and Plaza
Associates and gives effect to the Merger Transaction.
Assumptions Regarding the Atlantic City Market
The Financial Forecast assumes that the Atlantic City market will continue
to experience increased gaming revenues and visitor volume. Through 1995,
total Atlantic City gaming revenues have grown at a ten-year compound annual
growth rate of 5.7%. Moreover, total slot win and table game drop increased
12.0% and 4.1%, respectively, in 1995 versus 1994. In addition, through 1995
the number of guests visiting Atlantic City has grown at a ten-year compound
annual growth rate of %. In part because the volume of hotel rooms in
Atlantic City has remained relatively constant over the most recent [ ]
years, occupancy rates have increased from [83%] in to over [90%] in 1995.
P-2
<PAGE>
The Financial Forecast assumes that total Atlantic City slot win and table
drop will increase annually at 6.0% and 2.0%, respectively, during the
forecasted period. Management believes that these assumptions are reasonable
in light of, among other things, (i) the historic growth in the Atlantic City
market, (ii) infrastructure improvements being undertaken in Atlantic City
including the new Atlantic City Convention Center, tourist corridor and
airport expansion and (iii) increased gaming space and hotel rooms on account
of the Trump Plaza Expansion, Taj Mahal Expansion and additions by other
casino/hotel operators. These proposed improvement and expansion plans are,
however, subject to significant risks and uncertainties many of which are
beyond management's control. In the case of the Taj Mahal Expansion, which is
expected to be funded principally out of cash from operations, any shortfall
in operating cash flow during an early portion of the forecasted period may
result in a delayed completion date or in revised expansion plans, which would
adversely affect operating results in later portions of the forecasted period
and beyond. See "Risk Factors." The Financial Forecast also assumes that
overall economic conditions in the United States in general and the Northeast
in particular will not decline. Economic conditions and weather conditions
have in the past affected the operating results of Taj Associates and Plaza
Associates. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Moreover, forecasting the number of gaming
customers and their gaming propensity, with respect to the Atlantic City
market in general and to the Taj Mahal and Trump Plaza in particular, is
inherently difficult, as is the ability to forecast amounts to be wagered and
won. These and other factors and conditions will likely affect Taj Associates
and Plaza Associates operating results for the periods covered by the
Financial Forecast in ways that management cannot predict.
P-3
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
FORECASTED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
COMPARATIVE HISTORICAL YEAR FORECASTED YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------- -------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gaming..................... $ 442,064 $ 461,622 $ 501,378 $ 523,018 $ 598,000
Rooms...................... 40,682 41,815 43,309 44,733 48,100
Food and beverage.......... 55,953 58,029 57,195 58,289 68,200
Other...................... 16,656 17,894 15,864 18,209 22,000
--------- --------- --------- --------- ---------
Gross revenues........... 555,355 579,360 617,746 644,249 736,300
Less: Promotional
allowances................ 56,444 62,178 63,998 62,635 71,700
--------- --------- --------- --------- ---------
Net revenues............... 498,911 517,182 553,748 581,614 664,600
Costs and Expenses:
Gaming..................... 237,566 260,472 283,786 287,700 316,687
Rooms...................... 15,525 15,662 15,230 15,472 17,031
Food and beverage.......... 25,080 25,035 24,612 25,090 27,618
General and administra-
tive...................... 99,424 99,629 96,843 97,136 106,390
Pre-opening expense........ 0 0 0 0 0
Depreciation and amortiza-
tion...................... 36,858 39,750 43,387 48,400 41,300
Other...................... 0 0 0 0 0
--------- --------- --------- --------- ---------
414,453 440,548 463,858 473,798 509,026
--------- --------- --------- --------- ---------
Income from operations..... $ 84,458 $ 76,634 $ 89,890 $ 107,816 $ 155,574
========= ========= ========= ========= =========
OTHER DATA:
EBITDA(a).................... $ 128,371 $ 127,796 $ 140,835 $ 163,446 $ 204,299
Capital expenditures
Maintenance(b)............. 16,752 23,030 26,498 28,600 25,000
Expansion.................. 0 0 0 57,400 122,200
</TABLE>
- ---------------------
(a) EBITDA represents income from operations before depreciation,
amortization, restructuring costs, the non-cash write-down of CRDA
investments and a non-recurring cost of a litigation settlement in 1994,
lease payments on the Specified Parcels and payments under the Taj
Services Agreement.
(b) Represents maintenance capital expenditures of a routine or ongoing nature
as well as more substantial improvements to existing facilities.
See accompanying Summary of Significant Forecast Assumptions and Accounting
Policies.
P-4
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS AND ACCOUNTING POLICIES
YEARS ENDING DECEMBER 31, 1996 AND 1997
The Financial Forecast presents, to the best of management's knowledge and
belief, Taj Associates expected statement of operations data for the forecast
period. Accordingly, the forecast reflects management's judgment as of the
date of this Prospectus of the expected conditions and its expected course of
action. The assumptions disclosed herein are those that management believes
are significant to the forecast. There will usually be differences between
forecasted and actual results, because events and circumstances frequently do
not occur as expected, and these differences may be material. The comparative
historical information for 1993, 1994 and 1995 is extracted from Taj
Associates' financial statements for those years. Those financial statements,
the information disclosed under "Risk Factors" and the balance of this
Prospectus should be read carefully in their entirety for additional
information.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See Note (1) to Taj Associates' audited financial statements.
(2) GAMING REVENUES
Gaming revenues (other than poker/keno/simulcast revenues) for the Taj Mahal
are forecasted based on estimated Market Share, which is defined as the table
drop or slot win, as applicable, for the Taj Mahal divided by the
corresponding estimated total table drop or slot win, as applicable, for the
Atlantic City market generally. Poker/keno/simulcast revenues are forecasted
based on an assumed annual growth rate over the prior year's revenues.
In addition, gaming revenues in 1997 for the Taj Mahal assume the opening of
a new 60,000 square foot casino in connection with the Taj Mahal Expansion.
For purposes of the Financial Forecast, the new casino is assumed to have
approximately 2,500 slot machines and is assumed to open at the beginning of
the 3rd quarter of 1997.
P-5
<PAGE>
The table below presents historical and forecasted slot machine and table
game statistics for the Atlantic City market and the Taj Mahal:
<TABLE>
<CAPTION>
HISTORICAL FORECASTED
----------------------------------- ----------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
TABLE GAMES: (DOLLARS IN THOUSANDS)
Atlantic City table
games drop(a)........ $6,835,572 $6,832,517 $7,110,612 $7,252,824 $7,397,881
Atlantic City table
games drop growth %.. (3.1)% 0.0% 4.1% 2.0% 2.0%
Taj Mahal table games
drop(a).............. $1,062,042 $1,125,029 $1,192,200 $1,211,976 $1,234,887
Taj Mahal table games
market share %(b).... 15.5% 16.5% 16.8% 16.7% 16.7%
Taj Mahal table games
win.................. $ 173,432 $ 184,774 $ 201,817 $ 202,439 $ 206,226
Taj Mahal table
units................ 163 159 150 169 169
Taj mahal table games
fair share %(c)...... 14.5% 14.2% 13.3% 14.2% 14.0%
Taj Mahal table games
efficiency %(d)...... 106.9% 116.2% 126.3% 118.0% 118.8%
Taj Mahal table reve-
nue per unit per day
(actual dollars)..... $ 2,915 $ 3,184 $ 3,686 $ 3,281 $ 3,343
SLOT MACHINES:
Atlantic City slot
win(e)............... $2,214,638 $2,297,280 $2,572,219 $2,727,081 $2,890,706
Atlantic City slot win
growth %............. 4.8% 3.7% 12.0% 6.0% 6.0%
Taj Mahal slot
win(e)............... $ 264,504 $ 259,114 $ 285,248 $ 303,200 $ 373,925
Taj Mahal slot market
share %(f)........... 11.9% 11.3% 11.1% 11.1% 12.9%
Taj Mahal slot units.. 3,146 3,342 3,514 3,650 5,050
Taj Mahal slot fair
share %(c)........... 13.1% 12.6% 12.3% 11.4% 14.5%
Taj Mahal slot effi-
ciency %(d).......... 90.8% 89.7% 90.2% 97.6% 89.1%
Taj Mahal slot win per
unit per day (actual
dollars)(e).......... $ 230 $ 213 $ 222 $ 228 $ 203
</TABLE>
- ---------------------
(a) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(b) Represents the Taj Mahal's table game drop expressed as a percentage of
total Atlantic City table drop.
(c) Represents the percentage of the total number of table games or slot
machines, as applicable, at the Taj Mahal to the total number of table
games or slot machines, as applicable, in the total Atlantic City market.
(d) Represents the ratio of the Taj Mahal's market share to its fair share.
(e) Slot revenue is on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
(f) Represents the Taj Mahal's slot win expressed as a percentage of total
Atlantic City slot win.
Table Games. The Taj Mahal's table games Efficiency has historically been
above 100%, which management believes to be due primarily to the Taj Mahal's
reputation for glamour and excitement, its first-class facilities, the breadth
and variety of its table games and its success in attracting international
high-end table game players. In December 1995, the Taj Mahal opened an Asian-
themed table game room with 16 table games including pai-gow tiles, pai-gow
poker and mini baccarat, games which typically have a higher hold percentage
than average.
The Financial Forecast assumes that the Taj Mahal's table games Market Share
will remain essentially flat in 1996 and 1997 (as compared to 1995) despite
the addition of the new Asian-themed table game area. These Market Share
assumptions result in a forecasted decrease in table games Efficiency from
126.1% in 1995 to 118.0% in 1996 and 118.8% in 1997.
Slot Machines. The Taj Mahal's slot machine Efficiency has historically been
approximately 90%. Recently, Management has started to place greater emphasis
on its slot business by implementing a number of new initiatives designed to
increase the Taj Mahal's slot machine Market Share and Efficiency. Management
has recently expanded the Taj Mahal's slot marketing program, including its
busing program and direct marketing program for high-end slot players. In an
effort to attract high-end slot players, the Taj Mahal is developing the
Sultan's Palace, a separate 5,900 square foot high-end slot lounge and private
club to be completed by the middle of 1996. In addition, the Taj Mahal is in
the process of completing a program designed to modernize its slot machine
inventory and signage. By April 1996, all of the Taj Mahal's slot inventory
will consist of new machines (i.e., machines replaced within the last 2 years)
all of which will have bill acceptors. Finally, it is assumed that in
connection with the Taj Mahal Expansion, a 60,000 square foot circus-themed
"slots only" casino will open in the third-quarter of 1997 with 2,500 slot
machines. Management believes that the circus theme will help draw additional
traffic to the new casino.
P-6
<PAGE>
The Financial Forecast assumes that slot win in the Atlantic City Market
grows at 6% per year. The Financial Forecast assumes that the Taj Mahal's
Market Share will remain constant in 1996 (as compared to 1995) at 11.1% and
increase to 12.9% in 1997 due to the increased number of slot machines added
when the circus casino opens early in the third quarter of 1997. These
assumptions translate into an increase in slot machine Efficiency from 90.2%
in 1995 to 97.6% in 1996, which, while management believes to be reasonable in
light of the new initiatives described above, is subject to significant
inherent uncertainty. In 1997, the Financial Forecast assumes that slot
machine Efficiency will be reduced to 89.1% because of the added slot machine
capacity from the circus casino. In deriving this Efficiency, Management has
assumed a win/unit/day figure of $100 (as compared to its 1995 win/unit/day of
$222 for all Taj Mahal Slot Machines) for the new slot machines in the circus
casino. The table below compares this win/unit/day assumption with historical
and forecasted figures for the Taj Mahal and the Atlantic City market
generally:
<TABLE>
<CAPTION>
HISTORICAL FORECASTED
-------------- -----------
1993 1994 1995 1996 1997
---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Taj Mahal existing casino slot win/unit/day......... $230 $212 $222 $ 228 $ 237
Circus Casino assumed slot win/unit/day............. -- -- -- -- 100
Atlantic City average slot/win/unit/day............. 253 243 247 233 228
</TABLE>
Poker/Keno/Simulcast. The Taj Mahal had poker/keno/simulcast gross revenues
of $20.4 million in 1995. The Financial Forecast assumes that
poker/keno/simulcast revenues will grow approximately 5% annually during the
forecasted period.
(3) OTHER REVENUES
Rooms. In 1995, the Taj Mahal's occupancy rate was 91.2% and the average
daily room rate was approximately $104. The Financial Forecast assumes that
occupancy rates will be approximately 92% and 93.5% in 1996 and 1997,
respectively, and the average daily room rate will increase by 2.0-4.5%
annually. However, no assurance may be made that such rate increases will be
achieved.
Food and Beverage. Food and beverage revenues represented 11.4% of gross
gaming revenues in 1995. The Financial Forecast assumes that food and beverage
revenues will remain essentially the same percentage of gross gaming revenues
for the forecasted period.
Other. Other revenues consist primarily of revenues from entertainment
attractions, parking, retail shops, rentals and restaurant rents. In 1995,
other revenues were approximately $15.9 million and are projected to grow to
$18.2 million in 1996 and $22.0 million in 1997. These assumed increases are
due primarily to rental revenues from new tenants, including the addition of
three nationally recognized restaurants:--Rainforest Cafe, All Star Cafe and
Hard Rock Cafe--and improved merchandising at certain of the Taj Mahal
operated gift and other retail shops.
Promotional Allowances. In 1995, promotional allowances represented
approximately 12.8% of gross gaming revenues. The Financial Forecast assumes
that promotional allowances will decrease to 12.0% of gross gaming revenues in
1996 and 1997 due primarily to (i) an increasing slot machine mix which
management assumes to cause a reduction in promotional allowances per dollar
of gaming revenue and (ii) a decrease in the mix of projected Taj Mahal-
sponsored (versus outside promoter-sponsored) entertainment events.
(4) OPERATING COSTS AND EXPENSES
Management forecasted operating expenses, including those allocated to
casino, hotel and food and beverage operations, primarily based on the
historical operating expenses of the Taj Mahal as well as estimated increases
in operating expenses due to the Taj Mahal Expansion. From 1993 to 1995, the
Taj Mahal had EBITDA margins (i.e., EBITDA as a percentage of net revenues) of
between 24.7-25.7%. The Financial Forecast assumes
P-7
<PAGE>
that EBITDA margins will improve during the forecasted period for a number of
reasons, including the following:
. Improvements and/or reductions in certain coin and table game coupon
programs are assumed to be made. Management believes that certain of
these programs could be reduced without materially affecting the Taj
Mahal's revenues, thereby increasing EBITDA margins in the forecasted
period;
. The number of slot machines is assumed to increase as a result of the
circus casino and the addition of the Sultan's Lounge, which is assumed
to make slot machine revenues a bigger proportion of gross gaming
revenues than in the historical periods. Slot machines are assumed to
generate higher contribution margins than table games due to the lower
level of labor required to operate slot machines as well as lower
promotional expenses;
. Management has assumed that it will achieve certain efficiencies by not
having to replicate certain management and administrative functions and
departments (such as surveillance, security, accounting, reservations
and marketing) at the hotel and gaming facilities comprising the Taj
Mahal Expansion, given the existing management and administrative
infrastructure at the Taj Mahal; and
. Beginning in 1997, the Taj Mahal is assumed to receive certain rental
revenues (without any associated operating expense) from the addition of
the Hard Rock Cafe, All Star Cafe and Rainforest Cafe, thereby
increasing EBITDA margins.
(5) DEPRECIATION AND AMORTIZATION
Depreciation and amortization is expected to increase from $43.3 million in
1995 to $48.4 million in 1996 due to increased capital expenditures on
replacement furniture, fixtures and equipment and the shorter lives associated
therewith. Depreciation and amortization is expected to decrease to $41.3
million in 1997 due to the expiration of the useful life of the original
furniture, fixtures and equipment purchased for the Taj Mahal in 1990 which
utilized an estimated useful life of seven years.
(6) CAPITAL EXPENDITURES
Management anticipates that routine maintenance and improvement capital
expenditures will be $28.6 million in 1996 and $25.0 million in 1997.
Maintenance capital expenditures are anticipated to be larger in 1996
primarily because of the Taj Mahal's program to update its hotel rooms and
slot machines and reconfigure its casino floor to accommodate the addition or
on Sultan's Palace. Capital expenditures for the Taj Mahal Expansion,
including for the circus casino and approximately 800 room hotel tower, are
expected to be $57.4 million and $122.2 million in 1996 and 1997,
respectively.
P-8
<PAGE>
TRUMP PLAZA ASSOCIATES
FORECASTED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
COMPARATIVE HISTORICAL YEAR FORECASTED YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------- -------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gaming................... $ 264,081 $ 261,451 $ 298,073 $ 408,209 $ 442,681
Rooms.................... 18,324 18,312 19,986 40,105 44,338
Food and beverage........ 41,941 40,149 44,602 69,726 76,668
Other.................... 8,938 8,408 9,594 12,737 13,751
--------- --------- --------- --------- ---------
Gross revenues......... 333,284 328,320 372,255 530,777 577,438
Less: Promotional allow-
ances................... 32,793 33,257 38,934 54,546 65,823
--------- --------- --------- --------- ---------
Net revenues........... 300,491 295,063 333,321 476,231 511,615
Costs and Expenses:
Gaming................... 136,895 139,540 164,839 229,997 243,475
Rooms.................... 2,831 2,715 2,263 6,226 6,651
Food and beverage........ 18,093 17,050 18,306 29,668 32,201
General and administra-
tive.................... 71,624 73,075 68,550 96,667 104,282
Pre-opening expense...... 0 0 0 5,200 0
Depreciation and amorti-
zation.................. 17,554 15,653 16,213 23,018 24,970
Other.................... 3,854 3,615 3,363 5,029 5,280
--------- --------- --------- --------- ---------
250,851 251,648 273,534 395,805 416,858
--------- --------- --------- --------- ---------
Income from operations..... $ 49,640 $ 43,415 $ 59,787 $ 80,426 $ 94,757
========= ========= ========= ========= =========
OTHER DATA:
EBITDA(a).................. $ 68,241 $ 60,524 $ 75,319 $ 109,934 $ 121,569
Capital expenditures
Maintenance(b)........... 7,303 11,746 11,207 20,000 20,000
Expansion................ $ 2,749 $ 8,743 $ 98,549 $ 74,084 $ 0
</TABLE>
- ---------------------
(a) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, restructuring costs, the non-cash writedown of
CRDA investments and preopening expenses.
(b) Represents maintenance capital expenditures of a routine or ongoing nature
as well as more substantial improvements to existing facilities.
See accompanying Summary of Significant Forecast Assumptions and Accounting
Policies.
P-9
<PAGE>
TRUMP PLAZA ASSOCIATES
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES
YEARS ENDING DECEMBER 31, 1996 AND 1997
The Financial Forecast presents, to the best of Management's knowledge and
belief, Trump Plaza Associates' expected statement of operations data for the
forecast period. Accordingly, the forecast reflects Management's judgment as
of the date of this Prospectus of the expected conditions and its expected
course of action. The assumptions disclosed herein are those that Management
believes are significant to the forecast. There will usually be differences
between forecasted and actual results, because events and circumstances
frequently do not occur as expected, and these differences may be material.
The comparative historical information for 1993, 1994 and 1995 is extracted
from Trump Plaza Associates' financial statements for those years. Those
financial statements, the information disclosed under "Risk Factors" and the
balance of this Prospectus should be read carefully in their entirety for
additional information.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See Note (2) to THCR Atlantic City's audited financial statements.
(2) GAMING REVENUES
Gaming revenues for Trump Plaza are forecasted based on an estimated Market
Share, which is defined as the table drop or slot win, as applicable, for
Trump Plaza divided by the corresponding estimated total table drop or slot
win, as applicable, for the Atlantic City market generally.
Gaming revenues for Trump Plaza in 1996 and 1997 assume the opening of Trump
World's Fair in April 1996 and reflect the opening of the casino at Trump
Plaza East in the middle of the first quarter of 1996.
P-10
<PAGE>
The table below presents historical and forecasted slot machine and table
game statistics for the Atlantic City market and Trump Plaza:
<TABLE>
<CAPTION>
HISTORICAL FORECASTED
----------------------------------- ----------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
TABLE GAMES:
Atlantic City Table
Games Drop(a)......... $6,835,572 $6,832,517 $7,110,612 $7,252,824 $7,397,881
Atlantic City Table
Drop Games Growth %... (3.1)% 0.0% 4.1% 2.0% 2.0%
Plaza Table Games
Drop(a)............... $ 626,621 $ 599,881 $ 626,832 $ 798,854 $ 853,897
Plaza Table Games Mar-
ket Share %(b)........ 9.2% 8.8% 8.8% 11.0% 11.5%
Plaza Table Games Win.. $ 93,392 $ 92,770 $ 96,518 $ 123,822 $ 132,354
Plaza Table Units...... 87 89 97 132 141
Plaza Table Games Fair
Share %(c)............ 7.8% 8.0% 8.6% 11.1% 11.7%
Plaza Table Games Effi-
ciency %(d)........... 118.0% 110.6% 102.5% 99.5% 98.5%
Plaza Table Revenue Per
Unit Per Day (actual
dollars).............. $ 2,940 $ 2,855 $ 2,726 $ 2,570 $ 2,572
SLOT MACHINES:
Atlantic City Slot
Win(a)................ $2,214,638 $2,297,280 $2,572,219 $2,727,081 $2,890,706
Atlantic City Slot Win
Growth %.............. -- 3.7% 12.0% 6.0% 6.0%
Plaza Slot Win(e)...... $ 173,215 $ 170,316 $ 204,230 $ 289,265 $ 314,112
Plaza Slot Market Share
%..................... 7.8% 7.4% 7.9% 10.6% 10.9%
Plaza Slot Units....... 1,812 2,076 2,339 3,876 4,308
Plaza Slot Fair Share
%(c).................. 7.6% 8.0% 8.2% 12.1% 12.4%
Plaza Slot Efficiency
%(d).................. 103.1% 92.5% 96.7% 87.7% 87.8%
Plaza Slot Win Per Unit
Per Day (actual
dollars)(e)........... $ 262 $ 225 $ 239 $ 204 $ 200
</TABLE>
- ---------------------
(a) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(b) Represents Trump Plaza's table game drop expressed as a percentage of
total Atlantic City table drop.
(c) Represents the percentage of the total number of table games or slot
machines, as applicable, at Trump Plaza to the total number of table games
or slot machines, as applicable, in the total Atlantic City market.
(d) Represents the ratio of Trump Plaza's market share to its fair share.
(e) Slot revenue is on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
(f) Represents Trump Plaza's slot win expressed as a percentage of total
Atlantic City slot win.
Table Games. Trump Plaza's table game efficiency has historically been well
over 100% which management believes to be due primarily to its success in
attracting high-end table game players. In 1995, Trump Plaza's table game
efficiency was 102.5%, which was lower than in previous years because of a
continued deemphasis on "high roller" patrons from South America and the Far
East. Management has decided to reduce its marketing efforts to attract such
players because of the high costs associated with attracting such players and
the volatility of such players' impact on earnings.
The Financial Forecast assumes that Trump Plaza's market share will grow
from 8.8% in 1995 (and 1994) to 11.0% in 1996 and 11.5% in 1997. These Market
Share assumptions result in a table game Efficiency of 99.5% in 1996 and 98.5%
in 1997. Management believes that these market share and efficiency forecasts
are reasonable in light of historical results and the assumption that Trump
Plaza East and Trump World's Fair will increase Trump Plaza's table game
positions by approximately 45%. In addition, Trump Plaza East and Trump
World's Fair will increase Trump Plaza's hotel room inventory by over 150%
(849 additional rooms). Management believes that these additional hotel rooms
will serve as an important factor for increasing Trump Plaza's casino
revenues, as management assumes these additional rooms will enable Trump Plaza
to attract profitable weekend drive-in patrons as well as to host additional
and larger conventions. As an illustration of the importance of additional
hotel rooms, Trump Plaza was the only casino in Atlantic City to post a
revenue increase for the month of January 1996 versus January 1995 despite
severe weather conditions, which was due in part to the addition of 177 rooms
at Trump Plaza East that opened in late 1995.
Slot Machines. Trump Plaza's slot machine efficiency grew from 92.5% in 1994
to 96.7% in 1995. Management has attributed this improved slot machine
efficiency primarily to new marketing initiatives designed to attract high-end
slot players and the introduction of newer more efficient slot machines and
bill acceptors on slot machines.
P-11
<PAGE>
The Financial Forecast assumes that Trump Plaza's slot machine market share
will increase from 7.9% in 1995 to 10.6% in 1996 and 10.9% in 1997. The
Financial Forecast assumes that slot win in the Atlantic City Market grows at
6% per year. These market share assumptions result in a slot machine
efficiency of 87.7% in 1996 and 87.8% in 1997, substantially lower than Trump
Plaza's historical slot machine efficiency, due to the assumed increased
number of slot machines as a result of the aforementioned openings of Trump
Plaza East and Trump World's Fair.
(3) OTHER REVENUES
Rooms. In 1995, Trump Plaza's occupancy rate was 89.2% and the average daily
room rate was approximately $104. The Financial Forecast assumes that the
occupancy rate for both years of the forecasted period will be 89.9% and the
average daily room rate will be approximately $97. Management believes that
the projected occupancy rates are reasonable despite the substantial increase
in Trump Plaza's room base because of the high and increasing historical
occupancy rates in Atlantic City generally and at Trump Plaza specifically. In
addition, management believes that the additional room base will enable Trump
Plaza to better attract convention and tour business which, it is anticipated,
will increase occupancy rates during non-peak times. Management believes that
the average daily room rates, however, will decline somewhat primarily because
Trump World's Fair will be targeted to the middle market gaming patron and
contains proportionately fewer suites than the existing Trump Plaza facility.
Although the occupancy rate and average daily room rate assumptions are
identical for 1996 and 1997, overall room revenues are projected to increase
in 1997 due to an increase in available room days because of the assumed full
year of operations at Trump Plaza East and Trump World's Fair.
Food and Beverage. Food and beverage revenues represented 15.0% of gross
gaming revenues in 1995. The Financial Forecast assumes that food and beverage
revenues will represent approximately 17.1-17.3% of gross gaming revenues in
the forecasted period. The resulting increase reflects management's
assumptions regarding its planned marketing strategy at Trump World's Fair
which will focus on providing complimentary food and beverage to attract
middle market patrons.
Other. Other revenues consists primarily of revenues from entertainment
attractions, parking, retail shops and rentals. In 1995, other revenues were
approximately $9.6 million and are projected to grow approximately 33% in 1996
and 8% in 1997 primarily due to increased entertainment attractions and retail
shops at Trump World's Fair.
Promotional Allowances. Promotional allowances represented 13.1% of gross
gaming revenues in 1995. Historically, management has been constrained in its
ability to provide complimentary hotel rooms to weekend drive-in patrons at
Trump Plaza because of a lack of available hotel rooms. The Financial Forecast
assumes that promotional allowances will increase to 13.4% and 14.9% of gross
gaming revenues in 1996 and 1997, respectively. This expected increase is
mostly attributable to the large increase in Trump Plaza's hotel room
inventory which will enable Trump Plaza to attract more weekend drive-in
customers by offering complimentary hotel rooms to casino patrons.
(4) OTHER COSTS AND EXPENSES
Management forecasted operating expenses, including those allocated to
casino, hotel and food and beverage operations, primarily based on the
historical operating expenses of Trump Plaza as well as estimated
increases in operating expenses due to Trump Plaza East and Trump World's
Fair. From 1993 to 1995, Trump Plaza had EBITDA margins (i.e., EBITDA as a
percentage of net revenues) of between 20.5-22.7%. The Financial Forecast
assumes that Trump Plaza's EBITDA margin will improve during the forecasted
period. This forecasted margin improvement is attributable mostly to operating
efficiencies expected to be achieved by not having to replicate certain
management and administrative functions and departments (such as surveillance,
security, accounting, reservations and marketing) at Trump Plaza East and
Trump World's Fair because of the
P-12
<PAGE>
existing management and administrative infrastructure at Trump Plaza. For
instance, Trump Plaza currently has 3,700 employees and management intends to
hire only 1,500 additional employees for the Trump's World's Fair, whereas the
Trump's World's Fair represents a 150% increase in Trump Plaza's hotel room
inventory and 85% increase in casino square footage.
Management anticipates incurring approximately $5.2 million in one-time pre-
opening expenses in 1996 as a result of the opening of Trump World's Fair and
Trump Plaza East.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense is expected to increase from $16.2
million in 1995 to $23.0 million and $25.0 million in 1996 and 1997,
respectively. This increased depreciation and amortization is due to the
capital expenditures associated with the Trump Plaza Expansion.
CAPITAL EXPENDITURES
Management anticipates that maintenance capital expenditures will be
approximately $20 million in 1996 and $20 million in 1997. Maintenance capital
expenditures in 1996 include approximately $10 million room and other
improvements at Trump World's Fair. In addition, expansion capital
expenditures are assumed to be $74.1 million in 1996, representing the
remaining cost of Trump Plaza East and Trump World's Fair.
P-13
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONSOLIDATED FORECASTED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
FORECASTED
YEAR ENDED DECEMBER 31,
------------------------
1996 1997
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gaming............................................ $ 931,227 $ 1,040,681
Rooms............................................. 84,838 92,438
Food and beverage................................. 128,015 144,868
Other............................................. 30,946 35,751
----------- ------------
Gross revenues.................................. 1,175,026 1,313,738
Less: Promotional allowances........................ 117,181 137,523
----------- ------------
Net revenues.................................... 1,057,845 1,176,215
Costs and Expenses:
Gaming............................................ 517,697 560,162
Rooms............................................. 21,698 23,682
Food and beverage................................. 54,758 59,819
General and administrative........................ 177,508 185,527
Pre-opening expense............................... 5,200 0
Depreciation and amortization..................... 75,927 70,779
Other............................................. 5,029 5,280
----------- ------------
857,817 905,248
----------- ------------
Income From Operations.............................. $ 199,830 $ 270,769
=========== ============
OTHER DATA:
EBITDA(a)........................................... $ 285,650 $ 347,288
Capital expenditures
Maintenance(b).................................... 48,600 45,000
Expansion......................................... 131,484 122,200
</TABLE>
- ---------------------
(a) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, restructuring costs, the non-cash writedown of
CRDA investments and preopening expenses.
(b) Represents maintenance capital expenditures of a routine or ongoing nature
as well as more substantial improvements to existing facilities.
See accompanying Summary of Significant Forecast Assumptions and Accounting
Policies.
P-14
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS AND ACCOUNTING POLICIES
YEARS ENDING DECEMBER 31, 1996 AND 1997
The Forecasted Statement of Operations Data of Trump Atlantic City
consolidates the separate projected Statement of Operations Data of Trump
Plaza with that of the Taj Mahal and gives effect to the Merger Transaction as
outlined below. The separate stand-alone Statements of Operations of Trump
Plaza and the Taj Mahal do not reflect any adjustments related to or any
effects resulting from the Merger Transaction.
The adjustments to reflect the Merger Transaction are as follows:
Cost Savings. Management anticipates that Trump Atlantic City will achieve
$18.3 million in annual cost savings from combining certain operations of
Trump Plaza and the Taj Mahal. Because of the timing of the Merger
Transaction, Management anticipates that approximately one-half of these cost
savings can be achieved in 1996, with the full amount being realized in 1997.
Therefore the consolidated forecasted statements of operations for Trump
Atlantic City reflect a decrease in general and administrative costs of $9.15
million and $18.3 million in 1996 and 1997, respectively.
For an additional description of the anticipated cost savings, see
"Business--General".
Specified Parcels Lease. In connection with the Merger Transaction, Taj
Associates will purchase the Specified Parcels from Realty Corp., thereby
eliminating approximately $3.3 million in annual lease payments that have been
included in the historical and forecasted periods as general and
administrative expense on Taj Associates statement of operations. Therefore,
the consolidated forecasted statements of operations for Trump Atlantic City
reflect the elimination of this lease expense for the forecasted periods.
Taj Services Agreement. In connection with the Merger Transaction, the Taj
Services Agreement will be terminated. Taj Associates' forecasted statements
of operation include amounts that would have been paid pursuant to the Taj
Services Agreement which are forecasted to have been $1.3 million in 1996 and
$1.0 million in 1997 (less $575,000 which was paid annually by Trump to First
Fidelity to reduce the amount owed by Taj Associates under the lease for the
Specified Parcels). The consolidated forecasted statements of operations for
Trump Atlantic City reflect the elimination of this expense for the forecasted
periods.
Trump Plaza East Lease. In connection with the Merger Transaction, Trump
Plaza Associates will purchase Trump Plaza East for $28 million, thereby
eliminating approximately $3.1 million in lease expense that has been
classified as general and administrative expense on Trump Plaza Associates'
forecasted statements of operations. Therefore, the consolidated forecasted
statements of operations for Trump Atlantic City reflect the elimination of
this lease expense for the forecasted period.
Purchase Price Allocation. The Merger Transaction is accounted for as a
purchase transaction. THCR will push down the excess of the cost of acquiring
all of the direct and indirect equity interests in Taj Associates to Trump
Atlantic City. Trump Atlantic City has allocated these amounts based upon the
fair value of the assets acquired: $8.6 million to land and $164.7 million to
building. The amounts allocated to building are forecasted to be depreciated
over the remaining life of the building (35 years). The resulting additional
depreciation of $5.1 million annually has been included in the forecasted
consolidated statements of operations data.
P-15
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS, THE GUARANTORS, OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE FIRST MORTGAGE NOTES BY ANYONE IN ANY JU-
RISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 21
Use of Proceeds.......................................................... 33
Capitalization........................................................... 34
Selected Historical Combined Financial Information....................... 35
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 37
Unaudited Pro Forma Financial Information................................ 46
Business................................................................. 51
Regulatory Matters....................................................... 78
Management............................................................... 87
Certain Transactions..................................................... 105
Description of the First Mortgage Notes.................................. 107
Security Ownership of Certain Beneficial Owners and Management........... 137
Description of the Trump Atlantic City Partnership Agreement............. 138
Certain Federal Income Tax Considerations................................ 139
Underwriting............................................................. 141
Legal Matters............................................................ 142
Experts.................................................................. 142
Available Information.................................................... 142
Index to Financial Statements............................................ F-1
Financial Forecasted Information......................................... P-1
</TABLE>
----------------
Until , 1996 (90 days after the date hereof), all dealers effecting
transactions in the First Mortgage Notes, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as Underwriters
and with respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$1,100,000,000
(LOGO)
TRUMP ATLANTIC CITY ASSOCIATES
TRUMP ATLANTIC CITY FUNDING, INC.
% FIRST MORTGAGE NOTES DUE 2006
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT SECURITIES CORPORATION
SALOMON BROTHERS INC
APRIL , 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the First Mortgage Notes being registered, all of which will be paid by
Trump Atlantic City. All amounts are estimates except the registration fee and
the NASD filing fee.
<TABLE>
<S> <C>
Registration Fee................................................... $406,897
NASD Filing Fee.................................................... 30,500
Blue Sky Fees and Expenses......................................... *
Accounting Fees and Expenses....................................... *
Legal Fees and Expenses............................................ *
Printing and Engraving Fees and Expense............................ *
Miscellaneous...................................................... *
--------
Total............................................................ $ *
========
</TABLE>
- ---------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation may indemnify directors and officers against liabilities
and expenses they may incur in such capacities provided certain standards are
met, including good faith and the belief that the particular action is in or
not opposed to the best interests of the corporation.
TRUMP ATLANTIC CITY
Article IX of the Certificate of Incorporation of Plaza Holding Inc., the
managing general partner of Trump Atlantic City, provides that Plaza Holding
Inc. may indemnify any director, officer, employee or agent of Plaza Holding
Inc., or other person, to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law.
Article IX of the By-Laws of Plaza Holding Inc. provides that Plaza Holding
Inc. shall indemnify to the fullest extent permitted under and in accordance
with the laws of the State of Delaware any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of Plaza Holding Inc.) by reason of
the fact that he is or was a director, officer, incorporator, employee or
agent of Plaza Holding Inc., or is or was serving at the request of Plaza
Holding Inc. as a director, officer, trustee, employee or agent of or in any
other similar capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of Plaza Holding Inc., and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding shall (in the case of any action, suit
or proceeding against a director of Plaza Holding Inc.) or may (in the case of
any action, suit or proceeding against an officer, trustee, employee or agent)
be paid by Plaza Holding Inc. in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors upon
receipt of an undertaking by or on behalf of the indemnified person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by Plaza Holding Inc. as authorized in Article IX of the By-Laws
of Plaza Holding Inc.
Article IX of the By-Laws of Plaza Holding Inc. further provides that no
director shall be personally liable to Plaza Holding Inc. or any stockholder
for monetary damages for breach of fiduciary duty as a director, except for
any matter in respect of which such director (A) shall be liable under Section
174 of the General Corporation
II-1
<PAGE>
Law of the State of Delaware or any amendment thereto or successor provision
thereto, or (B) shall be liable by reason that, in addition to any and all
other requirements for liability, he:
(i) shall have breached his duty of loyalty to Plaza Holding Inc. or its
stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of Plaza
Holding Inc. shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
THCR ATLANTIC CITY FUNDING
Article IX of the Trump Atlantic City Funding Certificate of Incorporation
provides that Trump Atlantic City Funding shall indemnify to the fullest
extent permitted under and in accordance with the laws of the State of
Delaware any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of Trump Atlantic City Funding) by reason of the fact that he is
or was a director, officer, incorporator, employee or agent of Trump Atlantic
City Funding, or is or was serving at the request of Trump Atlantic City
Funding as a director, officer, trustee, employee or agent of or in any other
similar capacity with another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of Trump Atlantic City Funding, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or
not opposed to, the best interests of Trump Atlantic City Funding, and, with
respect to any criminal action or proceeding, shall not, of itself, create a
presumption that the person had reasonable cause to believe that his conduct
was unlawful. Article IX of the Trump Atlantic City Funding Certificate of
Incorporation further provides that Trump Atlantic City Funding shall
indemnify to the fullest extent permitted under and in accordance with the
laws of the State of Delaware any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit, by or in the right of Trump Atlantic City Funding to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of Trump Atlantic City Funding, or is or
was serving at the request of Trump Atlantic City Funding as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of Trump
Atlantic City Funding and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to Trump Atlantic City Funding unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper. Expenses (including
attorneys' fees) incurred in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall (in the case of any action,
suit or proceeding against a director of Trump Atlantic City Funding) or may
(in the case of any action, suit or proceeding against an officer, trustee,
employee or agent) be paid by Trump Atlantic City Funding in advance of the
final disposition of such action, suit or proceeding as authorized by the
Board of Directors upon receipt of an undertaking by or on behalf of the
indemnified person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by Trump Atlantic City Funding as
authorized in Article IX.
II-2
<PAGE>
No director or officer shall be personally liable to Trump Atlantic City
Funding or any stockholder for monetary damages for breach of fiduciary duty
as a director or officer, except for any matter in respect of which such
director or officer (A) shall be liable under Section 174 of the General
Corporation Law of the State of Delaware or any amendment thereto or successor
provision thereto, or (B) shall be liable by reason that, in addition to any
and all other requirements for liability, he:
(i) shall have breached his duty of loyalty to Trump Atlantic City
Funding or its stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of Trump
Atlantic City Funding shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
PLAZA ASSOCIATES
Section 16.14 of Plaza Associates' Second Amended and Restated Partnership
Agreement provides that Plaza Associates shall indemnify and hold harmless
each Partner, its Affiliates and all officers, directors, employees and agents
(individually, an "Agent") of such Partner, and its affiliates (individually,
an "Indemnitee") from and against any and all losses, claims, demands, costs,
damages, liabilities, joint and several, expenses of any nature (including
reasonable attorneys' fees and disbursements), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits, or
proceedings, civil, criminal, administrative or investigative, brought or
threatened in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise, arising out of or incidental to the
business of Plaza Associates or their status as an Agent including without
limitation liabilities under the Federal and state securities laws, regardless
of whether the Indemnitee continues to be a Partner, an Affiliate of a
Partner, or an Agent of a Partner or of an Affiliate of a Partner at the time
any such liability or expense is paid or incurred, so long as such indemnified
person acted in good faith on behalf of Plaza Associates, Plaza Funding or
Trump Atlantic City and in a manner reasonably believed by such person to be
in or not opposed to the best interests of Plaza Associates, Plaza Funding or
Trump Atlantic City but only if such course of conduct does not constitute
gross negligence or willful misconduct; provided that such indemnification or
agreement to hold harmless shall be recoverable only out of assets of Plaza
Associates and not from the Partners and; provided, further that no
indemnification shall be made to or on behalf of an Indemnitee if a judgment
or other final adjudication adverse to the Indemnitee establishes that his or
its acts or omissions (i) in the case of an Indemnitee who is or was a
director of Plaza Funding or the Trump Atlantic City managing general partner,
were in breach of his duty of loyalty to Plaza Funding or the Trump Atlantic
City managing general partner, as the case may be, or were not in good faith
or involved a knowing violation of law, or resulted in receipt by the
Indemnitee of an improper personal benefit or (ii) in the case of all other
Indemnitees, constituted gross negligence or willful misconduct.
Termination of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not itself create a
presumption that such Indemnitee did not meet the applicable standard of
conduct for indemnification. Indemnity shall be paid in advance of the final
disposition of the proceeding to an Indemnitee provided that the Indemnitee
undertakes to repay Plaza Associates if it shall ultimately be determined that
he or it is not entitled to indemnification as provided by Section 16.14. The
indemnification provided by Section 16.14 shall be in addition to any other
rights to which an Indemnitee may be entitled under any agreement, as a matter
of law or equity, or otherwise, both as to action in the Indemnitee's capacity
as a Partner, an Affiliate of a Partner, or as an officer, director, employee
or agent of a Partner or Affiliate of a Partner and as to any action in
another capacity, and shall continue as to an Indemnitee who has ceased to
serve in such
II-3
<PAGE>
capacity and shall inure to the benefit of the heirs, successors, assigns and
administrators of the Indemnitee. No Indemnitee shall be denied
indemnification in whole or in part under Section 16.14 by reason of the fact
that the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if such interest was fully disclosed and the
transaction was approved by Plaza Funding.
THCR
Trump Atlantic City and Trump Atlantic City Funding are currently
subsidiaries of THCR. Article IX of the THCR Certificate of Incorporation
provides that THCR shall indemnify to the fullest extent permitted under and
in accordance with the laws of the State of Delaware any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of THCR) by reason
of the fact that he is or was a director, officer, incorporator, employee or
agent of THCR, or is or was serving at the request of THCR as a director,
officer, trustee, employee or agent of or in any other similar capacity with
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of THCR,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of THCR, and, with
respect to any criminal action or proceeding, shall not, of itself, create a
presumption that the person had reasonable cause to believe that his conduct
was unlawful. Expenses (including attorneys' fees) incurred in defending any
civil, criminal, administrative or investigative action, suit or proceeding
shall (in the case of any action, suit or proceeding against a director of
THCR) or may (in the case of any action, suit or proceeding against an
officer, trustee, employee or agent) be paid by THCR in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors upon receipt of an undertaking by or on behalf of the indemnified
person to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by THCR as authorized in Article IX.
No director or officer shall be personally liable to THCR or any stockholder
for monetary damages for breach of fiduciary duty as a director or officer,
except for any matter in respect of which such director or officer (A) shall
be liable under Section 174 of the General Corporation Law of the State of
Delaware or any amendment thereto or successor provision thereto, or (B) shall
be liable by reason that, in addition to any and all other requirements for
liability, he:
(i) shall have breached his duty of loyalty to THCR or its stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of THCR
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
Each of the Executive Agreement between Trump and THCR and the Ribis Revised
Plaza Agreement among Mr. Ribis, THCR and THCR Holdings, provides for the
indemnification of such respective executive officer in connection with any
claims made against the executive officer involving the performance of his
duties, unless the claim is result of the gross negligence, willful conduct or
bad faith of the executive officer.
II-4
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
There have been no recent sales of unregistered securities of the registrants
other than in connection with the formation and capitalization of Trump
Atlantic City Funding, which sale was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended. In that regard, on
January 30, 1996, Trump Atlantic City Funding sold to Trump Atlantic City 100
shares of its Common Stock for $100.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
1.1* Form of Underwriting Agreement among Trump Atlantic City
Associates, Trump Atlantic City Funding, Inc., Trump Plaza
Associates, Donaldson, Lufkin & Jenrette Securities Corporation,
BT Securities Corporation and Salomon Brothers Inc.
2.1(13) Agreement and Plan of Merger, dated January 8, 1996, between
Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and
THCR Merger Corp.
2.1.1(15) Amendment to Agreement and Plan of Merger, dated January 31,
1996, by and among Trump Hotels & Casino Resorts, Inc., Taj
Mahal Holding Corp. and THCR Merger Corp.
3.1** Certificate of Incorporation of Trump Atlantic City Funding,
Inc. (formerly THCR Atlantic City Funding, Inc.).
3.1.1* Certificate of Amendment of Certificate of Incorporation of
Trump Atlantic City Funding, Inc. (formerly THCR Atlantic City
Funding, Inc.).
3.2** By-Laws of Trump Atlantic City Funding, Inc. (formerly THCR
Atlantic City Funding, Inc.).
3.3-3.6 Intentionally omitted.
3.7(6) Second Amended and Restated Partnership Agreement of Trump Plaza
Associates.
3.8(7) Partnership Agreement of Trump Atlantic City Associates
(formerly Trump Plaza Holding Associates).
3.8.1(7) Amendment No. 1 to the Partnership Agreement of Trump Atlantic
City Associates (formerly Trump Plaza Holding Associates.)
3.8.2(14) Amendment No. 2 to the Partnership Agreement of Trump Atlantic
City Associates (formerly Trump Plaza Holding Associates.)
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.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
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.
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.
4.12-4.25 Intentionally omitted.
4.26* Form of Indenture among Trump Atlantic City Associates (formerly
Trump Plaza Holding Associates) and Trump Atlantic City Funding,
Inc. (formerly THCR Atlantic City Funding, Inc.), as issuers,
the guarantors named therein and First Bank National Association
as trustee.
4.27* Form of First Mortgage Note Certificate (included in exhibit
4.26).
4.28* Form of Indenture of Mortgage and Security Agreement among Trump
Atlantic City Associates (formerly Trump Plaza Holding
Associates) and Trump Atlantic City Funding, Inc. (formerly THCR
Atlantic City Funding, Inc.), the guarantors named therein and
First Bank National Association, as trustee.
4.29* Form of Assignment Agreement among Trump Atlantic City Funding,
Inc. (formerly THCR Atlantic City Funding, Inc.) and Trump
Atlantic City Associates (formerly Trump Plaza Holding
Associates), the guarantors named therein, and First Bank
National Association, as trustee.
5.1 Opinion of Willkie Farr & Gallagher.
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.
10.22-10.27 Intentionally omitted.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
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.
10.31-10.32 Intentionally omitted.
10.33(6) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg
and Robert Rothenberg, dated October 3, 1983.
10.34(6) Intentionally omitted.
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.
10.38.1(12) Employment Agreement between Trump Hotels & Casino Resorts
Holdings, L.P. and Nicholas L. Ribis (with exhibits).
10.39(8) Severance Agreement between Trump Plaza Associates and Robert M.
Pickus.
10.40** Employment Agreement, 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 Intentionally omitted.
10.46(12) Executive Agreement among Donald J. Trump, Trump Hotels & Casino
Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47(12) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts, Inc.
10.48-10.49 Intentionally omitted.
10.50(11) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
10.51-10.55 Intentionally omitted.
10.55(12) Trademark Security Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.56(11) Agreement of Sublease between Donald J. Trump and Time Warner
Entertainment Company, L.P., as amended.
10.57-10.60 Intentionally omitted.
21* List of Subsidiaries of Trump Atlantic City.
23.1 Consent of Arthur Andersen LLP.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
23.2 Intentionally omitted.
23.3 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
23.4 Consent of Sterns & Weinroth.
24.1(16)** Power of Attorney (included on signature page).
25* Statement of Eligibility Under the Trust Indenture Act of 1939
of the First Mortgage Note Trustee.
27.1** Financial Data Schedule of Trump Atlantic City Funding, Inc.
(formerly THCR Atlantic City Funding, Inc.).
27.2 Financial Data Schedule of Trump Atlantic City Associates.
27.3 Financial Data Schedule of Trump Plaza Associates.
</TABLE>
- ---------------------
* To be filed by amendment.
** Previously filed.
(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.
(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) Contained on the signature page of this Registration Statement.
II-8
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--Valuation and Qualifying Accounts of Trump Plaza Holding
Associates and Trump Plaza Associates for the years ended
December 31, 1993, 1994 and 1995.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, New York, on March 5, 1996.
TRUMP ATLANTIC CITY ASSOCIATES
By: Trump Plaza Holding, Inc.,
its Managing General Partner
/s/ Nicholas L. Ribis
By: _________________________________
Name:Nicholas L. Ribis
Title:Vice President
TRUMP ATLANTIC CITY FUNDING, INC.
/s/ Nicholas L. Ribis
By: _________________________________
Name:Nicholas L. Ribis
Title:President, Chief Executive
Officer, Chief Financial Officer
and Director
TRUMP PLAZA ASSOCIATES
By: Trump Plaza Funding, Inc.,
its Managing General Partner
/s/ Nicholas L. Ribis
By: _________________________________
Name:Nicholas L. Ribis
Title:Vice President
II-10
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
TRUMP ATLANTIC CITY ASSOCIATES
By: Trump Plaza Holding, Inc.
its Managing General Partner
SIGNATURES TITLE DATE
* President and
- ------------------------------------- Chairman of the March 5, 1996
DONALD J. TRUMP Board of Directors
(principal
executive officer)
* Chief Financial
- ------------------------------------- Officer (principal March 5, 1996
FRANCIS X. MCCARTHY, JR. financial and
accounting officer)
Director
/s/ Nicholas L. Ribis March 5, 1996
- -------------------------------------
NICHOLAS L. RIBIS
* Director
- ------------------------------------- March 5, 1996
WALLACE B. ASKINS
* Director
- ------------------------------------- March 5, 1996
DON M. THOMAS
/s/ Nicholas L. Ribis
*By: ________________________________
NICHOLAS L. RIBIS
ATTORNEY-IN-FACT
II-11
<PAGE>
TRUMP ATLANTIC CITY FUNDING, INC.
SIGNATURES TITLE DATE
* Chairman of the
- ------------------------------------- Board of Directors March 5, 1996
DONALD J. TRUMP
President, Chief
/s/ Nicholas L. Ribis Executive Officer, March 5, 1996
- ------------------------------------- Chief Financial
NICHOLAS L. RIBIS Officer and
Director (principal
executive and
financial officer)
* Director
- ------------------------------------- March 5, 1996
ROBERT M. PICKUS
* Corporate Treasurer
- ------------------------------------- (principal March 5, 1996
JOHN P. BURKE accounting officer)
/s/ Nicholas L. Ribis
*By: ________________________________
NICHOLAS L. RIBIS
ATTORNEY-IN-FACT
II-12
<PAGE>
TRUMP PLAZA ASSOCIATES
By: Trump Plaza Funding, Inc.
its Managing General Partner
SIGNATURES TITLE DATE
* President and
- ------------------------------------- Chairman of the March 5, 1996
DONALD J. TRUMP Board of Directors
(principal
executive officer)
* Chief Financial
- ------------------------------------- Officer (principal March 5, 1996
FRANCIS X. MCCARTHY, JR. financial and
accounting officer)
Director
/s/ Nicholas L. Ribis March 5, 1996
- -------------------------------------
NICHOLAS L. RIBIS
* Director
- ------------------------------------- March 5, 1996
WALLACE B. ASKINS
* Director
- ------------------------------------- March 5, 1996
DON M. THOMAS
/s/ Nicholas L. Ribis
*By: ________________________________
NICHOLAS L. RIBIS
ATTORNEY-IN-FACT
II-13
<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 registration statement 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
S-1
<PAGE>
SCHEDULE II
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES VALUATION AND
QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993 1994 AND 1995
<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, 1993
Allowances for doubtful
accounts................. $14,402,000 $ 90,000 $(3,876,000)(A) $10,616,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 1,934,000 $1,047,000 -- $ 2,981,000
=========== ========== =========== ===========
YEAR ENDED DECEMBER 31, 1994
Allowances for doubtful
accounts................. $10,616,000 $ 323,000 $(2,446,000)(A) $ 8,493,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 2,981,000 $ 838,000 $(1,645,000)(B) $ 2,174,000
=========== ========== =========== ===========
YEAR ENDED DECEMBER 31, 1995
Allowances for doubtful
accounts................. $ 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
=========== ========== =========== ===========
</TABLE>
- ---------------------
(A) Write-off of uncollectible accounts.
(B) Write-off of allowance applicable to contribution of CRDA deposits.
S-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Taj Mahal Associates and Subsidiary:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Taj Mahal Associates (Partnership) and
Subsidiary included in this registration statement and have issued our report
thereon dated February 16, 1996. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The
accompanying schedule is the responsibility of the Partnership's 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 16, 1996
S-3
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED DEDUCTIONS BALANCE
BEGINNING COSTS AND TO OTHER FROM AT END
OF PERIOD EXPENSES ACCOUNTS RESERVES OF PERIOD
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Allowance for doubtful
receivables............ $ 5,275 $3,472 $-- $4,401(B) $ 4,346
Valuation allowance for
CRDA investments (A)... 4,369 2,764 -- -- 7,133
------- ------ ---- ------ -------
$ 9,644 $6,236 $-- $4,401 $11,479
======= ====== ==== ====== =======
December 31, 1994:
Allowance for doubtful
receivables............ $ 4,346 $2,974 $-- $3,261(B) $ 4,059
Valuation allowance for
CRDA investments (A)... 7,133 2,134 -- 4,753 4,514
------- ------ ---- ------ -------
$11,479 $5,108 $-- $8,014 $ 8,573
======= ====== ==== ====== =======
December 31, 1995:
Allowance for doubtful
receivables............ $ 4,059 $4,508 $-- $3,525(B) $ 5,042
Valuation allowance for
CRDA investments (A)... 4,514 3,090 -- -- 7,604
------- ------ ---- ------ -------
$ 8,573 $7,598 $-- $3,525 $12,646
======= ====== ==== ====== =======
</TABLE>
- ---------------------
(A) See Note 5 to financial statements.
(B) Uncollectible accounts written off, net of recoveries.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
5.1 Opinion of Willkie Farr & Gallagher.
23.1 Consent of Arthur Andersen LLP.
23.4 Consent of Sterns & Weinroth
27.2 Financial Data Schedule of Trump Atlantic City Associates.
27.3 Financial Data Schedule of Trump Plaza Associates.
</TABLE>
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
March 5, 1996
Trump Atlantic City Associates
Trump Atlantic City Funding, Inc.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Re: Registration Statement on Form S-1
File No. 333-643
---------------------------------------
Dear Sirs:
We have acted as counsel for Trump Atlantic City Associates, a New Jersey
general partnership ("Associates") and Trump Atlantic City Funding, Inc., a
Delaware corporation ("Funding" and together with Associates, the "Issuers"), in
connection with the registration pursuant to the Securities Act of 1933, as
amended (the "Act"), of $1,100,000,000 aggregate principal amount (the "Initial
Offering") of the Issuers' First Mortgage Notes due 2006 (the "First Mortgage
Notes") and up to 20% of the maximum aggregate offering amount of the Initial
Offering which may be offered pursuant to Rule 462(b) promulgated under the Act
("Rule 462(b)").
The First Mortgage Notes will be issued under an Indenture (the "First
Mortgage Note Indenture") to be entered into by and among the Issuers, as
issuers, First Bank National Association, as trustee (the "Trustee") and Trump
Plaza Associates, a New Jersey general partnership, Trump Taj Mahal Associates,
a New Jersey general partnership, and all other existing and future subsidiaries
of Associates, as guarantors.
In connection therewith, we have participated in the preparation of the
Registration Statement relating to the First Mortgage Notes (File No. 333-643)
heretofore filed with the Securities and Exchange Commission (as amended, the
"Registration Statement"), and we are familiar with the partnership and
corporate proceedings taken to date in connection with the authorization and
issuance of the First Mortgage Notes.
In so acting, we have examined original, reproduced or certified copies of
such records of the Issuers and of Trump Hotels & Casino Resorts Holdings, L.P.,
a Delaware limited
<PAGE>
Trump Atlantic City Associates
Trump Atlantic City Funding, Inc.
March 5, 1996
Page 2
partnership and a general partner of Associates ("THCR Holdings"), Trump Plaza
Holding, Inc., a Delaware corporation and the other general partner of
Associates ("TPHI," and together with THCR Holdings, the "Partners") and Trump
Hotels & Casino Resorts, Inc., a Delaware corporation and the sole general
partner of THCR Holdings ("THCR"), relevant and necessary for the opinions
hereinafter set forth including, but not limited to, the Registration Statement,
the Certificates of Incorporation of THCR, TPHI and Funding (as each has been
amended or amended and restated, as applicable), the By-Laws of THCR, TPHI and
Funding (as each has been amended or amended and restated, as applicable), the
Amended and Restated Partnership Agreement of THCR Holdings, the Amended and
Restated Partnership Agreement of Associates and the form of the First Mortgage
Note Indenture and the First Mortgage Notes as each of such documents has been
or will be filed as an Exhibit to the Registration Statement, and the relevant
minutes of THCR, as the general partner of THCR Holdings, as general partner of
Associates, TPHI, as general partner of Associates, and Funding.
In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic originals of all documents submitted to us as certified or reproduced
copies. As to various questions of fact material to such opinions, we have
relied upon certificates of, or communications with, officers of the Issuers,
the Partners and THCR and of public officials.
Based on the foregoing and assuming that the following shall occur on or
before such time as the Registration Statement shall have been declared
effective under the Act: (i) the First Mortgage Note Indenture substantially in
the form to be filed as an Exhibit to the Registration Statement, shall have
been qualified under the Trust Indenture Act of 1939 and shall have been duly
authorized, executed and delivered by each of the parties thereto, (ii) no
certificate of dissolution or proceeding therefor shall have been filed or
commenced with respect to the Issuers and (iii) the definitive terms of the
First Mortgage Notes shall have been duly authorized and established in
conformity with the First Mortgage Note Indenture, we are of the opinion that:
The execution and delivery of the First Mortgage Note Indenture and the
issuance of the First Mortgage Notes have been duly authorized by Funding and by
TPHI, as general partner of Associates. When the First Mortgage Note Indenture
has been duly executed and delivered by the parties thereto and the First
Mortgage Notes have been duly executed and delivered by the
<PAGE>
Trump Atlantic City Associates
Trump Atlantic City Funding, Inc.
March 5, 1996
Page 3
Issuers and duly authenticated by the Trustee, all in accordance with the terms
of the First Mortgage Note Indenture, and the First Mortgage Notes have been
issued in the manner described in the Registration Statement after it has become
effective under the Act (and in any abbreviated registration statement related
to the Registration Statement filed pursuant to Rule 462(b)), the First Mortgage
Notes will be duly and validly issued, and will constitute legal, valid and
binding obligations of the Issuers, enforceable against the Issuers in
accordance with their terms, except insofar as enforceability thereof may be
limited by (a) usury, bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, (b) general principles
of equity, (c) the Casino Control Act of the State of New Jersey, the
regulations adopted pursuant thereto, or rulings of the New Jersey Casino
Control Commission, as such laws, regulations or rulings may now or hereafter be
in effect or (d) other state gaming laws, the regulations adopted pursuant
thereto, or rulings from other state gaming authorities, as such laws,
regulations or rulings may now or hereafter be in effect.
No person or entity other than you may rely or claim reliance upon this
opinion. This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. We call to your
attention that we are not admitted to practice, do not purport to be experts in
the laws of, and, accordingly, do not express an opinion as to matters arising
under the laws of any jurisdiction, other than the laws of the State of New
York, the Delaware General Corporation Law and the Federal laws of the United
States. We are not admitted to practice law in the State of New Jersey.
We hereby consent to being named as counsel for the Company in the
Registration Statement and under the caption "Legal Matters" in the Prospectus
included in the Registration Statement, to the incorporation by reference of
this opinion in any abbreviated registration statement related to the
Registration Statement filed under Rule 462(b) and to the filing of this opinion
as an exhibit to the Registration Statement.
Very truly yours,
/s/ WILLKIE FARR & GALLAGHER
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, and to all references to our Firm, included in or made a part of this
registration statement.
Arthur Andersen LLP
Roseland, New Jersey
March 5, 1996
<PAGE>
Exhibit 23.4
CONSENT OF STERNS & WEINROTH
----------------------------
We hereby consent to being named as New Jersey gaming counsel for Trump
Atlantic City Associates and Trump Atlantic City Funding, Inc. (the "Issuers")
in the Issuers' Registration Statement on Form S-1 (No. 333-00643), filed
pursuant to the Securities Act of 1933, as amended (the "Act"), and in any
amendments thereto (the "Registration Statement") and in any related
registration statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Act, and to the filing of this consent as an
exhibit to the Registration Statement.
STERNS & WEINROTH
/s/ STERNS & WEINROTH
Trenton, New Jersey
March 4, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000897729
<NAME> TRUMP ATLANTIC CITY 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> 88,941
<SECURITIES> 0
<RECEIVABLES> 17,215
<ALLOWANCES> 5,042
<INVENTORY> 7,161
<CURRENT-ASSETS> 117,181
<PP&E> 908,950
<DEPRECIATION> 217,963
<TOTAL-ASSETS> 821,793
<CURRENT-LIABILITIES> 54,593
<BONDS> 649,139
0
0
<COMMON> 0
<OTHER-SE> 39,635
<TOTAL-LIABILITY-AND-EQUITY> 821,793
<SALES> 617,746
<TOTAL-REVENUES> 617,746
<CGS> 0
<TOTAL-COSTS> 463,858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,435
<INCOME-PRETAX> (26,623)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,623)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<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> 88,941
<SECURITIES> 0
<RECEIVABLES> 17,215
<ALLOWANCES> 5,042
<INVENTORY> 7,161
<CURRENT-ASSETS> 117,181
<PP&E> 908,950
<DEPRECIATION> 217,963
<TOTAL-ASSETS> 821,793
<CURRENT-LIABILITIES> 54,593
<BONDS> 649,139
0
0
<COMMON> 0
<OTHER-SE> 39,635
<TOTAL-LIABILITY-AND-EQUITY> 821,793
<SALES> 617,746
<TOTAL-REVENUES> 617,746
<CGS> 0
<TOTAL-COSTS> 463,858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,435
<INCOME-PRETAX> (26,623)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,623)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
