<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1996
REGISTRATION NO. 333-639
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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 HOTELS & CASINO RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7011 13-3818402
(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 HOTELS & CASINO RESORTS, 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)
---------------
WITH COPIES TO:
DANIEL D. RUBINO, ESQ. ROBERT M. PICKUS, ESQ. NICHOLAS P. SAGGESE,
WILLKIE FARR & GALLAGHER EXECUTIVE VICE PRESIDENT ESQ.
ONE CITICORP CENTER TRUMP HOTELS & CASINO SKADDEN, ARPS, SLATE,
153 EAST 53RD STREET RESORTS, INC. MEAGHER & FLOM
NEW YORK, NEW YORK 10022 MISSISSIPPI AVENUE 300 SOUTH GRAND AVENUE
(212) 821-8000 AND THE BOARDWALK SUITE 3400
ATLANTIC CITY, NEW JERSEY 08401 LOS ANGELES, CALIFORNIA
(609) 441-6060 90071
(213) 687-5000
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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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED PROPOSED
SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share........ 14,875,000 $24.00 $357,000,000 $123,104(3)
</TABLE>
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(1) Includes 1,875,000 shares which may be sold pursuant to the Underwriters'
over-allotment option and 500,000 shares to be issued to First Fidelity
Bank, National Association.
(2) Estimated solely for purposes of determining the registration fee.
(3) $75,618 was previously paid. $47,486 is being paid herewith.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
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 HOTELS & CASINO RESORTS, INC.
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; Dividend
Policy; Capitalization;
Description of Capital Stock;
Special Tax Considerations for
Foreign Shareholders
10. Interests of Named Experts and
Counsel.............................. Experts
11. Information with Respect to the
Registrant........................... Prospectus Summary; Risk Factors;
Price Range of Common Stock;
Dividend Policy; 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
Capital Stock; Description of
THCR Holdings Partnership
Agreement; Shares Eligible for
Future Sale; Legal Matters
12. Disclosure of Commission Position on
Indemnification of Securities Act
Liabilities.......................... Not Applicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to the public
offering by the Registrant of up to 14,375,000 shares of its Common Stock to
be sold in an underwritten offering, together with certain pages of a second
Prospectus, which will be provided by amendment, relating to the public
offering by the Registrant of 500,000 shares of its Common Stock in a non-
underwritten sale to First Fidelity Bank, National Association. The Prospectus
relating to underwritten offering follows immediately after this Explanatory
Note. Following such Prospectus will be the alternate cover page, pages and
the back cover page of the Prospectus relating to the non-underwritten
offering, which will be filed by amendment. All other pages of the Prospectus
relating to the underwritten offering will also be used for the Prospectus
relating to the non-underwritten offering.
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 5, 1996
PROSPECTUS
, 1996
[LOGO]
12,500,000 SHARES
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK
All of the shares of Common Stock ("Common Stock") offered hereby (the "Stock
Offering") are being sold by Trump Hotels & Casino Resorts, Inc. (the
"Company").
The Stock Offering is part of a comprehensive plan (the "Merger Transaction")
relating to the acquisition (the "Merger") of Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), by Trump Hotels & Casino Resorts Holdings, L.P., a subsidiary of
the Company ("THCR Holdings"), and the refinancing of the debt obligations of
Taj Associates and Trump Plaza Associates ("Plaza Associates"), the owner and
operator of the Trump Plaza Hotel and Casino ("Trump Plaza"). Upon consummation
of the Merger Transaction, Trump Atlantic City Associates ("Trump Atlantic
City"), a wholly owned subsidiary of THCR Holdings, will wholly own Plaza
Associates and Taj Associates. In addition to the shares of Common Stock to be
issued in the Stock Offering, the Company may issue up to 1,688,000 shares of
Common Stock in the Merger. To the extent that the Company issues any or all of
these 1,688,000 shares in the Merger, the Company may decrease the size of the
Stock Offering.
As part of the Merger Transaction and concurrently with the Stock Offering,
Trump Atlantic City and Trump Atlantic City Funding, Inc. ("Trump Atlantic City
Funding"), a wholly owned finance subsidiary of Trump Atlantic City, are
offering $1.1 billion aggregate principal amount of first mortgage notes (the
"Mortgage Notes") (the "Mortgage Note Offering"). Consummation of the Stock
Offering is conditioned upon the consummation of the other transactions
contemplated by the Merger Transaction (including the Mortgage Note Offering).
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "DJT." On March 4, 1996, the closing price of the Common Stock on the
NYSE was $25 5/8 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
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, THE INDIANA GAMING
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 COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
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</TABLE>
(1) The Company and its subsidiaries have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , payable by Trump Hotels &
Casino Resorts Holdings, L.P.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 1,875,000 additional shares of Common Stock, on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions, and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock offered by this Prospectus 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 shares
of Common Stock will be made in New York, New York on or about , 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 STOCK OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, 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 "Company" as used in this
Prospectus includes the Company 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. Prospective investors are
urged to read this Prospectus carefully in its entirety.
THE COMPANY
Trump Hotels & Casino Resorts, Inc. (the "Company") will acquire all of the
outstanding equity interests of Trump Taj Mahal Associates ("Taj Associates"),
which owns and operates the Trump Taj Mahal Casino Resort (the "Taj Mahal"), in
connection with the Merger Transaction. The Merger Transaction will create one
of the largest casino entertainment companies in the United States by combining
two "Four Star" Atlantic City casino hotels, a riverboat gaming project
approximately 25 miles from downtown Chicago (the "Indiana Riverboat") and the
rights to any future Donald J. Trump ("Trump") gaming venture. Upon
consummation of the Merger Transaction, the Company will own and operate the
Taj Mahal, currently Atlantic City's largest casino hotel, and Trump Plaza
Hotel and Casino, which will be the largest upon completion of its expansion
program scheduled to be completed in the second quarter of 1996 (the "Trump
Plaza Expansion"). Following the consummation of the Merger Transaction, the
Company plans to undertake an expansion program at the Taj Mahal designed to
increase its hotel room inventory and casino floor space and expand its
entertainment arena and parking facilities (the "Taj Mahal Expansion"). In
addition, the Company expects to commence operations in the second quarter of
1996 of the Indiana Riverboat casino at Buffington Harbor on Lake Michigan,
which will establish the Company's position in the greater Chicago metropolitan
area market, one of the most successful new gaming markets in the United
States. The Company is and will continue to be the exclusive vehicle through
which Trump will engage in new gaming activities in both emerging and
established gaming jurisdictions. Trump Plaza and the Taj Mahal are
collectively referred to herein as the "Atlantic City Properties."
Management believes that the acquisition of the Taj Mahal will strengthen the
Company'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 the Company'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, the Company 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
Plaza's existing and planned operations will provide opportunities for
operational efficiencies, economies of scale and benefits from the expertise
and experience of management at the operating entities. Management further
believes that the Company's size following the Merger Transaction alone with
its industry experience and reputation for quality will allow the Company to
compete more effectively for gaming licenses in other jurisdictions.
Management believes the Company will benefit from the following factors:
. LEADING ATLANTIC CITY FACILITIES. Upon consummation of the Trump Plaza
Expansion, the Company will own and operate the two largest casino hotel
properties in Atlantic City, both of which are strategically located on
The Boardwalk. The Company believes that the Atlantic City Properties'
prime
3
<PAGE>
locations, reputations for high quality amenities and first class customer
service and targeted marketing strategies are ideally suited to capitalize
on the expected continued growth in the Atlantic City gaming market. The
Company 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. The Company is in the process of
executing expansion projects at both of its Atlantic City Properties to
increase their gaming space and hotel room capacity allowing the Company
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 the Company's casino and hotel capacity
following the planned expansion at the Atlantic City Properties:
<TABLE>
<CAPTION>
TRUMP TAJ INDIANA TRUMP PLAZA TAJ MAHAL
PLAZA(A) MAHAL RIVERBOAT(B) EXPANSION(B)(C) EXPANSION(D) TOTAL
-------- ------- ------------ --------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Casino square footage... 75,395 120,000(e) 37,000 64,158 60,000 356,553(e)
Slot machines........... 2,368 3,550 1,500 1,898 2,500 11,816
Table games............. 97 169 73 44 -- 383
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 open 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.
. INDIANA RIVERBOAT. Trump Indiana, Inc. ("Trump Indiana"), the Company's
subsidiary that owns and will operate the Indiana Riverboat, has received
site approval and a certificate of suitability to develop a gaming
project at Buffington Harbor on Lake Michigan, approximately 25 miles
southeast of downtown Chicago. The Indiana Riverboat is one of 11
riverboat gaming projects permitted under current Indiana law and one of
only five to be located in northern Indiana. The Indiana Riverboat is
currently scheduled to open for business in the second quarter of 1996.
The Indiana Riverboat is planned to have approximately 37,000 square feet
of gaming space that will feature 1,500 slot machines and 73 table games
and will be one of the largest riverboat casinos in the United States.
The Indiana Riverboat's principal market will be the approximately 6.8
million people residing within 50 miles of Buffington Harbor in the
greater Chicago metropolitan area. Approximately 11.2 million and 24.2
million people live within a 100- and 200-mile radius of Buffington
Harbor, respectively.
. OPERATING SYNERGIES. The Company 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. The Company capitalizes on the widespread recognition
of the "Trump" name and its association with high quality amenities and
first class service. To this end, the Company provides
4
<PAGE>
a broadly diversified gaming and entertainment experience consistent with
the "Trump" name and reputation for quality, tailored to the gaming patron
in each market. The Company also benefits from the "Trump" name in
connection with its efforts to expand and to procure new gaming
opportunities in the United States and abroad. The Company explores
opportunities to establish additional gaming operations, particularly in
jurisdictions where the legalization of casino gaming is relatively recent
or is anticipated.
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. The Company 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, the Company 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 and integrating 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 4,270 slot machines and 140 table games. Trump
Plaza's hotel capacity will increase to a total of 1,404 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 it 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 14,886 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 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 open by the end of April 1996. Also
reflects nine super suites scheduled to open 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 15,900 of
which will be 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.
5
<PAGE>
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 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. The 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.
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 on 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, 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
6
<PAGE>
million capital plan to upgrade and expand the Atlantic City International
Airport. The Company believes that, as leading Atlantic City attractions, the
Atlantic City Properties will attract a large portion of any increase in the
number of potential casino hotel patrons.
THE INDIANA RIVERBOAT
The Indiana Riverboat, currently scheduled to open for business in the second
quarter of 1996, will feature an approximately 280-foot luxury yacht with
approximately 37,000 square feet of gaming space with 1,500 slot machines, 73
table games and capacity of approximately 2,450 passengers and 300 employees.
The Indiana Riverboat will be one of the largest riverboat casinos in the
United States. Trump Indiana is one of 11 riverboat gaming projects permitted
under current Indiana law and one of only five to be located in northern
Indiana.
The Indiana Riverboat's principal market will be the approximately 6.8
million people residing within 50 miles of Buffington Harbor in the greater
Chicago metropolitan area. Approximately 11.2 million and 24.2 million people
live within a 100- and 200-mile radius of Buffington Harbor, respectively,
encompassing portions of the states of Indiana, Illinois, Michigan, Ohio and
Wisconsin (the "Great Lakes Market"). Through the use of the "Trump" name and
systematic marketing programs, the Company will seek to attract drive-in
customers to the Indiana Riverboat. Casinos currently operating in the Great
Lakes Market have generally been very successful, achieving operating results
exceeding those of most new jurisdictional markets. The Company believes that
these operating results indicate that the Great Lakes Market should be capable
of absorbing significant capacity expansion in the future. Under current
regulations in Indiana, all games typically available in Atlantic City casinos
will be permitted on the Indiana Riverboat. Riverboat casinos in Indiana will
be permitted to stay open 24 hours per day, 365 days per year and to extend
credit and accept credit charge cards, with no loss or wagering limits.
THE STOCK OFFERING
<TABLE>
<C> <S>
Common Stock Offered.................. 12,500,000 shares
Common Stock to be outstanding after
the Merger Transaction............... 23,066,667 shares(/1/)
New York Stock Exchange Symbol........ DJT
</TABLE>
- --------------------
(1) Includes a stock bonus award of 66,667 shares of Common Stock granted to
the Chief Executive Officer of the Company pursuant to the Company's 1995
Stock Plan (as defined). Does not include (i) 6,666,836 shares of Common
Stock (subject to certain adjustments) issuable to Trump upon conversion of
his limited partnership interest in THCR Holdings; (ii) 1,687,331 shares of
Common Stock (subject to certain adjustments) issuable to TTMI upon
conversion of its limited partnership interests in THCR Holdings; (iii)
133,333 shares of Common Stock issuable upon exercise of options granted to
the Chief Executive Officer of the Company pursuant to the 1995 Stock Plan;
(iv) a phantom stock unit award (representing the right to receive 66,666
shares of Common Stock on June 12, 1997) granted to the Chief Executive
Officer of the Company pursuant to the 1995 Stock Plan; (v) 733,334
additional shares reserved for issuance pursuant to the 1995 Stock
Incentive Plan; (vi) 1,800,000 shares of Common Stock underlying the
warrant to be issued to Trump in connection with the Merger Transaction; or
(vii) any shares of Common Stock which may be issued in the Merger. Also
excludes shares of Class B Stock of the Company held and to be held by
Trump and TTMI which represent non-economic voting interest in the Company.
Assumes a Market Value (as defined) of $24.00 per share of Common Stock in
the Merger and as the public offering price in the Stock Offering, and that
all holders of Taj Holding Class A Common Stock elect to receive cash in
the Merger. In the event that holders of Taj Holding Class A Common Stock
elect to receive shares of Common Stock in the Merger, the Company may or
may not reduce the size of the Stock Offering, in which case such
additional shares issued in the Merger would also be outstanding following
the Merger Transaction. In addition to the 12,500,000 shares of Common
Stock offered hereby, the Company may issue up to an additional 20% of such
number of shares to fund working capital. See "Management--Executive
Compensation--1995 Stock Incentive Plan" and "Description of Capital
Stock."
7
<PAGE>
THE MORTGAGE NOTE OFFERING
(Offered by Trump Atlantic City and Trump Atlantic City Funding exclusively
pursuant to a separate prospectus)
Concurrently with and as a condition to consummation of the Stock Offering,
Trump Atlantic City and Trump Atlantic City Funding will issue $1.10 billion of
the Mortgage Note Offering. Trump Atlantic City Funding, a Delaware
corporation, was recently formed for the sole purpose of, and will engage in no
activities or business other than in connection with, the issuance of the
Mortgage Notes. Certain terms of the Mortgage Notes are described under
"Business--Certain Indebtedness."
The Mortgage Note Offering and the Stock Offering (collectively, the
"Offerings") are part of the comprehensive plan relating to the Merger of a
subsidiary of the company within and to Taj Mahal Holding Corp. ("Taj
Holding"), which currently beneficially owns a fifty (50%) percent equity
interest in Taj Associates; the contribution by the company to Trump Atlantic
City (on behalf, and at the direction, of THCR Holdings) of all of its direct
and indirect ownership interests in Taj Associates acquired in the Merger; the
contribution by Trump of the remaining fifty (50%) percent equity interest in
Taj Associates to Trump Atlantic City (on behalf of, and of 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 Stock 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
Mortgage Note 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 the Company
. the Company's holding company structure and the likelihood that dividends
will not be paid for the foreseeable future
. the risk in refinancing and repayment of indebtedness, and the need for
additional financing
. the restrictions on certain activities imposed by certain debt
instruments
. the historical results of Trump Plaza and the Taj Mahal, including past
net losses
. conflicts of interest
. control by and the involvement of Trump
. risks associated with the Trump Plaza Expansion and the Taj Mahal
Expansion
. risks relating to the Indiana Riverboat
. competition in the gaming industry
. reliance on certain key personnel
. the strict regulation by gaming authorities, including the potential
disqualification of holders of Common Stock
. considerations with respect to the acquisition and development of
additional gaming ventures
. limitations on THCR's license of the "Trump" name
. fraudulent transfer considerations
. the shares of Common Stock eligible for future sale
. the trading markets and potential volatility of the market price of the
shares of THCR Common Stock.
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Stock Offering, after payment of
underwriting discounts and expenses of the Stock Offering, are estimated to be
$ million ($ million if the Underwriters' over-allotment option is
exercised in full). The proceeds from the Stock Offering, together with net
proceeds of $ million from the Mortgage Note Offering, and available cash,
will be used as set forth below:
(i) pay cash to those holders of the Class A Common Stock of Taj Holding
(the "Taj Holding Class A Common Stock") electing to receive cash in the
Merger (see note (i) below);
(ii) redeem the outstanding 11.35% Mortgage Bonds, Series A, due 1999 of
Trump Taj Mahal Funding, Inc.'s ("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% 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 U.S.A. ("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 Common Stock
and purchase 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 Trump Plaza East pursuant to the purchase option (the
"Trump Plaza East Purchase Option") held by Trump Plaza Associates ("Plaza
Associates");
(viii) pay Bankers Trust Company ("Bankers Trust") $10 million to obtain
releases of the liens and guarantees that Bankers Trust has in connection
with certain outstanding indebtedness owed by Trump to Bankers Trust (the
"Trump Indebtedness"); and
(ix) pay related fees and expenses and provide for working capital.
9
<PAGE>
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming a April 15, 1996 consummation):
(DOLLARS IN MILLIONS)
ANTICIPATED SOURCES OF FUNDS
<TABLE>
<CAPTION>
CASH SOURCES
- ------------
<S> <C>
Stock Offering(a)(d).............. $ 300.0
Mortgage Note Offering............ 1,100.0
Available Cash.................... 10.7
--------
Total Cash Sources............... 1,410.7
--------
<CAPTION>
NON-CASH SOURCES
- ----------------
<S> <C>
Common Stock Equivalents to be issued to Trump(c).. 40.5
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
Acquisition 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
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 that any holder of
Taj Holding Class A Common Stock elects Stock Consideration (as defined) in
lieu of Cash Consideration, the Company may decrease the size of the Stock
Offering.
(c) Represents the value of the shares of 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 ("TTMI") in connection
with the Merger Transaction will be convertible.
(d) Assumes a price of $24.00 per share of Common Stock.
10
<PAGE>
SUMMARY FINANCIAL INFORMATION
SUMMARY FINANCIAL INFORMATION OF THE COMPANY
The following tables set forth (a) certain historical consolidated financial
information of Trump Atlantic City (formerly Trump Plaza Holding Associates)
and Plaza Associates (predecessors of the Company) for each of the years ended
December 31, 1991 through 1994 and for the period January 1, 1995 through June
12, 1995 and certain historical consolidated financial information of the
Company for the period from inception (June 12, 1995) to December 31, 1995 (see
Note 1 below) and (b) unaudited pro forma financial information of the Company.
The unaudited pro forma information gives effect to the Merger Transaction. The
historical financial information of Trump Atlantic City and Plaza Associates as
of December 31, 1994 and June 12, 1995 and for the years ended December 31,
1993, 1994 and for the period January 1, 1995 through June 12, 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 was derived from the audited
consolidated financial statements of Trump Atlantic City and Plaza Associates
not included in this Prospectus. The historical financial information of the
Company as of December 31, 1995 and for the period from inception (June 12,
1995) through December 31, 1995 as set forth below has been derived from the
audited consolidated financial statements of the Company included elsewhere in
this Prospectus.
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
it 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.
11
<PAGE>
<TABLE>
<CAPTION>
TRUMP ATLANTIC CITY AND PLAZA ASSOCIATES THE COMPANY
------------------------------------------------------ ---------------
FROM FROM INCEPTION
YEARS ENDED DECEMBER 31, JANUARY 1 1995 (JUNE 12, 1995)
-------------------------------------- THROUGH TO DECEMBER 31,
1991 1992 1993 1994 JUNE 12, 1995 1995 (NOTE 1)
-------- -------- -------- -------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $279,684 $313,318 $300,491 $295,063 $137,848 $195,473
Depreciation and amor-
tization.............. 16,193 15,842 17,554 15,653 6,999 9,219
Income from opera-
tions................. 16,087 35,003 49,640 43,415 21,818 33,446
Interest expense, net.. 33,363 31,356 39,889 48,219 22,113 31,273
Extraordinary gain
(loss) (a)............ -- (38,205) 4,120 -- (9,250) --
Net income (loss) (b).. (29,230) (35,787) 9,338 (8,870) (11,033) (1,921)
OTHER DATA:
EBITDA (c)............. $ 44,000 $ 60,399 $ 68,241 $ 60,524 $ 29,011 $ 42,942
Capital expenditures
(d)................... 5,509 8,643 10,052 20,489 7,364 115,430
Ratio of earnings to
fixed charges (defi-
ciency) (e)........... (32,094) 1.1x 1.1x (9,735) (1,944) (2,010)
Cash flows provided by
(used in)
Operating activities... 9,514 $ 26,191 $ 21,820 19,950 $ 22,758 $ (9,219)
Investing activities... (6,175) (10,469) (12,679) (21,691) (7,364) (190,973)
Financing activities... (2,870) (7,367) (13,550) (1,508) 1,587 191,214
BALANCE SHEET DATA (AT
END OF PERIODS):
Total assets........... $378,398 $370,349 $374,498 $375,643 $394,085 $ 584,545
Total long-term debt,
net of current
maturities (f)........ 33,326 249,723 395,948 403,214 331,142 494,471
Total capital (defi-
cit).................. 54,043 11,362 (54,710) (63,580) (74,613) 50,591
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA (AT END
OF
PERIOD): (g)
Casino square footage.. 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 (m)...... $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 (m)............. 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 the following page)
12
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA (n)
----------------------------------
YEAR ENDED DECEMBER 31, 1995 (NOTE
1)
----------------------------------
STATEMENT OF OPERATIONS DATA: (DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C>
Net revenues............................... $ 887,069
Depreciation and amortization.............. 64,752
Income from operations..................... 149,681
Interest expense, net (o).................. 146,374
Net income (loss).......................... 85
Net income (loss) per common share (p)..... .00
OTHER DATA:
EBITDA (c)(o).............................. $ 216,813
Ratio of earnings to fixed charges (e)..... 1.0x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................... $1,668,781
Total long-term debt, net of current
maturities................................ 1,268,128
Total capital.............................. 280,327
</TABLE>
Note 1: The Company was incorporated on March 28, 1995 and conducted no
operations until June 12, 1995, when the Company issued $140,000,000 of Common
Stock on June 12, 1995 (the "June 1995 Stock Offering" and together with the
offering by THCR Holdings and THCR Funding (as defined) of $155 million
aggregate principal amount of Senior Secured Notes due 2005 (the "Senior
Notes") (the "June 1995 Note Offering") (the "June 1995 Offerings") and
contributed the proceeds therefrom to THCR Holdings in exchange for an
approximately 60% general partnership interest in THCR Holdings. At the
consummation of the June 1995 Stock Offering, pursuant to the Contribution
Agreement, dated as of June 12, 1995, between Trump and THCR Holdings (the
"Contribution Agreement"), Trump contributed his 100% beneficial interest in
Plaza Funding, Trump Atlantic City and Plaza Associates to THCR Holdings, among
other things, for an approximate 40% limited partnership interest in THCR
Holdings. The financial data as of December 31, 1995 and for the period ended
December 31, 1995 reflect the operations of the Company from inception (June
12, 1995) to December 31, 1995.
- --------
(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 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 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 income for 1992 includes $1.5 million of costs associated with certain
litigation. Net income (loss) for the years ended December 31, 1993, 1994,
for the period from January 1, 1995 through June 12, 1995 and for the
period from inception (June 12, 1995) to December 31, 1995, includes $3.9,
$4.9, $1.6 and $2.1 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, non-cash compensation
charges associated with awards to the President of the Company under the
1995 Stock Incentive Plan, and the non-cash write-down of New Jersey Casino
Reinvestment Development Authority ("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 the Company'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 the Company's historical ability to service its debt.
(d) Capital expenditures attributable to Trump Plaza East were approximately
$2.8 million, $8.7 million, $4.9 million, and $20.0 million for the years
ended December 31, 1993, 1994 for the period January 1 through June 12,
1995 and for the period June 12, 1995 through December 31, 1995. Capital
expenditures attributable to Trump World's Fair were approximately $73.7
million for the period June 12, 1995 through December 31, 1995,
respectively. Capital expenditures for routine or ongoing maintenance and
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 loss before
income taxes, extraordinary items, minority interest 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, 1994, for the period January 1, 1995 through June
12, 1995 and for the period June 12, 1995 through December 31, 1995 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 CCC (as defined) 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 table drop
or slot revenue, as appropriate.
(k) Fair share is the percentage of the total number of gaming units (table
games or slot machines, as applicable) at 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 the same had occurred on January 1, 1995 and
the Pro Forma Balance Sheet Data gives effect to the Merger Transaction as
if the 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.
(p) Pro forma earnings per share is based upon weighted average shares
outstanding as of December 31, 1995, shares and phantom stock units awarded
to the President of the Company pursuant to the 1995 Stock Incentive Plan
and shares to be issued in the Company Stock Offering. The shares of the
Company Class B Common Stock owned by Trump have no economic interest and
therefore, are not considered.
13
<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 and 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, 1992 and 1993 and for the years ended 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 Conditions and Results
of Operations--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.. 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(f)......... $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(f)............... $1,160,714 $1,067,595 $1,062,042 $1,125,029 $1,192,200
Taj Mahal table games
market share(g)....... 16.1 % 15.1 % 15.5 % 16.5% 16.8%
Taj Mahal table games
fair share(h)......... 12.7 % 13.3 % 14.5 % 14.2% 13.3%
Taj Mahal table games
efficiency(i)......... 126.8 % 113.5 % 106.9 % 116.2% 126.3%
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>
14
<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(j)....... $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(j)............ $ 197,383 $ 246,947 $ 264,504 $ 259,114 $ 285,248
Taj Mahal slot market
share(g).............. 10.7% 11.7% 11.9% 11.3% 11.1%
Taj Mahal slot fair
share(h).............. 13.0% 12.7% 13.1% 12.6% 12.3%
Taj Mahal slot
efficiency(i)......... 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)(j)...... $ 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 and 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 are $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) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(g) 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.
(h) 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.
(i) Efficiency is the ratio of the Taj Mahal's market share to its fair share.
(j) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
15
<PAGE>
THE MERGER TRANSACTION
Upon consummation of the Merger Transaction, the Company will own and operate
the Taj Mahal and Trump Plaza. Pursuant to the Agreement and Plan of Merger,
dated as of January 8, 1996, as amended by Amendment to Agreement and Plan of
Merger, dated as of January 31, 1996, among the Company, Taj Holding and THCR
Merger Corp. ("Merger Sub") (the "Merger Agreement"), (a) Merger Sub will be
merged with and into Taj Holding and (b) 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 the Company's Common Stock as is determined by
dividing $30.00 by the Market Value ("Stock Consideration"). Market Value is
defined as the average of the high and low per share sales prices on the NYSE
of a share of 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 Stock Offering and the Mortgage Note Offering, 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 owing to First Fidelity 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 Common Stock and purchase the Specified Parcels from Realty
Corp. for ten dollars 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
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. 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. 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. 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
16
<PAGE>
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, 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 Associates and Plaza Funding intend 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
Stock 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 shares of 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 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 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 Common Stock
(representing approximately 40% of the outstanding shares of Common Stock after
giving effect to such
17
<PAGE>
conversion). Upon consummation of the Merger Transaction (assuming a price of
$24.00 per share of 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 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 the Company, par
value $.01 per share ("Class B Common Stock") to TTMI. The Company'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 such holders's 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, the Company will
issue to Trump a warrant to purchase an aggregate of 1.8 million shares of
Common Stock, (i) 600,000 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 shares of which may be purchased on or prior to the fourth anniversary
of the issuance of the warrant at $35.00 per share and (iii) 600,000 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.
The Company Contribution and Consideration. In connection with the Merger
Transaction, the Company will cause TM/GP Corporation, which will become an
indirect wholly owned subsidiary of the Company 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 the Company
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 in Taj Associates). As a result
of the Merger Transaction, the Company'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.
18
<PAGE>
MANAGEMENT AND CORPORATE STRUCTURE
Trump is the Company's Chairman of the Board and Nicholas L. Ribis is the
Company's President, Chief Executive Officer and Chief Financial Officer. The
Company 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. THCR
Holdings' principal assets are its ownership interests in its subsidiary
corporations and partnerships. The partnership agreement governing THCR
Holdings provides that all business activities of the Company must be conducted
through THCR Holdings or its subsidiary corporations and partnerships. As the
sole general partner of THCR Holdings, the Company generally has the exclusive
rights, responsibilities and discretion in the management and control of THCR
Holdings.
THCR Holdings' subsidiary corporations and partnerships currently include
Trump Indiana, Plaza Associates, Plaza Funding, Trump Atlantic City, Trump
Plaza Holding, Inc. ("Plaza Holding Inc."), Trump Atlantic City Funding and
Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding"). THCR Funding and
THCR Holdings are the co-obligors of the Senior Notes. Plaza Associates owns
and operates Trump Plaza and is the guarantor of 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. 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. In addition to its ownership of the Indiana Riverboat, Trump
Indiana has a 50% equity interest in Buffington Harbor Riverboats, LLC ("BHR"),
which will own, develop and operate all common land-based and waterside
operations in support of the Indiana Riverboat and another operator's riverboat
casino at Buffington Harbor.
Upon consummation of the Merger Transaction, THCR Holdings will indirectly
wholly own Taj Associates through its ownership of a 99% equity interest in
Trump Atlantic City and all of the capital stock of Plaza Holding Inc., which
owns a 1% equity interest in Trump Atlantic City. Trump Atlantic City will
wholly own Taj Associates through its ownership of a 99% equity interest in Taj
Associates and all of the capital stock of TTMC, which will own a 1% equity
interest in Taj Associates. Trump Atlantic City and its subsidiary Trump
Atlantic City Funding will be the issuers and co-obligors of the Mortgage
Notes. Plaza Associates and Taj Associates will be guarantors of the Mortgage
Notes.
The Company, a Delaware corporation, was incorporated on March 28, 1995. The
principal executive offices of the Company are located at Mississippi Avenue
and The Boardwalk, Atlantic City, New Jersey 08401, and the Company's telephone
number is (609) 441-6060.
19
<PAGE>
PRO FORMA STRUCTURE OF THE COMPANY
[INSERT TABLE]
20
<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 shares of Common Stock offered
hereby.
HIGH LEVERAGE AND FIXED CHARGES
Upon consummation of the Merger Transaction, the Company 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, the Company's consolidated indebtedness for borrowed money would
have totaled approximately $1.27 billion, including $155 million aggregate
principal amount of Senior Notes and $1.10 billion aggregate principal amount
of Mortgage Notes (collectively, the "Notes"). See "Use of Proceeds" and
"Business--Certain Indebtedness." Assuming that the Merger Transaction had
been consummated on January 1, 1996, the Company's ratio of consolidated
earnings to fixed charges on a pro forma basis was 1.0x for the year ended
December 31, 1995.
Interest on the Senior Notes is, and interest on the Mortgage Notes will be,
payable semiannually in cash. The ability of THCR Holdings and Trump Atlantic
City to pay interest on the Senior Notes and the Mortgage Notes, respectively,
will be dependent upon the ability of the Company and its subsidiaries (in the
case of the Senior Notes) and Trump Atlantic City and its subsidiaries (in the
case of the Mortgage Notes) to generate enough cash from operations sufficient
for such purposes and will be subject to the risks associated with refinancing
and repayment of indebtedness described below. See "--Holding Company
Structure; No Anticipation of Dividends," "--Risk in Refinancing and Repayment
of Indebtedness; Need for Additional Financing," "--Historical Results; Past
Net Losses--Trump Plaza," and "--Historical Results; Past Net Losses--Taj
Mahal."
Taj Associates has a working capital facility (the "Working Capital
Facility") which matures in 1999 and permits borrowings of up to $25.0
million. During 1994 and 1995, no amounts were borrowed under the Working
Capital Facility. The Company 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. See
"Business--Certain Indebtedness--Taj Associates--Working Capital Facility."
The substantial consolidated indebtedness and fixed charges of the Company
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
the Company 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. The Company 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--Liquidity and Capital
Resources." There is no assurance that any of these alternatives could be
effected on satisfactory terms, if at all. See "--Holding Company Structure;
No Anticipation of Dividends" and "--Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing." Furthermore, such alternatives
could impair the Company's competitive position, reduce cash flow and/or have
a material adverse effect on the Company's results of operations. See "--
Atlantic City Properties Expansion."
HOLDING COMPANY STRUCTURE; NO ANTICIPATION OF DIVIDENDS
The Company is a holding company, the principal asset of which is its
general partnership interest in THCR Holdings, and has no independent means of
generating revenue. As a holding company, the Company depends
21
<PAGE>
on distributions and other permitted payments from THCR Holdings 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."
In addition, both THCR Holdings and Trump Atlantic City are holding
companies, the principal assets of which are the shares of capital stock and
partnership interest of their respective subsidiaries. Dividends and
distributions received with respect to equity interests in subsidiaries of
THCR Holdings and Trump Atlantic City are the sole source of funds which are
available to THCR Holdings and Trump Atlantic City to meet their respective
obligations, including the obligations under the Senior Notes by THCR Holdings
and the obligations under the Mortgage Notes by Trump Atlantic City. The
payment of dividends and distributions by the Company's subsidiaries including
THCR Holdings, however, is significantly restricted by certain covenants
contained in debt agreements and other agreements to which such subsidiaries
are subject and may be restricted by other agreements entered into in the
future and by applicable law. However, the terms of the Mortgage Notes will,
under certain circumstances and subject to certain limitations, require Trump
Atlantic City to make distributions to THCR Holdings to enable THCR Holdings
to make scheduled interest payments on its Senior Notes. See "--Restrictions
on Certain Activities" and "Description of the THCR Holdings Partnership
Agreement." In the event that THCR Holdings and Trump Atlantic City are not
able to meet scheduled payments of interest and principal, with respect to the
Senior Notes or the Mortgage Notes, the value of the Common Stock would be
materially and adversely affected.
The Company has never paid a dividend on the Common Stock and does not
anticipate paying one in the foreseeable future.
RISK IN REFINANCING AND REPAYMENT OF INDEBTEDNESS; NEED FOR ADDITIONAL
FINANCING
The ability of THCR Holdings and THCR Funding, and Trump Atlantic City and
Trump Atlantic City Funding, to pay their respective indebtedness when due
will depend upon the ability of the Company and its subsidiaries (with respect
to the Senior Notes) and Trump Atlantic City and its subsidiaries (with
respect to the Mortgage Notes) 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 Senior Notes or Mortgage Notes. Thus, the
repayment of the principal amount of the Notes will likely depend primarily
upon the ability to refinance the Notes when due. The future operating
performance and the ability to refinance the 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
the Company. There can be no assurance that the future operating performance
of the Company 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 the Company will be conducive to refinancing the Notes
or other attempts to raise capital. In the event that the Company is unable to
refinance the Notes when due, the value of the Common Stock would be
materially and adversely affected. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
The cost to the Company for the development of the Indiana Riverboat through
the commencement of its operations (expected in the second quarter of 1996),
which includes the land, the vessel, gaming equipment, a pavilion for staging
and ticketing and restaurant facilities, berthing and support facilities and
parking facilities, is expected to be approximately $84 million. The Company
initially anticipated spending $59 million prior to the commencement of the
Indiana Riverboat's operations for the vessel, gaming equipment and initial
berthing and support facilities, and also anticipated spending an additional
$27 million in the second phase to be completed by mid-1997, which would
feature a pavilion for staging and ticketing and restaurant facilities,
berthing and support facilities and expanded parking. To facilitate the
Indiana Riverboat's operations from the opening day and to avoid disruptive
construction at the site for an additional year, the Company determined to
accelerate the second phase of the project, now expected to cost $25 million,
and complete both phases prior to commencing
22
<PAGE>
operations. The Company anticipates obtaining the additional $25 million in
financing to complete the accelerated development of the Indiana Riverboat
through the commencement of its operations in the form of $5 million in
additional vessel financing, $10 million in mortgage financing or from a
working capital facility and $10 million in operating leases. Trump Indiana
has entered into an equipment lease for nearly $2.0 million and has signed a
letter of intent for an additional equipment lease for $14.2 million
(including approximately $8 million for slot machines included in the initial
$59 million cost). Trump Indiana is seeking commitments for the remaining
financing. During its initial five-year license term, an additional $69
million of funds (consisting of approximately $48 million for construction of
a hotel and other amenities and $21 million in infrastructure improvements and
other municipal uses) will be required to be spent by Trump Indiana, which is
expected to be funded with cash from operations or additional borrowings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company 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 the Company
to obtain all or a significant portion of the financings discussed above may
have a material adverse effect on the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
RESTRICTIONS ON CERTAIN ACTIVITIES
The Senior Note Indenture imposes restrictions on the activities of THCR
Holdings and its subsidiaries and the indenture pursuant to which the Mortgage
Notes will be issued (the "Mortgage Note Indenture") will impose restrictions
on the activities of 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 the Company 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 Senior Note Indenture or the
Mortgage Note Indenture, which could permit acceleration of the Notes and
acceleration of certain other indebtedness of the Company under other
instruments that may contain cross-acceleration or cross-default provisions.
In the event that the Notes are accelerated, the value of the Common Stock
would be materially and adversely affected.
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 (including an extraordinary gain of $4.1 million) for the year
ended December 31, 1993. For the period from January 1, 1995 through June 12,
1995, Plaza Associates had a net loss of $11.0 million (including an
extraordinary loss of $9.3 million). 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. See "Business--Business Strategy--Trump
Plaza." In June 1993, Plaza Associates, Plaza Funding and THCR Atlantic City
completed a refinancing, the purpose of which was to enhance Plaza Associates'
liquidity and to position Plaza Associates for a subsequent deleveraging
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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 the Company and Taj Associates, is also the Chief
Executive Officer of TCA, the partnership that owns and operates Trump's
Castle. Messrs. Robert M. Pickus and John P. Burke, officers of the Company,
are each officers of TCA and Taj Associates. In addition, Messrs. Trump,
Ribis, Pickus and Burke serve on one or more of the governing bodies of the
Company, 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 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 the Company. 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
the Company and Taj Holding that they will not engage in any activity which
they reasonably expect will harm the Company, Taj Holding or their respective
affiliates or is otherwise inconsistent with their obligations as officers and
directors of the Company, Taj Holding or their affiliates. See "Management--
Compensation Committee Interlocks and Insider Participation--Certain Related
Party Transactions of Trump" and "--Other Relationships."
CONTROL AND INVOLVEMENT OF TRUMP
Trump's Substantial Voting Power. Upon consummation of the Merger
Transaction, through his beneficial ownership of the Class B Common Stock,
Trump will continue to exercise considerable influence over the affairs
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of the Company and will control approximately 27% of the total voting power of
the Company (assuming a price of $24.00 per share of Common Stock as Market
Value in connection with the Merger and as the public offering price in the
Stock Offering). The Company believes that the involvement of Trump in the
affairs of the Company is an important factor that will affect the prospects
of the Company. Following the Merger Transaction, Trump will continue to
pursue, develop, control and conduct all of his gaming business (except for
Trump's Castle) through the Company. See "--Conflicts of Interest."
Trump's Personal Indebtedness. Although Trump has no obligation to
contribute funds to the Company or THCR Holdings 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 the Company 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 the Company'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 shares of Common Stock
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 interests 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 will have ongoing requirements to make payments of principal and
interest on his outstanding indebtedness following the consummation of the
Merger Transaction. In addition, the agreements with respect to Trump's
indebtedness generally contain comprehensive covenants and events of default
which relate to the operations of certain of his affiliates. If such covenants
are breached or if events of default otherwise occur, either of which could
occur at any time, such indebtedness could be subject to acceleration by the
applicable lenders. Any such acceleration could have a material adverse effect
on Trump. Furthermore, a substantial portion of Trump's assets consist of real
property or interests in regulated enterprises, which may affect the liquidity
of such assets. Trump has advised the Company and Taj Holding that he is
actively pursuing all reasonable means of providing for the repayment or
rescheduling of such indebtedness. There can be no assurance that Trump will
be successful in repaying or rescheduling his indebtedness or that his assets
will appreciate sufficiently to provide a source of repayment for such
indebtedness. Trump's ability to repay his indebtedness is subject to
significant business, economic, regulatory and competitive uncertainties, many
of which are beyond his control. Any failure by Trump to repay or reschedule
his indebtedness or to otherwise maintain financial stability may have a
material adverse effect on the Company. Moreover, if the CCC at any time finds
Trump to be financially unstable under the Casino Control Act, the CCC is
authorized to take any necessary public action to protect the public interest,
including the suspension or revocation of the casino licenses of Plaza
Associates and/or Taj Associates. Any jurisdiction in which the Company may
seek to conduct gaming operations would likely have similar regulations. See
"--Strict Regulation by Gaming Authorities" and "Regulatory Matters."
Trump has informed the Company 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 the Company
and THCR Holdings. In the event that Trump is unable to pay such indebtedness
when due, subject to applicable regulatory approval, such lenders would have
the right to foreclose on the pledged Class B Common Stock and the pledged
limited partnership interests in THCR Holdings and cause such interests to be
converted into shares of 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 Common Stock. Trump is currently subject to
certain loan agreements which contain covenants that relate to his equity
interests in Taj Associates. See "--Control and Involvement of
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Trump." In connection with the Merger Transaction, Trump is seeking to obtain
from his personal creditors, among other things, releases of liens on his
direct and indirect equity interests in Taj Associates, which releases are
required to consummate the Merger Transaction. 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 connection with the Merger
Transaction in order to release certain liens and guarantees. BT Securities
has rendered financial advisory services to the Company and Taj Holding in the
past, acted as co-manager in the June 1995 Offerings, and is expected to serve
as an underwriter of 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.
Change of Control. The Amended and Restated Certificate of Incorporation of
the Company (the "Certificate of Incorporation") and Amended and Restated By-
Laws of the Company (the "By-Laws") contain provisions which may have the
effect of delaying, deferring or preventing a change in control of the
Company. In addition, the Senior Note Indenture contains, and the Mortgage
Note Indenture will contain, provisions relating to certain changes of control
of THCR Holdings and Trump Atlantic City. Upon the occurrence of such a change
of control, the respective issuers would be obligated to make an offer to
purchase all of the respective 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. Because of the control of Trump as described above, the value of the
Common Stock may be less than it would otherwise be absent such control.
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 early in 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, 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 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 Company. 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
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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" and "Management--Compensation
Committee Interlocks and Insider Participation--Certain Related Party
Transactions of Trump--Plaza Associates."
Trump Plaza East. Plaza Associates has opened the casino and 249 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, the Company would be required to write off the
capitalized construction costs associated with the project. Plaza Associates
intends to exercise the Trump Plaza East Purchase Option in connection with
the Merger Transaction. See "Management--Compensation Committee Interlocks and
Insider Participation--Certain Related Party Transactions of Trump--Plaza
Associates."
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 beginning two years after the commencement date in
the event that gross sales for the store do not meet certain threshold amounts
or at any time after July 1996 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--Plaza Associates."
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, the Company 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
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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," "--Holding Company Structure; No
Anticipation of Dividends," "--Risk in Refinancing and Repayment of
Indebtedness; 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 preliminary and subject to modification will be principally funded
out of cash from the operations of the Atlantic City Properties. The ability
to complete such expansion is also expected to depend on the ability of the
Company to obtain debt financing for such purpose. There can be no assurance
that the Atlantic City Properties will be able to generate sufficient cash
from operations or that financing could be obtained on terms satisfactory to
the Company, 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 Mortgage Note Indenture. See
"--High Leverage and Fixed Charges," "--Holding Company Structure; No
Anticipation of Dividends," "--Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing," "--Restrictions on Certain
Activities" and "Business--Atlantic City Marketing Strategy--The Taj Mahal."
THE INDIANA RIVERBOAT
New Venture Risk. The Indiana Riverboat is a start-up development. Trump
Indiana's operations are subject to all of the many risks inherent in the
establishment of a new business enterprise, including unanticipated
construction, permitting, licensing or operating problems with the riverboat
and land-based, berthing and support facilities, as well as the ability of the
Company to market and operate a new venture in a new gaming jurisdiction.
Although construction of the vessel and land-based facilities has begun and is
scheduled for opening in the second quarter of 1996, there can be no assurance
that the Indiana Riverboat will become operational or that such project will
be completed on budget or on schedule. Furthermore, construction projects,
such as the Indiana Riverboat, entail significant risks. See "--Considerations
with Respect to the Acquisition or Development of Additional Gaming Ventures."
As with gaming laws and regulations generally, and particularly in light of
the limited history of regulated gaming activities in Indiana, the application
of Indiana gaming laws and Indiana Gaming Commission ("IGC") regulations may
cause uncertainty with respect to the Indiana Riverboat and the restrictions
under which Trump Indiana must operate. The Company cannot make any
predictions as to the application of such gaming laws and regulations by the
IGC.
While the Company and its management have substantial experience in
operating gaming properties in New Jersey, the Company has never been involved
in constructing or operating riverboat casinos, and there is no operating
history with respect to the Company's proposed operation at Buffington Harbor,
Indiana. The Company's future operating results at Buffington Harbor will
depend upon the Company's ability to complete and open gaming facilities on
schedule and several other factors over which the Company will have little or
no control, including, without limitation, general economic conditions, gaming
taxes, the availability of ancillary facilities to support gaming visitors,
competition, the availability of adequately trained gaming employees and the
ability to obtain and maintain the necessary licenses and permits. There can
be no assurance that the Company's operations will prove successful or that
the Company will be able to generate sufficient revenues from such operations
or attain and maintain profitable operations. In addition, the Company is
unable to predict whether seasonality will have a material effect on the
operations of the Indiana Riverboat.
Trump Indiana and The Majestic Star Casino, LLC ("Barden"), an entity
beneficially owned by Don H. Barden, a developer based in Detroit without
significant gaming experience, are the two holders of certificates of
suitability for Buffington Harbor. Trump Indiana and Barden formed BHR and
have entered into an agreement (the "BHR Agreement") relating to the joint
ownership, development and operation of all common land-based and waterside
operations in support of each of Trump Indiana's and Barden's separate
riverboat casinos at Buffington Harbor. Trump Indiana and Barden will each be
equally responsible for the development and operating expenses of the common
land-based facilities at such site and the Company will be dependent on the
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ability of Barden to pay for its share of all future expenses. There can be no
assurance that the Company or Trump Indiana will be able to fund from
operations or to finance on terms satisfactory to the Company or Trump Indiana
any such required expenditures or, if available, such other indebtedness would
be permitted under existing debt instruments of the Company. Furthermore, while
Barden has made all required capital contributions, there can be no assurance
that Barden will be able to fund its portion of such expenses. Additionally, if
either Trump Indiana or Barden causes, permits or suffers an event of default
under the BHR Agreement to continue for more than 270 days, including the
failure to make a capital contribution or to fulfill any other obligation
thereunder within 30 days after written notice, the nondefaulting party will
have the right to acquire the defaulting party's interest in BHR for a purchase
price of $1 million.
Environmental Risks. The Indiana Riverboat is located in an area on Lake
Michigan known as Buffington Harbor. Buffington Harbor had been the site of
industrial operations, which prior operations or activities have or may have
resulted in pollution or contamination of the environment. As an owner and
operator of the Indiana Riverboat, Trump Indiana and the Company could be held
liable under certain legal theories for the costs of cleaning up, as well as
certain damages resulting from, past or present spills, disposals or other
releases of hazardous or toxic substances or wastes on, in or from the site,
regardless of whether either party knew of, or was responsible for, the
presence of such substances or wastes at the site. Neither the Company nor
Trump Indiana has a source of indemnity for any such liability. However, the
Company believes, based on third-party engineering reports, that it has
completed all remedial activities expected to be required.
Maritime and Weather Considerations. Under the provisions of Title 46 of the
United States Code, the design, construction and operation of the Indiana
Riverboat are subject to regulation and approval by the U.S. Coast Guard. Prior
to the commencement of operations, a Certificate of Inspection and a
Certificate of Documentation must be obtained from the U.S. Coast Guard. As a
condition of the issuance of a Certificate of Inspection, the U.S. Coast Guard
may, among other things, require changes in the design or construction of the
Indiana Riverboat that may materially increase the cost of construction and/or
materially delay the completion of construction and the commencement of
operations. All shipboard employees of Trump Indiana employed on U.S. Coast
Guard regulated vessels, including those not involved with the actual operation
of the vessel, such as dealers, cocktail hostesses and security personnel, may
be subject to certain federal legislation relating to maritime activity, which,
among other things, exempts those employees from state limits on workers'
compensation awards. The Company expects that it will have adequate insurance
to cover employee claims.
The Indiana Riverboat is anticipated to be a cruising riverboat, which, among
other things, would require a U.S. Coast Guard hull inspection at five-year
intervals. Operating at Buffington Harbor will expose the Indiana Riverboat to
marine hazards such as unpredictable currents, floods or other severe weather
conditions and a heavy volume of maritime traffic. The Company anticipates that
adequate maritime insurance coverage will be obtained for the Indiana
Riverboat; however, the occurrence of a catastrophic loss in excess of coverage
would have a material adverse effect on the Company. Trump Indiana's revenues
will be derived from its riverboat and land-based facilities. A riverboat could
be lost from service due to casualty, mechanical failure, extended or
extraordinary maintenance, or inspection. The loss of a vessel from service for
an extended period of time could adversely affect Trump Indiana's operations.
Business activity at any location could also be adversely affected by a flood
or other severe weather conditions. Flooding in particular, as well as other
severe weather conditions, could make the Company's vessel more difficult or
impossible to board, or even result in a prolonged or total loss of a gaming
vessel, either of which could have a material adverse effect on the Company.
Although the Company expects to maintain insurance against casualty losses
resulting from severe weather, the insurance coverage maintained may not
adequately compensate the Company for losses, including loss of profits,
resulting from severe weather.
COMPETITION
Trump Plaza and the Taj Mahal. Competition in the Atlantic City casino hotel
market is intense. The Atlantic City Properties compete with each other and
with the other casino hotels located in Atlantic City,
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including the other casino hotel owned by Trump, Trump's Castle Casino Resort
("Trump's Castle"). See "--Conflicts of Interest." The Atlantic City
Properties each 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 Atlantic City Properties, 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 the Company 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 of the Atlantic
City Properties. 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, the Company 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."
The Atlantic City Properties also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, the Atlantic City Properties face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, 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, the Atlantic
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City Properties compete directly with each other and with Trump 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 the Taj Mahal will operate to the competitive detriment of
the other.
The Indiana Riverboat. The Company anticipates that the Indiana Riverboat
will compete primarily with riverboats and other casinos in the greater
Chicago metropolitan area and throughout the Great Lakes Market. Although
northern Indiana is part of the greater Chicago metropolitan market, which is
one of the most successful new gaming markets in the United States, the
Indiana Riverboat may be more dependent on patrons from northern Indiana than
its Illinois competitors, and the propensity of these patrons to wager cannot
be predicted with any degree of certainty. In addition to competing with
Barden's riverboat at the shared Buffington Harbor site, the Indiana Riverboat
will compete with a riverboat in Hammond, Indiana which is being developed by
the owner and operator of the Empress Riverboat Casino in Joliet, Illinois, a
riverboat in East Chicago, Indiana, which is being developed by Showboat, Inc.
and with the riverboat expected to be licensed in the nearby community of
Michigan City, Indiana. To a lesser degree, the Indiana Riverboat will compete
with the six additional riverboats expected to be licensed in the rest of
Indiana. At present there are four other riverboat casino operations in the
Chicago area (three of which operate two riverboats each, with each operator
limited to 1,200 gaming positions in the aggregate). In addition, a casino
opened during 1994 in Windsor, Ontario, across the river from Detroit, and
Detroit is considering several proposals for casinos in its downtown area.
Although the Company believes that there is sufficient demand in the market to
sustain the Indiana Riverboat, there can be no assurance to that effect.
Legislation has also been introduced on numerous occasions in recent years to
expand riverboat gaming in Illinois, including by authorizing new sites in the
Chicago area with which the Indiana Riverboat would compete. The Company
understands that there have been recent discussions in Illinois regarding
possible legislation to permit dockside gaming and or increase the gaming
position limitations. There can be no assurance that either Indiana or
Illinois, or both, will not authorize additional gaming licenses, including
for the Chicago metropolitan area. See "--The Indiana Riverboat."
The Company believes that competition in the gaming industry, particularly
the riverboat and dockside gaming industry, is based principally on the
quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Although management of the
Company believes that the location of the Indiana Riverboat will allow the
Company to compete effectively with other casinos in the geographic area
surrounding its casino, the Company expects competition in the casino gaming
industry to be intense as more casinos are opened and new entrants into the
gaming industry become operational. Furthermore, new or expanded operations by
other persons can be expected to increase competition for existing and future
operations and could result in a saturation of the Great Lakes Market.
Other Competition. In addition, the Atlantic City Properties face, and the
Indiana Riverboat will face, competition from casino facilities in a number of
states operate by federally recognized Native American tribes. Pursuant to the
Indian Gaming Regulatory Act ("IGRA"), which was passed by Congress in 1988,
any state which permits casino style gaming (even if only for limited charity
purposes) is required to negotiate gaming compacts with federally recognized
Native American tribes. Under IGRA, Native American tribes enjoy comparative
freedom from regulation and taxation of gaming operations, which provides them
with an advantage over their competitors, including the Atlantic City
Properties and the Indiana Riverboat. 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
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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, 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. 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. Legislation has also been
introduced on numerous occasions in recent years to expand riverboat gaming in
Illinois, including by authorizing new sites in the Chicago area with which
the Indiana Riverboat would compete and by otherwise modifying existing
regulations to decrease or eliminate certain restrictions such as gaming
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position limitations. To date, no such legislation has been enacted. The
Company is unable to predict whether any such legislation, in New Jersey,
Indiana, Illinois or elsewhere, will be enacted or whether, if passed, it
would have a material adverse impact on the Company.
RELIANCE ON KEY PERSONNEL
The ability of the Company and Taj Associates 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 the
Company, the Chief Executive Officer of THCR Holdings and the Chief Executive
Officer of Taj Associates. Mr. Ribis' employment agreements with the Company
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 the Company and Taj Associates currently
allocate their time among the Company'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 the Company and its
subsidiaries. See "Management."
STRICT REGULATION BY GAMING AUTHORITIES
General. Any jurisdiction in which the Company may seek to conduct gaming
operations would likely require the Company to apply for and obtain licenses
and regulatory approvals with respect to the construction, design and
operational features of the gaming facilities it intends to operate in that
jurisdiction. The obtaining of such licenses and approvals may be time
consuming and expensive and cannot be assured.
The Company believes that the availability of significant additional revenue
through taxation is one of the primary reasons that Indiana and other
jurisdictions have legalized gaming. The Company'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 the Company.
Trump Plaza and the Taj Mahal. 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 the Company. 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, subject to
revocation or suspension upon the occurrance of certain events. 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.
The Casino Control Act imposes substantial restrictions on the ownership of
securities of the Company. A shareholder may be required to meet the
qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. Each institutional investor (as defined in
the Casino Control Act) seeking a waiver of qualification must execute a
certification that it has no intention of influencing or affecting the affairs
of the issuer, the casino licensee or its holding or intermediary companies
(except for voting at shareholder meetings), which certification will be
provided to the New Jersey Division of Gaming Enforcement and the CCC.
Pursuant to the provisions of the Casino Control Act, the Certificate of
Incorporation provides that all securities of the Company are held subject to
the condition that, if a holder thereof is found to be disqualified by the CCC
pursuant to the provisions of the Casino Control Act, such holder shall (a)
dispose of his interest in the Company;
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(b) not receive any dividends or interest upon any such securities; (c) not
exercise, directly or through any trustee or nominee, any right conferred by
such securities; and (d) not receive any remuneration in any form from the
casino licensee for services rendered or otherwise. See "Regulatory Matters--
New Jersey Gaming Regulations."
The Indiana Riverboat. In January 1996, the Indiana Gaming Commission (the
"IGC") extended Trump Indiana's certificate of suitability constituting
approval of the application for a riverboat owner's license for a riverboat to
be docked at Buffington Harbor, on Lake Michigan in Indiana. The certificate
of suitability is valid until June 28, 1996, and may be further extended upon
written application to and approval of the IGC. A riverboat owner's license
will only be issued upon satisfaction of the conditions of the certificate of
suitability and the requirements of the gaming laws, which include completion
of the Indiana Riverboat's vessel, acquisition of necessary permits or
approvals from federal, state and local authorities and readiness to commence
operations. Pursuant to the terms of the certificate of suitability, Trump
Indiana must comply with certain other requirements imposed by the IGC,
including a requirement that Trump Indiana invest an aggregate of $153 million
in the Indiana Riverboat and certain related projects and certain economic
development projects and pay certain incentive fees based on percentages of
gaming revenues and earnings to the City of Gary, Indiana. Failure to comply
with the foregoing conditions and/or failure to commence riverboat excursions
as may be required by the IGC may result in the expiration of the certificate
of suitability. There can be no assurance that the Company and/or Trump
Indiana will be able to comply with the terms of the certificate of
suitability, that it will be further extended if operations do not commence by
June 28, 1996 or that a riverboat owner's license for the Indiana Riverboat
will ultimately be granted. Further, the IGC may place restrictions,
conditions or requirements on the permanent riverboat owner's license. If
granted, such license would be for an initial term of five years and renewable
annually thereafter, subject to revocation or suspension. With respect to
certain land-based, berthing and support facilities as currently planned,
Trump Indiana is also dependent on the ability of Barden to obtain the
requisite licenses and fund its portion of joint development and operating
costs under the BHR Agreement.
In October 1994, the U.S. Attorney General's Office in Indiana notified the
IGC that a federal law passed in 1951, commonly known as the Johnson Act,
prohibits gaming vessels from cruising within federal maritime jurisdiction
and prohibits gaming on such vessels. The Department of Justice has expressed
concern that the Johnson Act may prohibit gaming on vessels on the Great Lakes
because it has contended that the Great Lakes are within federal maritime
jurisdiction. The Department of Justice is still considering the issue,
however, and has not reached a definitive conclusion. Currently, Congress has
legislation pending that contains a related amendment to the Johnson Act. The
Coast Guard Authorization bill, which contains a provision that would amend
the Johnson Act specifically to allow gaming on vessels in the Indiana waters
of Lake Michigan, was passed by the House of Representatives. The Senate-
passed version of the Coast Guard Authorization bill does not contain a
similar provision. Because the House of Representatives and the Senate passed
different versions of the Coast Guard Authorization bill, a conference
committee composed of House and Senate members is expected to be formed later
in the Second Session of the 104th Congress (1996) to resolve differences in
these versions. The Johnson Act also contains an exception to such
prohibitions if a state adopts a law that permits gaming vessels to depart and
return to ports within its jurisdiction and engage in gaming outside federal
maritime jurisdiction. The Indiana legislature has taken certain actions with
respect to gaming on vessels and the IGC has determined that the legislature
modified Indiana law to allow gaming on vessels while the vessels are docked
under certain conditions. Notwithstanding the IGC's determination, there can
be no assurance that commencement of gaming operations by Trump Indiana when
the riverboat is docked would not be challenged as a violation of Indiana law
or federal law. See "Regulatory Matters--Indiana Gaming Regulations--
Excursions."
Pursuant to IGC proposed rules, any person acquiring 5% or more of Common
Stock (or for certain institutional investors, 15%) must be found suitable by
the IGC. The IGC has the authority to require a finding of suitability with
respect to any stockholder regardless of the percentage of ownership. In this
regard, the Certificate of Incorporation provides that the Company may redeem
any shares of the Company's capital stock held by any person or entity whose
holding of shares may cause the loss or non-reinstatement of a governmental
license held by the Company. Such redemption shall be at the lesser of the
price at which the stock was
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purchased or the market price (as defined in the Certificate of
Incorporation). See "Regulatory Matters--Indiana Gaming Regulations--Indiana
Gaming Commission."
CONSIDERATIONS WITH RESPECT TO THE ACQUISITION OR DEVELOPMENT OF ADDITIONAL
GAMING VENTURES
The Company's growth strategy includes the selective acquisition,
development, ownership and/or management of dockside, riverboat and/or land-
based casinos in emerging and established gaming jurisdictions. The Company's
plans for development and acquisition of gaming ventures in addition to Trump
Plaza, the Indiana Riverboat and the Taj Mahal are speculative at this time,
as the Company has no present plans to acquire or develop any other specific
gaming venture. The availability of new gaming opportunities is largely
dependent on the legality of gaming in various states, and gaming is currently
prohibited throughout most of the United States. Moreover, the recent
expansion of the legalization of gaming may not continue and furthermore, the
potential exists for the repeal of gaming in certain jurisdictions where it is
currently permitted. Legislation relating to gaming has been introduced and
failed to pass in the legislatures in a number of states including Connecticut
and Florida, and furthermore, the potential exists for the repeal of gaming in
certain jurisdictions where it is currently permitted. For these and other
reasons, no assurance can be given that attractive opportunities to develop
new operations will be available to the Company or that the Company will be
able to take advantage of any opportunity that does arise.
To engage in multiple projects or larger scale development activities, the
Company will need to obtain financing from third parties and may require
additional managerial resources. There can be no assurance that additional
financing or managerial talent will be available or, if available, that it
would be on terms satisfactory to the Company. Incurrence of such indebtedness
would also be subject to restrictions under debt instruments of the Company.
See "--High Leverage and Fixed Charges" and "--Restrictions on Certain
Activities." In addition, the Company would need to obtain additional sites
and licenses to operate such gaming facilities and competition for suitable
sites and for licenses is usually intense. No assurance can be given that the
Company will be able to obtain desirable sites or necessary licenses or
successfully overcome the regulatory, financial, business and other problems
inherent in the construction and operation of any new gaming venture.
Construction projects, such as those proposed in connection with the
development of new gaming ventures, including those currently proposed by
Plaza Associates, Trump Indiana and Taj Associates, entail significant risks,
including shortages of materials or skilled labor, unforeseen engineering,
environmental or geological problems, work stoppages, weather interference,
floods, unanticipated cost increases, the inability to commence operations as
scheduled and other problems. The number and scope of the licenses and
approvals required to complete the construction of any project, such as a
hotel and other destination resort facilities, are extensive, including,
without limitation, the approval of state and local land-use authorities and
the acquisition of building and zoning permits. Unexpected concessions
required by local, state or federal regulatory authorities could involve
significant additional costs and delay scheduled openings of facilities. There
can be no assurance that the Company will receive the licenses and approvals
necessary to undertake or complete any of its development plans, or that such
licenses and approvals will be obtained within the anticipated time frame.
LIMITATIONS ON LICENSE OF THE TRUMP NAME
Subject to certain restrictions, the Company 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 the Company (the "License
Agreement"). See "Business--Trademark/Licensing." The Company'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, the Company would have
rights, subject to the requirements of applicable state law, to enforce the
rights and remedies contained in the Trademark Security
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Agreement. In the event of a foreclosure sale of the Marks, the net amount
realized in such sale by the Company might not yield the full amount of
damages that the Company 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 the Company to realize the benefits of the Trademark Security
Agreement. The Company'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 the Company's having
repossessed and disposed of the Marks. Under the Bankruptcy Code, secured
creditors, such as the Company, 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 the Company would repossess or dispose of the
Marks, or whether or to what extent the Company 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, the Company could assert a claim for damages, secured by the
Company's lien on the Marks.
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of Trump Atlantic City under the Mortgage Notes, which will
be issued as part of the Merger Transaction, 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 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 court
could avoid Trump Atlantic City's obligations under the 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 (each, a "Guarantor") under its guarantee of the Mortgage Notes, as
well as the security interest granted by such Guarantor in its assets to
secure the 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 that event, if 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.
In the event a fraudulent transfer were found to have occurred under the
circumstances described above, 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, would not have recourse against
stockholders of the Company.
If a court were to conclude that Trump Atlantic City received less than
reasonably equivalent value from selling stockholders of Taj Holding, and, as
a consequence thereof, Trump Atlantic City: (i) was insolvent, (ii) was
rendered insolvent, (iii) was engaged in a business or transaction for which
its remaining unencumbered
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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, Trump Atlantic City, as debtor in possession, or another
representative of its estate (such as a bankruptcy trustee) could, among other
things, seek to recover the amounts paid to such selling stockholders to the
extent such amounts exceed the fair market value of the assets transferred.
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) were less 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.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following completion of the Merger Transaction, there will be
23,066,667 shares of Common Stock outstanding (assuming all of the holders of
Taj Holding elect Cash Consideration and a Market Value of $24.00 per share in
connection with the Merger and as the public offering price in the Stock
Offering) (24,941,667 shares if the Underwriters' over-allotment option is
exercised in full), excluding (i) 8,354,167 shares of Common Stock (subject to
certain adjustment) issuable upon conversion of Trump's and TTMI'S limited
partnership interest in THCR Holdings, (ii) the 66,666 shares of Common Stock
underlying phantom stock units issued to the Chief Executive Officer of the
Company, (iii) 133,333 shares of Common Stock issuable upon exercise of
options granted to the Chief Executive Officer of the Company pursuant to the
1995 Stock Plan, (iv) an additional 733,334 shares of Common Stock reserved
for issuance pursuant to the 1995 Stock Plan, (v) 1.8 million shares of Common
Stock reserved for issuance in connection with the warrant to be issued to
Trump and (vi) the Class B Common Stock, which shares are not entitled to
dividends or distributions and represent Trump's and TTMI's respective voting
interest and become nonvoting to the extent of a conversion of Trump's and
TTMI's respective interest in THCR Holdings. In the event that holders of Taj
Holding Class A Common Stock elect to receive shares of Common Stock in the
Merger, the Company may or may not reduce the size of the Stock Offering, in
which case such additional shares issued in the Merger would also be
outstanding following the Merger Transaction. In addition to the 12,500,000
shares of Common Stock offered hereby, the Company may issue up to an
additional 20% of such number of shares to fund working capital. Of those
shares outstanding, an aggregate of 23,000,000 shares, including those shares
to be sold in the Stock Offering and issued to First Fidelity (24,875,000
shares if the Underwriters' over-allotment option is exercised in full) (the
"Offered Shares"), will be freely tradeable without restriction or future
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless acquired by an "affiliate" (as defined in the Securities Act) of
the Company, which shares will be subject to resale limitations of Rule 144
promulgated under the Securities Act ("Rule 144"). The remaining 66,667 shares
outstanding upon completion of the Stock Offering will not have been
registered under the Securities Act and are restricted securities within the
meaning of Rule 144 ("Restricted Shares"), except that such shares and the
shares of Common Stock issuable upon conversion of Trump's and TTMI's limited
partnership interest in THCR Holdings, will have certain registration rights.
See "Description of the THCR Holdings Partnership Agreement--Exchange and
Registration Rights." Restricted Shares cannot be sold publicly in the absence
of such registration, unless sold pursuant to an exemption under the
Securities Act, such as the exemption provided by Rule 144. It is expected
that the Company and certain stockholders will agree not to issue, sell or
otherwise dispose of shares of or securities convertible into or exercisable
or exchangeable for Common Stock for a period of time after the date of this
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") as the lead Underwriter of the Stock Offering.
Upon expiration of the applicable lock-up agreement with the Underwriters, the
shares subject to and covered thereby will be eligible for sale subject to the
restrictions contained in the Securities Act and the rules and regulations
promulgated thereunder, including Rule 144. Sales of substantial amounts of
Common Stock in the
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public market subsequent to the Stock Offering, or the perception that such
sales could occur, could adversely affect the prevailing market price of the
Common Stock and could impair the Company's ability to raise capital through
the sale of equity securities. See "Shares Eligible for Future Sale."
TRADING MARKETS; POTENTIAL VOLATILITY OF MARKET PRICE
The Common Stock began trading in June 1995, and since that time its price
has fluctuated substantially. The price at which the Common Stock will trade
in the future will depend upon a number of factors, including, without
limitation, the Company's historical and anticipated operating results
(including the timing of the openings related to the various expansion
projects), overall Atlantic City gaming results and general market and
economic conditions, several of which factors are beyond the control of the
Company. In addition, factors such as quarterly fluctuations in the Company's
financial and operating results, announcements by the Company or others, and
developments affecting the Company, its customers, the Atlantic City or Great
Lakes markets or the gaming industry generally, could cause the market price
of the Common Stock to fluctuate substantially. See "Price Range of Common
Stock."
38
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Stock Offering, after payment of
underwriting discounts and expenses, are estimated to be $ million ($
million if the Underwriters' over-allotment option is exercised in full). In
connection with the Merger Transaction, the net proceeds from the Stock
Offering, together with the net proceeds from the Mortgage Note 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>
Stock Offering(b)(d)..... $ 300.0
Mortgage Note Offering... 1,100
Available Cash........... 10.7
--------
Total Cash Sources...... 1,410.7
--------
</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 Fee and Expenses.... 49.4
Payment to First Fidelity..... 50.0
Payment to Bankers Trust...... 10.0
Acquisition 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
--------
</TABLE>
<TABLE>
<CAPTION>
NON-CASH SOURCES
- ----------------
<S> <C>
Common Stock Equivalents to be issued to Trump(c).. 40.5
Common Stock to be issued to
First Fidelity(d).............. 12.0
--------
Total Non-Cash Sources......... 52.5
--------
TOTAL SOURCES................... $1,463.2
========
</TABLE>
<TABLE>
<S> <C>
NON-CASH USES
- -------------
Acquisition of Trump's direct
and indirect equity interests
in Taj Associates............. 40.5
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 that any holder of Taj Holding
Class A Common Stock elects Stock Consideration in lieu of Cash
Consideration, the Company may decrease the size of the Stock Offering.
(c) Represents the value of the shares of 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 ("TTMI") in connection
with the Merger Transaction will be convertible.
(d) Assumes a price of $24.00 per share of Common Stock.
39
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is listed on the NYSE under the symbol "DJT." The initial
public offering price of the Common Stock was $14.00 per share. The following
table reflects the high and low sales prices of the Common Stock as reported
by the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
----
First quarter............................................... N/A N/A
Second quarter (from June 7, 1995).......................... $14 1/4 $11 3/8
Third quarter............................................... $19 3/4 $13
Fourth quarter.............................................. $21 5/8 $14
1996
----
First quarter (through March 4, 1996)....................... $25 5/8 $18 3/4
</TABLE>
On January 31, 1996, the last sales price of the Common Stock reported on
the NYSE was $21 1/2. As of March , 1996, there were approximately
holders of record of Common Stock.
Trump is the sole beneficial owner of all 1,000 outstanding shares of Class
B Common Stock. No established trading market exists for the Class B Common
Stock, and no shares of Class B Common Stock have been transferred since their
issuance to Trump. Following the Merger Transaction, Trump and TTMI will each
own Class B Common Stock; because Trump wholly owns TTMI, Trump will remain
the sole beneficial owner of all outstanding shares of Class B Common Stock.
DIVIDEND POLICY
The Company has never paid a dividend on the Common Stock and does not
anticipate paying one in the foreseeable future. The payment of any future
dividends will be at the discretion of the Board of Directors and will depend
upon, among other things, the Company's financial condition and capital needs,
legal restrictions on the payment of dividends, contractual restrictions in
financing agreements and other factors deemed pertinent by the Board of
Directors. See "Risk Factors--Restrictions on Certain Activities." It is the
current policy of the Board of Directors to retain earnings, if any, for use
in its subsidiaries' operations (except as set forth in the THCR Holdings
Partnership Agreement), and the Company otherwise has no current intention of
paying dividends to the holders of Common Stock. In addition, the Senior Note
Indenture contains, and the Mortgage Note Indenture will contain, certain
covenants, including, without limitation, covenants with respect to
limitations on the payment of dividends, which limitations would limit the
Company's ability to obtain funds from THCR Holdings and Trump Atlantic City,
respectively with which to pay dividends. Pursuant to these indentures there
are restrictions on the payment of dividends unless, among other things, (i)
no default or event of default has occurred and is continuing under the
indentures subject to certain exceptions, (ii) certain entities meet certain
consolidated financial ratios and (iii) the total amount of the dividends does
not exceed certain amounts specified in the indentures. See "Business--Certain
Indebtedness" and "Description of the THCR Holdings Partnership Agreement."
The Class B Common Stock has no right to receive any dividend or other
distribution from the Company.
40
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1995, as adjusted to give effect to the Merger Transaction. This
table should be read in conjunction with the Company's consolidated financial
statements and notes thereto and Unaudited Pro Forma Financial Information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
--------------------------
ACTUAL PRO FORMA
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash: $ 19,208 $ 91,346
========== ============
Debt (including current maturities):
Total debt....................................... $ 500,720(A) $ 1,271,749
---------- ------------
Minority Interest.................................. -- 30,500
---------- ------------
Stockholders' Equity:
Common Stock, $.01 par value, 50,000,000 shares
authorized, 10,066,667 shares issued and
outstanding (23,066,677 shares(B) on a pro forma
basis).......................................... 101 231
Class B Common Stock, $.01 par value, 1,000
shares authorized, issued and outstanding....... -- --
Additional Paid-in Capital....................... 52,411 341,131
Retained Earnings................................ (1,921) (61,035)
---------- ------------
Total Stockholders' Equity..................... 50,591 280,327
---------- ------------
Total Capitalization......................... $ 551,311 $ 1,582,576
========== ============
</TABLE>
- ---------------------
(A) Does not include unamortized discount of $3,348.
(B) Includes a stock bonus award of 66,667 shares of Common Stock granted to
the Chief Executive Officer of the Company pursuant to the Company's 1995
Stock Plan (as defined). Does not include (i) 6,666,836 shares of Common
Stock (subject to certain adjustments) issuable to Trump upon conversion
of his limited partnership interest in THCR Holdings; (ii) 1,687,331
shares of Common Stock (subject to certain adjustments) issuable to TTMI
upon conversion of its limited partnership interests in THCR Holdings;
(iii) 133,333 shares of Common Stock issuable upon exercise of options
granted to the Chief Executive Officer of the Company pursuant to the 1995
Stock Plan; (iv) a phantom stock unit award (representing the right to
receive 66,666 shares of Common Stock on June 12, 1997) granted to the
Chief Executive Officer of the Company pursuant to the 1995 Stock Plan;
(v) 733,334 additional shares reserved for issuance pursuant to the 1995
Stock Plan; (vi) 1,800,000 shares of Common Stock underlying the warrant
to be issued to Trump in connection with the Merger Transaction; or (vii)
any shares of Common Stock which may be issued in the Merger. Also
excludes shares of Class B Stock of the Company held and to be held by
Trump and TTMI which represent non-economic voting interest in the
Company. Assumes a Market Value (as defined) of $24.00 per share of Common
Stock in the Merger and as the public offering price in the Stock
Offering, and that all holders of Taj Holding Class A Common Stock elect
to receive cash in the Merger. In the event that holders of Taj Holding
Class A Common Stock elect to receive shares of Common Stock in the
Merger, the Company may or may not reduce the size of the Stock Offering,
in which case such additional shares issued in the Merger would also be
outstanding following the Merger Transaction. In addition to the
12,500,000 shares of Common Stock offered hereby, the Company may issue up
to an additional 20% of such number of shares to fund working capital. See
"Management--Executive Compensation--1995 Stock Incentive Plan" and
"Description of Capital Stock."
41
<PAGE>
SELECTED HISTORICAL
COMBINED FINANCIAL INFORMATION
THE COMPANY
The following table sets forth certain historical consolidated financial
information of Plaza Associates and Trump Atlantic City (predecessors of the
Company) for each of the years ended December 31, 1991 through 1994 and for
the period January 1, 1995 through June 12, 1995 and certain historical
consolidated financial information of the Company for the period from
inception (June 12, 1995) to December 31, 1995 (See Note 1 below). The
historical financial information of Trump Atlantic City and Plaza Associates
as of December 31, 1994 and June 12, 1995 and for the years ended December 31,
1993 and 1994 for the period January 1, 1995 through June 12, 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. The historical financial
information of the Company as of December 31, 1995 and for the period from
inception (June 12, 1995) through December 31, 1995 as set forth below has
been derived from the audited consolidated financial statements of the Company
included elsewhere in this Prospectus. 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>
TRUMP ATLANTIC CITY AND PLAZA ASSOCIATES
THE COMPANY
FROM INCEPTION
JUNE 12, 1995 TO
FROM DECEMBER 31, 1995
YEARS ENDED DECEMBER 31, JANUARY 1, 1995 (NOTE 1)
-------------------------------------- THROUGH -----------------
1991 1992 1993 1994 JUNE 12, 1995 1995
-------- -------- -------- -------- --------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming................. $233,265 $265,448 $264,081 $261,451 $122,865 $175,208
Other.................. 66,411 73,270 69,203 66,869 29,523 44,659
Trump World's Fair
(formerly Trump
Regency Hotel)........ 11,547 9,465 -- -- -- --
-------- -------- -------- -------- -------- --------
Gross revenues......... 311,223 348,183 333,284 328,320 152,388 219,867
Promotional
allowances............ 31,539 34,865 32,793 33,257 14,540 24,394
-------- -------- -------- -------- -------- --------
Net revenues........... 279,684 313,318 300,491 295,063 137,848 195,473
-------- -------- -------- -------- -------- --------
Costs and expenses:
Gaming................. 133,547 146,328 136,895 139,540 69,467 95,533
Other.................. 23,404 23,670 24,778 23,380 9,483 14,449
General and
administrative........ 69,631 75,459 71,624 73,075 30,081 42,826
Depreciation and
amortization.......... 16,193 15,842 17,554 15,653 6,999 9,219
Restructuring charges.. 943 5,177 -- -- -- --
Trump World's Fair
(formerly Trump
Regency Hotel)........ 19,879 11,839 -- -- -- --
-------- -------- -------- -------- -------- --------
Total costs and
expenses.............. 263,597 278,315 250,851 251,648 116,030 162,027
-------- -------- -------- -------- -------- --------
Income from operations.. 16,087 35,003 49,640 43,415 21,818 33,446
Interest expense, net... 33,363 31,356 39,889 48,219 22,113 31,273
Other non-operating
expense(a)............. 14,818 1,462 3,873 4,931 1,649 4,094
Extraordinary (loss)
gain(b)................ -- (38,205) 4,120 -- (9,250) --
Provision (benefit) for
income taxes........... (2,864) (233) 660 (865) (161) --
-------- -------- -------- -------- -------- --------
Net income (loss)....... $(29,230) $(35,787) $ 9,338 $ (8,870) $(11,033) $ (1,921)
======== ======== ======== ======== ======== ========
Net (loss) per common
share(c)............... $(.19)
=====
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents............ $ 10,474 $ 18,802 $ 14,393 $ 11,144 $ 28,125 $ 19,208
Property and equipment,
net.................... 306,834 300,266 293,141 298,354 301,316 408,231
Total assets............ 378,398 370,349 374,498 375,643 394,085 584,545
Total long-term debt,
net of current
maturities(d).......... 33,326 249,723 395,948 403,214 331,142 494,471
Preferred partnership
interest............... -- 58,092 -- -- -- --
Total capital
(deficit).............. 54,043 11,362 (54,710) (63,580) (74,613) 50,591
</TABLE>
- ------------------
Note 1: The Company was incorporated on March 28, 1995 and conducted no
operations until the June 1995 Stock Offering and contributed the proceeds
therefrom to THCR Holdings in exchange for an approximately 60% general
partnership interest in THCR Holdings. At the consummation of the June 1995
Stock Offering, Trump contributed his 100% beneficial interest in Plaza
Funding. Trump Atlantic City and Plaza Associates, the owner and operator of
Trump Plaza, to THCR Holdings for an approximate 40% limited partnership
interest in THCR Holdings. In addition, Trump contributed to THCR Holdings
all of his existing interests and rights to new gaming activities in both
emerging and established gaming jurisdictions, including Trump Indiana. The
financial data as of December 31, 1995 and for the period ended December 31,
1995 reflect the operations of the Company from inception (June 12, 1995) to
December 31, 1995.
(footnotes on following page)
42
<PAGE>
(a) Other non-operating 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 expense for 1992
includes $1.5 million of costs associated with certain litigation. Other
non-operating expense for the years ended December 31, 1993, 1994, for the
period January 1, 1995 through June 12, 1995 and for the period June 12,
1995 through December 31, 1995 includes $3.9, $4.9, $1.6 and $2.1 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) Earnings per share is based upon weighted average shares outstanding,
shares and phantom stock units awarded to the President of the Company
under the 1995 Stock Incentive Plan and common stock equivalent. The
shares of Class B Common Stock owned by Trump have no economic interest
and, therefore, are not considered.
(d) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
43
<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, 1993, 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 of Financial Condition and Results of Operations--Taj
Associates," "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
--------- --------- --------- --------- ---------
(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
(deficit)............. 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.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
As the Company commenced operations on June 12, 1995 and its results of
operations are primarily those of Plaza Associates, a discussion and analysis
of the financial condition and results of operations of Plaza Associates is
set forth below. Neither the Company nor any of its subsidiaries has any
significant operating history, other than Plaza Associates, although THCR
Holdings has incurred certain expenses including interest on the Senior Notes
and Trump Indiana has incurred significant expenses relating to the
development of the Indiana Riverboat. See "--Liquidity and Capital Resources".
The partnership agreement governing THCR Holdings provides that all business
activities of the Company must be conducted through THCR Holdings or
subsidiary partnerships or corporations. 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 17% 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.
45
<PAGE>
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.
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--Atlantic City Marketing Strategy--Trump Plaza" 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 games 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.
46
<PAGE>
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.
Gaming costs and expenses were $139.5 million for the year ended December
31, 1994, an increase of $2.6 million or 1.9% from gaming costs and expenses
of $136.9 million in 1993. This increase was primarily due to
increased marketing costs instituted toward the end of 1994. These marketing
programs consisted of increased bus programs and direct marketing activities.
The increase in marketing costs was offset by decreased gaming taxes
associated with the decreased levels of gaming activity and revenues from
1993.
General and administrative expenses were $73.1 million for the year ended
December 31, 1994, an increase of $1.5 million or 2.1% from the general and
administrative expenses of $71.6 million in 1993. This increase resulted
primarily from $1.1 million in cash associated with donations to the CRDA for
the year ended December 31, 1994.
Income from operations was $43.4 million for the year ended December 31,
1994, a decrease of $6.2 million or 12.5% from income from operations of $49.6
million for 1993.
Net interest expense was $48.2 million for the year ended December 31, 1994,
an increase of $8.3 million or 20.8% from net interest expense of $39.9
million in 1993. This increase is primarily attributable to increased interest
expenses associated with the Plaza Notes and the PIK Notes which were
outstanding for all of 1994.
Other non-operating expense was $4.9 million (including $3.1 million of
leasing costs) for the year ended December 31, 1994, an increase of $1.0
million or 25.6% from other non-operating expense of $3.9 million in 1993.
This increase is directly attributable to twelve months of costs associated
with Trump Plaza East. See Note 6 to the accompanying Financial Statements of
Trump Atlantic City and Plaza Associates.
TAJ ASSOCIATES
The following information has been prepared by Taj Associates and provides
historical information regarding Taj Associates' operations.
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
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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 lighter than the Atlantic City average is its mix of
higher hold table games.
Slot revenues were approximately $259.1 million for the year ended December
31, 1995, an increase of $26.1 million or 10.1% from slot win of $285.2
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 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'
keno/poker/simulcasting 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. For the years ended December 31, 1995 and 1994, these revenues
totaled $116.4 million and $117.8 million, respectively. Room
revenue of approximately $43.3 million in 1995 was the result of an occupancy
rate of 91.2% and an average room rate of $104.04. In 1994, room revenue of
$41.8 million was the result of an occupancy rate of 92.4% and an average room
rate of $99.19.
In the food and beverage outlets, Taj Associates generated revenues of
approximately $57.2 million and $58.0 million during 1995 and 1994,
respectively. The approximately $0.8 million decrease is primarily
attributable to the decrease in the average food check to $11.62 in 1995 from
$11.68 in 1994 and the elimination of the private bar in guest rooms. The
decrease in food and beverage revenue reflects both fewer complimentaries
offered to patrons (which are recorded both as revenue and as a promotional
allowance) and reduced food prices designed to stimulate cash sales.
The decrease in other revenue of approximately $2.0 million was primarily
attributable to a decrease in entertainment revenue of approximately $1.6
million resulting from fewer in-house sponsored events and an increased
emphasis on promoter sponsored entertainment events in 1995 versus events
sponsored by Taj Associates in 1994.
Promotional allowances were $64.0 million for the year ended December 31,
1995, an increase of $1.8 million from promotional allowances of $62.2 million
for the year ended December 31, 1994. Promotional allowances were 10.4% of
gross revenues in 1995 compared to 10.7% in 1994, reflecting Taj Associates'
efforts to increase control over complimentaries while increasing gaming
revenues.
Gaming expenses increased approximately $23.3 million or 9.0% for the year
ended December 31, 1995 from the year ended December 31, 1994, primarily due
to increased marketing/promotional costs associated with increased gaming
revenues. Both room and food and beverage expenses remained generally
constant. General and administrative expenses decreased primarily due to the
nonrecurrence of costs for settlement of litigation
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which were incurred during 1994. Costs for settlement of litigation for the
year ended December 31, 1995 decreased by approximately $3.7 million or 100%
to $0 from the year ended December 31, 1994. Depreciation expense increased in
1995 compared to 1994 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 decreased to 83.8%
for the year ended December 31, 1995 compared to 85.2% for the year ended
December 31, 1994.
As a result of the foregoing factors, income from operations was $89.9
million for the year ended December 31, 1995, an increase of $13.3 million or
17.3% from income from operations of $76.6 million for the year ended December
31, 1994.
The $5.1 million or 4.4% increase in interest expense is attributable to (i)
the increased amount of principal outstanding resulting from the issuance of
Taj Bonds to satisfy the Additional Amount (as defined in the Taj Bond
Indenture) and (ii) the increased accretion of the discount on the Taj Bonds
as they approach maturity.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Net revenues were $517.2 million for the year ended December 31, 1994, an
increase of $18.3 million or 3.7% from net revenues of $498.9 million for the
year ended December 31, 1993.
Gaming revenues, which comprise the major component of total revenues and
consist of win from table games, poker, slot machines, horserace simulcasting
and keno, were approximately $461.6 million in 1994, an increase of $19.5
million or 4.4% from gaming revenues of $442.1 million in 1993. The increase
in gaming revenues occurred while the overall Atlantic City gaming industry
experienced an increase in gaming revenue of 3.9%. These revenues represent a
market share of the Atlantic City market of approximately 13.5% in each of
1994 and 1993, based on figures filed with the CCC.
Table game win was approximately $184.7 million for the year ended December
31, 1994, an increase of $11.3 million or 6.5% from table game win of $173.4
million in 1993. Dollars wagered at table games was $1,125.0 million in 1994,
an increase of $63.0 million or 5.9% from dollars wagered at table games of
$1,062.0 million in 1993. Table win percentage (i.e., percentage of dollars
wagered that were retained by Taj Associates) increased to 16.4% in 1994 from
16.3% in 1993.
For the year ended December 31, 1994, slot win was approximately $257.9
million, a decrease of $2.4 million or 0.9% from slot win of $260.3 million in
1993. The decrease was largely due to a decrease in the slot
win percentage. Slot win percentages were 8.8% in 1994 and 9.3% in 1993.
Dollars wagered at slot machines were $2,940.1 million in 1994, an increase of
$82.2 million or 2.9% from the dollars wagered at slot machines of $2,857.9
million in 1993. The decrease in slot win percentage and the increase in slot
machine wagering is consistent with the industry trend in Atlantic City in
recent years.
In addition to table game and slot revenues, Taj Associates' newly opened
Keno room and expanded poker/simulcasting operations generated approximately
$16.3 million of revenues from poker, $1.4 million of revenues from
simulcasting and $1.3 million of revenues from keno in 1994 compared to
approximately $7.5 million in poker revenue and $0.8 million in simulcasting
revenue for the year ended December 31, 1993. Poker/Simulcasting operations
commenced in June 1993 while keno operations commenced on June 15, 1994.
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 were $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
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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 in
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
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 discount on the Taj Bonds as they approach maturity and
professional fees incurred during the first six months of 1994 related to the
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, the Company consummated the June 1995 Stock
Offering, resulting in aggregate gross proceeds to the Company of 10 million
shares of Common Stock and THCR Holdings and THCR Funding consummated the June
1995 Note Offering. The proceeds to the Company from the June 1995 Stock
Offering were contributed by the Company 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 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, (d) construction costs and Trump Plaza
East of $15,150,000 and (e) construction and land acquisition costs of
$29,999,000 for the Indiana Riverboat. 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 and the Indiana Riverboat, as well as for
general corporate purposes.
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Each of the Plaza Note Indenture and the Senior Note Indenture restricts the
ability of Plaza Associates, Trump Indiana and other subsidiaries of THCR
Holdings to make distributions to partners or pay dividends, as the case may
be, unless certain financial ratios are achieved. Further, given the rapidly
changing competitive environment and the risks associated with the Company's
proposed expansion plans, the Company's future operating results are highly
conditional and could fluctuate significantly. Moreover, as a condition to the
June 1995 Note Offering, THCR Holdings and THCR Funding entered into a Cash
Collateral and Disbursement Agreement (the "Cash Collateral Agreement") with
First Bank National Association in its respective capacities as Trustee and
Disbursement Agent (each as defined therein). The Cash Collateral Agreement
called for initial deposits to custodial accounts which are restricted in use
for (a) Trump Indiana for the ship and land projects, (b) Trump Plaza
construction projects, including the exercise of the Trump World's Fair
Purchase Option and construction projects at Trump Plaza East and Trump
World's Fair and (c) the first two interest payments on the Senior Notes. As
of December 31, 1995, $12,013,000 was restricted for the second interest
payment on the Senior Notes and is reflected as restricted cash in the
Company's condensed consolidated balance sheets. The balance of restricted
funds as of December 31, 1995 consisted of approximately $4,001,000 to be used
at Trump Indiana and approximately $36,029,000 to be used at Trump World's
Fair, and such amounts are reflected as cash restricted for future
construction as a non-current asset in the Company's balance sheets. With
these restricted funds, as well as cash flow from operating activities, and
the financings discussed above (some of which still remain to be obtained),
management believes that sufficient funds will be available to complete the
projects that are currently in development. In addition, Plaza Associates may
be obligated to comply with certain proposed regulations of the Occupational
Safety and Health Administration ("OSHA"), if adopted. The Company is unable
to estimate the cost, if any, to Plaza Associates of such compliance. See
"Regulatory Matters--Other Laws and Regulations."
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 of $6.0 million for
reimbursable improvements made to the Trump Plaza East, which
receivable is currently the subject of litigation. See "Business--Legal
Proceedings--Plaza Associates." 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," "--Atlantic City
Properties Expansion," "--The Indiana Riverboat" and "--Considerations with
Respect to the Acquisition or Development of Additional Gaming Ventures."
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
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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--Plaza Associates." 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 ninety 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 two 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 anticipates incurring approximately $5.2 million of pre-opening
costs, which will be expensed at the time of its opening.
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Pursuant to the terms of 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--Plaza Associates."
Trump Indiana. Pursuant to the terms of the certificate of suitability
issued to Trump Indiana, Trump Indiana must comply with certain statutory and
other requirements imposed by the IGC. Failure to comply with the foregoing
conditions and/or failure to commence riverboat excursions by June 28, 1996,
may result in the revocation of the certificate of suitability. There can be
no assurance that the Company and/or Trump Indiana will be able to comply with
the terms of the certificate of suitability or that a riverboat owner's
license will ultimately be granted. The Company anticipates that its riverboat
owner's license (which would supersede the certificate of suitability) would
impose substantially similar conditions on the operations of the Indiana
Riverboat, although no assurances may be made.
In addition to the approximately $84 million anticipated to be spent prior
to commencing the operations of the Indiana Riverboat in the second quarter of
1996, during its initial five-year license term, an additional $69 million of
funds (consisting of approximately $48 million for the construction of a hotel
and other amenities and $21 million for infrastructure improvements and other
municipal uses) will be required to be spent by Trump Indiana in connection
with the Indiana Riverboat facility and related commitments, including
commitments required in connection with the licensure process. The sources of
the initial $84 million include, and are anticipated to include: $34 million
from the proceeds of the June 1995 Offerings, $20 million from vessel
financing, $10 million from slot machine financing, $10 million from a
mortgage on Trump Indiana's interest in the Buffington Harbor site or from a
working capital facility and $10 million from operating leases. Trump Indiana
has received commitments for $15 million in vessel financing and nearly $2
million in equipment financing and has signed a letter of intent for an
additional $14.2 million in equipment financing (including approximately $8
million for slot machines). Trump Indiana is seeking commitments for the
additional financing required to commence the operations of the Indiana
Riverboat. The remaining $69 million required to be spent over the five-year
license term is expected to be funded with cash from operations or additional
borrowings. See "Risk Factors--The Indiana Riverboat."
On August 30, 1995, Trump Indiana entered into a loan and security agreement
with debis Financial Services, Inc. ("dFS") pursuant to which dFS will
provide, subject to the terms and conditions thereof, $15 million in financing
for the gaming vessel, which is currently under construction. As of December
31, 1995, dFS has provided Trump Indiana with approximately $6.8 million
pursuant to such agreement.
Trump Indiana and Barden entered into the BHR Agreement relating to the
formation of BHR. Pursuant to the BHR Agreement, BHR will own, develop and
operate all common land-based and waterside operations in support of each of
Trump Indiana's and Barden's separate riverboat casinos at Buffington Harbor.
Trump Indiana and Barden will each be equally responsible for the development
and operating expenses of BHR. Upon its formation, BHR was capitalized with
the contribution by Trump Indiana of ownership of the Buffington Harbor site
and the contribution by Barden of $6.75 million. Barden has subsequently
contributed approximately $14 million for construction costs to equal the
costs previously funded by Trump Indiana; thereafter, Trump Indiana and Barden
will share all of the development and operating expenses of BHR equally. There
can be no assurance that the Company or Trump Indiana will be able to fund
from operations or to finance on terms satisfactory to the Company or Trump
Indiana any future required expenditures or, if available, other such
indebtedness would be permitted under existing debt instruments of the
Company. Furthermore, the Company will also be dependent
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on the ability of Barden to pay for its share of the development and operating
expenses of BHR and there can be no assurance that Barden will be able to fund
such expenses. Associated with the opening of the Indiana Riverboat,
management anticipates incurring $5.75 million of pre-opening costs, which
will be expensed at the time of the opening. See "Risk Factors--The Indiana
Riverboat."
The Company. The Company has no independent means of generating revenues and
its sole source of liquidity is distributions and other permitted payments
from THCR Holdings. As of December 31, 1995, the Company did not have any long
or short-term indebtedness and is not anticipated to have any in the near
future. THCR Holdings has agreed that all expenses of the Company shall, to
the maximum extent practicable, be paid directly by THCR Holdings. Any other
expenses paid directly by the Company are required to be reimbursed promptly
by THCR Holdings and are deemed to be expenses of THCR Holdings. Any other
projects pursued by the Company in the future would require additional funds.
There can be no assurance that sufficient funds will be available either from
cash generated by operating activities or from additional financing sources
for such projects.
Taj Associates. Giving pro forma effect to the consolidation of Taj
Associates and the other elements of the Merger Transaction, Trump Atlantic
City will have approximately $1.2 billion of indebtedness for borrowed money
on a consolidated basis, principally representing the First Mortgage Notes,
and will also have access to up to $25.0 million of borrowings under the
Working Capital Facility or a replacement thereof. See "Capitalization" and
"Unaudited Pro Forma Financial Information."
Following the consummation of the Merger Transaction, management plans to
undertake an expansion plan of the Taj Mahal; existing operations, which plans
are preliminary and subject to modification. It is currently expected that the
expansion will be principally funded out of cash from 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, as
currently contemplated, involves the construction of an approximately 800 room
hotel tower adjacent to the Taj Mahal's existing hotel tower, 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. See "Risk Factors--Atlantic
City Property Expansion."
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 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 slot machines, completion of the Taj Entertainment
Complex and modification of existing space to accommodate the new games of
race simulcasting and poker.
Taj Associates' capital budget for fiscal 1996 totals approximately $28.6
million and is expected to be financed principally by cash from operations.
The budget includes provision 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
54
<PAGE>
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 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--
Properties." See "Risk Factors--Holding Company Structure; No Anticipation of
Dividends," "--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, the Company'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. The Company has no operating
history in Indiana and is unable to predict seasonality with respect to the
Indiana Riverboat.
INFLATION
There was no significant impact on Plaza Associates' or Taj Associates'
respective operations as a result of inflation during 1995, 1994 or 1993.
55
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet of the Company 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
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 Statement 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 Consolidated Balance Sheet and Statement of
Operations of THCR each give effect to (a) the consolidation of Taj
Associates, which will be an indirect subsidiary of THCR 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 Mortgage Note
Offering, (d) the Stock Offering, (e) purchase accounting adjustments required
by the Merger, (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 liens that Bankers Trust has with respect to certain
equity interests in Taj Associates and related guarantees. The Unaudited Pro
Forma Consolidated Statement of Operations of the Company gives effect to (i)
the June 1995 Offerings for the full period presented and (ii) the Merger
Transaction, including those transactions described in (a) through (h) above.
The accompanying unaudited financial information assumes (x) that all holders
of Taj Holding Class A Common Stock elect to received Cash Consideration in
the Merger, (y) that the underwriters' over-allotment option is not exercised
in the THCR Stock Offering, and (z) that the Market Value of THCR Common Stock
in the Merger is $24.00.
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."
56
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MORTGAGE OTHER
TAJ NOTE STOCK MERGER
THE COMPANY ASSOCIATES OFFERING OFFERING TRANSACTIONS THE COMPANY
------------ ------------ ---------- -------- ------------ -----------
(HISTORICAL) (HISTORICAL) (PRO FORMA)
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equiva- $ 19,208 $ 88,941 $1,100,000 (a) $278,350(j) $ (9,900)(g) $ 91,346
lents................. (780,243)(b) (10,000)(k)
(390)(c) (50,000)(l)
(375,900)(d) (40,500)(m)
(28,000)(e)
(18,775)(f)
(43,450)(g)
(36,500)(h)
(1,495)(i)
Restricted cash........ 12,013 12,013
Accounts receivable, 14,460 17,215 31,675
net...................
Inventories............ 2,609 7,161 9,770
Prepaid expenses and 5,171 3,864 9,035
other current assets..
-------- -------- ----------
Total current as- 53,461 117,181 153,839
sets.................
Property and Equipment, 408,231 690,987 28,000 (e) 9,900 (g) 1,344,880
net................... 43,347 (l)
40,500 (m)
40,500 (m)
83,415 (n)
Investment in Buffing- 21,823 21,823
ton Harbor............
Land rights............ 29,320 29,320
Cash restricted for fu- 40,030 40,030
ture construction.....
Note receivable........ 3,000 3,000
Deferred loan costs.... 20,026 43,450 (g) 53,610
(9,866)(d)
Other assets........... 8,654 13,625 22,279
-------- -------- ----------
Total assets.......... $584,545 $821,793 $1,668,781
======== ======== ==========
Current Liabilities:
Current maturities of
long-term debt........ $ 2,901 $ 920 (200)(h) $ 3,621
Accounts payable and
accrued expenses...... 24,368 8,335 32,703
Accrued interest pay- 2,498 9,154 (9,144)(f) 1,013
able.................. (1,495)(i)
Due to affiliates, 278 974 1,252
net...................
Other current liabili- 5,257 35,210 40,467
ties..................
-------- -------- ----------
Total current liabil-
ities................ 35,302 54,593 79,056
Other long-term liabili-
ties................... 33,373 (9,631)(f) (17,153)(l) 6,589
Taj Bonds, net of dis-
count.................. 649,139 (649,139)(b) 0
Plaza Mortgage Notes,
net of discount........ 326,652 (326,652)(d) 0
Long-term debt, net of
discount and current
maturities............. 161,069 161,069
Mortgage Notes.......... 1,100,000 (a) 1,100,000
Other long-term debt.... 6,750 45,053 (44,744)(h) 7,059
Deferred state income
taxes.................. 4,181 4,181
-------- -------- ----------
Total Liabilities..... 533,954 782,158 1,357,954
Minority interest....... 40,500 (m) 30,500
(10,000)(k)
Capital:
Common stock........... 101 125(j) 5 (l) 231
Contributed capital.... 52,411 123,765 278,225(j) 10,495 (l) 341,131
(123,765)(o)
Accumulated (deficit).. (1,921) (84,130) (131,104)(b) 83,415 (n) (61,035)
(390)(c) 123,765 (o)
(59,114)(d)
8,444 (h)
-------- -------- ----------
Total capital......... 50,591 39,635 280,327
-------- -------- ----------
Total Liabilities and
Capital............. $584,545 $821,793 $1,668,781
======== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
57
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PLAZA HOLDING
AND PLAZA
ASSOCIATES THE COMPANY PRO FORMA THE PRO FORMA
---------------- ---------------- ADJUSTMENTS FOR COMPANY ADJUSTMENTS
JANUARY 1, 1995- JUNE 12 1995- JUNE 1995 PRO FORMA TAJ FOR MERGER
JUNE 12, 1995 DECEMBER 31 1995 OFFERINGS COMBINED ASSOCIATES TRANSACTION PRO FORMA
---------------- ---------------- --------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................ 122,865 175,208 $ 298,073 $501,378 $ 799,451
Rooms................. 7,676 12,310 19,986 43,309 63,295
Food and Beverage..... 18,537 26,065 44,602 57,195 101,797
Other................. 3,310 6,284 9,594 15,864 25,458
------- ------- ---------- -------- ----------
Gross Revenues...... 152,388 219,867 372,255 617,746 990,001
Less-Promotional
Allowances........... 14,540 24,394 38,934 63,998 102,932
------- ------- ---------- -------- ----------
Net Revenues........ 137,848 195,473 333,321 553,748 887,069
------- ------- ---------- -------- ----------
Cost and Expenses:
Gaming................ 69,467 95,533 165,000 283,786 448,786
Rooms................. 958 1,305 2,263 15,230 17,493
Food and Beverage..... 7,128 11,178 18,306 24,612 42,918
General and
Administrative....... 30,081 42,826 72,907 96,843 $(2,725)(l) 160,076
2,738 (p)
(1,743)(q)
(7,944)(r)
Depreciation and
Amortization......... 6,999 9,219 16,218 43,387 416 (l) 64,752
4,731 (s)
Other................. 1,397 1,966 3,363 3,363
------- ------- ---------- -------- ----------
116,030 162,027 278,057 463,858 737,388
------- ------- ---------- -------- ----------
Income from Operations.. 21,818 33,446 55,264 89,890 149,681
Interest Income....... 403 3,741 134 (t) 4,278 3,922 8,200
Interest Expense...... (22,516) (35,014) (11,239)(u) (63,711) (120,435) (709)(v) (154,574)
5,058(w) 30,281 (x)
Other non-operating... (1,649) (4,094) (5,743) 3,120 (e) (2,623)
------- ------- ---------- -------- ----------
Income (loss) before
state income taxes,
minority interest and
extraordinary loss..... (1,944) (1,921) (9,912) (26,623) 684
Benefit for state income
taxes (z).............. (161) -- (161) (161)
------- ------- ---------- -------- ----------
Income (loss) before
minority interest and
extraordinary loss..... (1,783) (1,921) (9,751) (26,623) 845
Minority Interest....... -- -- -- (760) (y) (760)
------- ------- ---------- -------- ----------
Income (loss) before
extraordinary loss..... $(1,783) $(1,921) $ (9,751) $(26,623) $ 85
======= ======= ========== ======== ==========
Income (loss) per
share before
extraordinary loss
(z).................. $ 0.00
==========
Weighted Average
Shares
Outstanding (aa)..... 23,133,333
==========
</TABLE>
See Notes to Unaudited Financial Information.
58
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS:
(a) To record the issuance of $1,100,000 aggregate principal amount of
Mortgage Notes issued by Trump Atlantic City Funding, a wholly owned
subsidiary of Trump Atlantic City. Trump Atlantic City and Plaza
Associates are, and upon consummation of the Merger Transaction Taj
Associates will be, direct or indirect wholly owned subsidiaries of
THCR Holdings.
(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 each 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 expense.
(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 net proceeds from the Stock Offering of 12,500,000 shares
at $24 per share.
(k) To record the payment to Bankers Trust to obtain certain releases of
the liens and guarantees that Bankers Trust has in connection with
certain indebtedness owed by Trump to Bankers Trust. 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 500,000 shares of Common Stock
valued at $10,500 (an average value of $21 per share of Common Stock
based on the price of the Common Stock several days before and after
the date of the amended Merger Agreement). Taj Associates had accrued
$17,153 with respect to its obligation 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 the Company in the Merger.
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 Common Stock ($40,500). It is assumed
herein that all holders elect cash consideration. As Trump's ownership
interest in Taj Associates is 50%, the amount of consideration paid for
the publicly held 50% (represented by the Taj Holding Class A Stock)
has been ascribed as the value of his contribution.
59
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(n) To record the historical book value of Taj Associates and Taj Funding
($39,635), as adjusted for the 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.
(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 $2,083 of additional general and administrative expenses
relating to corporate overhead of the Company and THCR Holdings, and
$655 of operating expenses incurred at Trump Indiana prior to opening.
(q) To record the elimination of the fee resulting from the termination of
the Taj Services Agreement.
(r) 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.
(s) 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) on a pro rata
basis and are being depreciated over the remaining life of the building
(35 years).
(t) To record interest income on a $3,000 note receivable from Trump at
prime plus 1%.
(u) To record interest expense (including amortization of deferred
financing costs) relating to the Senior Notes.
(v) To record interest expense on amounts borrowed under the equipment and
vessel financing line. To date, Trump Indiana has obtained a commitment
for $17,000, has signed a letter of intent for an equipment lease for
$14,200 and has obtained advances of $9,750 at a rate of 10.5%.
Although the Company expects to borrow an additional $15,000, no
assurances can be given that such financing will be available. See
"Risk Factors--The Indiana Riverboat."
(w) To eliminate interest expense (including amortization of deferred
financing costs) on Plaza Associates' PIK Notes which were redeemed
with the proceeds from the June 1995 Offerings.
(x) To record adjustments to historical interest expense to give effect to
the Merger Transaction as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Interest expense adjustment:
(i)Elimination of interest and discount accretion on
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)Reflect interest and amortization of deferred loan
costs on the Mortgage Notes............................ 127,849
--------
Pro Forma Adjustment........................................ $(30,281)
========
</TABLE>
For every 0.5% change in interest rate, the correlative change in
interest expense for the period would be $5,500 on a pre-tax basis, with
an identical change to the denominator in debt service coverage ratios.
If the composition of the financing were to change, whereby there was a
decrease in the Mortgage Note Offering of $10,000 and a corresponding
increase in the Stock Offering, there would be a $1,100 decrease in
annual interest expense.
60
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT, SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(y) To reflect minority interest as pro forma adjustments result in a loss
at THCR Holdings and there is a minority interest basis on the Company
pro forma balance sheet.
(z) A provision for state income taxes is not required as state tax net
operating losses are used to offset pro forma taxable income.
(aa) Weighted Average Shares Outstanding includes the number of shares
outstanding on December 31, 1995, shares awarded to the Chief
Executive Officer of the Company pursuant to the 1995 Stock Incentive
Plan and the shares to be issued in the Merger Transaction. If the
composition of the financing were to change, whereby there was an
increase in the Stock Offering of $10,000 and a corresponding decrease
in the Mortgage Note Offering, there would be an increase in the pro
forma income per share before extraordinary loss of $.03.
61
<PAGE>
BUSINESS
GENERAL
The Company will acquire all of the outstanding equity interests of Taj
Associates, which owns and operates the Taj Mahal, in connection with the
Merger Transaction. The Merger Transaction will create one of the largest
casino entertainment companies in the United States by combining two "Four
Star" Atlantic City casino hotels, the Indiana Riverboat and all of Trump's
future gaming activities. Upon consummation of the Merger Transaction, the
Company will own and operate the Taj Mahal, currently Atlantic City's largest
casino hotel, and Trump Plaza, which will be the largest upon the completion
of the Trump Plaza Expansion scheduled to be completed in the second quarter
of 1996. Following the consummation of the Merger Transaction, the Company
plans to undertake the Taj Mahal Expansion, an expansion program at the Taj
Mahal designed to increase its hotel room inventory and casino floor space and
expand its entertainment arena parking facilities. In addition, the Company
expects to commence operations in the second quarter of 1996 of the Indiana
Riverboat to be located at Buffington Harbor on Lake Michigan. The Indiana
Riverboat will establish the Company's position in the greater Chicago
metropolitan area market, which is one of the most successful new gaming
markets in the United States. Furthermore, the Company is and will continue to
be the exclusive vehicle through which Trump will engage in new gaming
activities in both emerging and established gaming jurisdictions.
Management believes that the acquisition of the Taj Mahal will strengthen
the Company'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 the Company'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, the Company 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 Plaza's existing and planned operations will
provide opportunities for operational efficiencies, economies of scale and
benefits from the expertise and experience of management at the operating
entities. Management further believes that the Company's size following the
Merger Transaction alone with its industry experience and reputation for
quality will allow the Company to compete more effectively for prime gaming
licenses in other jurisdictions.
Management believes the Company will benefit from the following factors:
. LEADING ATLANTIC CITY FACILITIES. Upon consummation the Trump Plaza
Expansion, the Company will own and operate the two largest casino hotel
properties in Atlantic City, both of which are strategically located on
The Boardwalk. The Company 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 continued growth in the Atlantic City gaming
market. The Company 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. The Company is in the process of
executing expansion projects at the Atlantic City Properties to increase
their gaming space and hotel room capacity allowing the Company 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.
62
<PAGE>
The following table profiles the Company's casino and hotel capacity
following the expansion at the Atlantic City Properties:
<TABLE>
<CAPTION>
TRUMP TAJ INDIANA TRUMP PLAZA TAJ MAHAL
PLAZA(a) MAHAL RIVERBOAT(b) EXPANSION(b)(c) EXPANSION(d) TOTAL
-------- ------- ------------ --------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Casino square footage... 75,395 120,000(e) 37,000 64,158 60,000 356,553(e)
Slot machines........... 2,368 3,550 1,500 1,898 2,500 11,816
Table games............. 97 169 73 44 -- 383
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 open 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.
. INDIANA RIVERBOAT. Trump Indiana has received site approval and a
certificate of suitability to develop a gaming project in Buffington
Harbor, on Lake Michigan, approximately 25 miles southeast of downtown
Chicago. The Indiana Riverboat is one of 11 riverboat gaming projects
permitted under current Indiana law, and one of only five to be located
in northern Indiana. The Indiana Riverboat is currently scheduled to open
for business in the second quarter of 1996. The Indiana Riverboat is
planned to have approximately 37,000 square feet of gaming space that
will feature 1,500 slot machines and 73 table games, and will be one of
the largest riverboat casinos in the United States. The Indiana
Riverboat's principal market will be the approximately 6.8 million people
residing within 50 miles of Buffington Harbor in the greater Chicago
metropolitan area. Approximately 11.2 million and 24.2 million people
live within a 100- and 200-mile radius of Buffington Harbor,
respectively.
. OPERATING SYNERGIES. The Company 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 $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. The Company capitalizes on the widespread recognition
of the "Trump" name and its association with high quality amenities and
first class service. To this end, the Company provides a broadly
diversified gaming and entertainment experience consistent with the
"Trump" name and reputation for quality, tailored to the gaming patron in
each market. The Company also benefits from the "Trump" name in
connection with its efforts to expand and to procure new gaming
opportunities in the United States and abroad. The Company explores
opportunities to establish additional gaming operations, particularly in
jurisdictions where the legalization of casino gaming is relatively
recent or is anticipated.
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
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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.
The Company 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 15,900 of which is 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 the Company 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."
Trump Plaza has opened the casino and 249 rooms at Trump Plaza East.
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 "--Properties--Plaza Associates--Trump Plaza East"
and "Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates." Trump Plaza
East 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 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 open by the end of April 1996. Also
reflects nine super suites are scheduled to open early in 1997 and not
otherwise included in the "Trump Plaza Expansion."
Trump Plaza's management team commenced the Trump Plaza Expansion in 1995
and has recently launched a variety of new initiatives designed to increase
the level of casino gaming activity generally at its casino and, in
particular, to attract casino patrons who tend to wager more frequently and in
larger denominations than the typical Atlantic City patron. These initiatives
include targeted marketing and advertising campaigns directed to select groups
of customers in the Boston-New York-Washington, D.C. corridor, the
introduction of new slot machines and table games and the addition of bill
acceptors on slot machines.
THE TAJ MAHAL
The Taj Mahal is currently the largest casino hotel facility 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
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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, opened a private Asian themed table game area 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 table games, and is currently in the
process of constructing "Sultan's Palace," a separate 5,900 square-foot high-
end slot lounge and private club to be completed in the second quarter of
1996.
The Taj Mahal Expansion. Following the consummation of the Merger
Transaction, the Company 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 cash from 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,
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 mid 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 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 capital costs:
<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>
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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, the
Company intends to pursue a targeted marketing approach with respect to the
Atlantic City Properties.
Trump Plaza. Trump Plaza East has been integrated into Trump Plaza and
together are operated as a single casino hotel facility. Trump Plaza will
continue the marketing strategies it has found successful in the past,
including targeting lucrative high-end drive-in slot customers. Management
believes the additional hotel rooms and gaming facilities at Trump Plaza East
will better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the
typical walk-in or bus patron.
Trump World's Fair. Trump World's Fair, which will operate as part of Trump
Plaza, will seek to attract the "middle market" segment (primarily bus
customers and boardwalk pedestrian traffic) by offering high value food and
entertainment attractions in a festive "World's Fair" atmosphere. The first
floor of Trump's World's Fair will feature a Boardwalk level casino offering
walk-in customers direct access from The Boardwalk to 581 slot machines. In
addition, Trump World's Fair is constructing a new bus terminal that will have
a dedicated escalator leading directly to a 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 its newly refurbished 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.
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 Atlantic City 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
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 table game area, and is in
the process of construction, the Sultan's Palace, a high-end slots lounge and
private club.
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 at the Atlantic City Properties
focuses 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 means of attracting and retaining
gaming patrons. Trump Plaza offers headline entertainment
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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, affords and is
expected to affords 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 Trump Plaza and the
Taj Mahal 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 the Company'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. The Company'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.
Bus Program. Trump Plaza and the Taj Mahal each have bus programs which
transport approximately 2,400 and 2,700 gaming patrons per day during the week
and 3,500 and 3,600 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's facility
contains 18 bus bays.
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
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
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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 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
10-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino, and is located directly off the Atlantic City
Expressway, of 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). 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
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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.
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 rooms 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 new
themed restaurants: the Hard Rock Cafe, the Rainforest Cafe and the All Star
Cafe. 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.
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Despite generally 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 such 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 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 the Grand for 295
rooms (both of which are under construction) and 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."
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.
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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."
INDIANA RIVERBOAT
The Indiana Riverboat is expected to feature an approximately 280-foot
luxury yacht containing approximately 37,000 square feet of gaming space with
1,500 slot machines, 73 table games and capacity of approximately 2,450
passengers and 300 employees. The site adjacent to the Indiana Riverboat is
anticipated to include surface parking for approximately 3,000 automobiles and
certain other infrastructure improvements. The cost to the Company for the
development of the Indiana Riverboat, which includes the land, the vessel,
gaming
equipment, a pavilion for staging and ticketing and restaurant facilities,
berthing and support facilities and parking facilities, is expected to be
approximately $84 million through the planned opening in the second quarter of
1996. The Company initially anticipated spending $59 million prior to the
commencement of the Indiana Riverboat's operations for the vessel, gaming
equipment and initial berthing and support facilities, and also anticipated
spending an additional $27 million in the second phase to be completed by mid-
1997, which would feature a pavilion for staging and ticketing and restaurant
facilities, berthing and support facilities and expanded parking. To
facilitate the Indiana Riverboat's operations from the opening day and to
avoid disruptive construction at the site for an additional year, the Company
determined to accelerate the second phase of the project, now expected to cost
$25 million, and complete both phases prior to commencing operations. In
addition to the approximately $84 million to be spent through the planned
opening, the Company has further committed in the licensure process to
construct a hotel facility and other amenities (at an approximate cost of $48
million) and to fund approximately $21 million of infrastructure improvements
and other municipal uses.
Buffington Harbor is approximately 25 miles from downtown Chicago. In
addition, the cities of Indianapolis, Fort Wayne, Toledo and Grand Rapids are
each within a 175-mile radius of Buffington Harbor. The Company believes the
Indiana Riverboat will benefit from (i) its location and size, (ii) its
strategy of developing, together with Barden, an array of entertainment,
retail and restaurant attractions, and coordinated cruise schedules and (iii)
the widespread recognition of the "Trump" name and what management believes to
be its reputation for quality. Gaming facilities in Illinois are limited at
present to 1,200 gaming positions under current regulations in Illinois, which
the Company believes put Illinois properties at a competitive disadvantage to
larger facilities such as the Indiana Riverboat. The Company expects to draw
on these competitive advantages and to capitalize on its experience in gaming
activities in Atlantic City in order to create an outstanding gaming and
entertainment experience.
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The Company expects to focus its marketing efforts for the Indiana Riverboat
on the middle market, which makes up the majority of the gaming population in
the Great Lakes Market. The middle market constitutes a broad segment of
casino patrons who come to a casino for exciting recreation and entertainment
and who typically wager less, on an individual basis, than high-end patrons.
Through the use of the "Trump" name and systematic marketing programs, the
Company will seek to attract drive-in customers to the facility. Casinos
currently operating in the Great Lakes Market have generally been very
successful, achieving operating results exceeding those of most new
jurisdictional markets in terms of win per unit. The Company believes that
these operating results indicate that the Great Lakes Market should be capable
of absorbing significant capacity expansion in the future.
Under current gaming laws in Indiana, all games typically available in
Atlantic City casinos will be permitted on the Indiana Riverboat. The
riverboat casinos in Indiana will be permitted to stay open 24 hours per day,
365 days per year and to extend credit and accept credit charge cards, with no
loss or wagering limits. Subject to certain exceptions, the Johnson Act
prohibits gaming vessels from cruising within federal maritime jurisdiction
and prohibits gaming on such vessels. The Johnson Act contains an exception to
such prohibitions if a state adopts a law that permits gaming vessels to
engage in gaming outside federal maritime jurisdiction. The Indiana
legislature has taken certain actions with respect to gaming on vessels and
the IGC has determined that the legislature thereby modified Indiana law to
allow gaming on vessels which are docked under certain conditions.
Notwithstanding the IGC's determination, there can be no assurance that
commencement of gaming operations by Trump Indiana when the riverboat is
docked would not be challenged as a violation of Indiana law. See "Risk
Factors--The Indiana Riverboat" and "Regulatory Matters--Indiana Gaming
Regulations--Excursions."
The Company believes that competition in the gaming industry, particularly
the riverboat and dockside gaming industry, is based on the quality and
location of gaming facilities, the effectiveness of marketing efforts, and
customer service and satisfaction. Although management of the Company believes
that the location of the Indiana Riverboat will allow the Company to
effectively compete with other casinos in the geographic area surrounding its
casino, the Company expects competition in the casino gaming industry to be
intense as more casinos are opened and new entrants into the gaming industry
become operational.
Barden and Trump Indiana are the holders of the certificates of suitability
in Buffington Harbor. Barden is an entity beneficially owned by Don H. Barden,
a developer based in Detroit without significant prior gaming experience.
Pursuant to the BHR Agreement, BHR will own, develop and operate all common
land-based and waterside operations in support of Trump Indiana's and Barden's
separate riverboat casinos at Buffington Harbor. Trump Indiana and Barden will
each be equally responsible for the development and the operating expenses of
BHR. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
On June 30, 1995, Trump Indiana acquired, pursuant to the Agreement of Sale
(the "Site Sale Agreement") with Lehigh Portland Cement Company ("Lehigh"),
dated May 10, 1995, approximately 88 acres of land at Buffington Harbor for
$13.5 million (the "Site Purchase Price"). Pursuant to the Harbor Lease
Agreement, between Lehigh and BHR, Lehigh granted Trump Indiana and Barden a
ten year lease for the initial use of the harbor and certain of Lehigh's
property adjacent to the Buffington Harbor site for the docking of the Indiana
Riverboat vessel and the Barden vessel. No lease payments will be made to
Lehigh during the first 30 months of the lease. In the event that the use of
this property continues beyond the 30-month period, Lehigh will be entitled to
receive a license fee in an amount equal to $125,000 per month for each month
either Trump Indiana or Barden uses Lehigh's property during the remaining
term of the lease.
In 1994, the City of Gary (the "City") commenced a legal proceeding in Lake
County Superior Court of Indiana captioned City Of Gary v. Lehigh Portland
Cement Company, et al., in which the City sought to exercise its eminent
domain power to acquire certain of Lehigh's property, including the Buffington
Harbor site, for the purpose of using the land as a gaming venture. On May 12,
1995, the court ruled in favor of the City.
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Consummation of the condemnation process is subject to additional conditions.
However, on May 27, 1995, the Company entered into a Memorandum of
Understanding (the "MOU") with the City pursuant to which the City agreed to
take all necessary steps to dismiss the condemnation suit following the
closing of the Site Sale Agreement. This proceeding was dismissed with
prejudice in July 1995. The Company and Trump Indiana further agreed, among
other things, to (i) pay to the City $205,000 as reimbursement for certain
costs and expenses incurred by the City, and pay certain additional costs and
expenses to be incurred by the City in connection with the dismissal of its
condemnation suit; (ii) use best efforts to negotiate and complete by June 20,
1995 a long-term ground lease pursuant to which the City would lease the
Buffington Harbor Site to Trump Indiana for a period of 99 years with rent at
$1.00 per year (the "Buffington Harbor Lease"); (iii) transfer title to the
Buffington Harbor Site to the City in consideration of $1.00 upon closing the
Site Sale Agreement, provided the Buffington Harbor Lease is then effective;
(iv) use best efforts to negotiate and complete by July 25, 1995 a development
agreement with the City in order to confirm Trump Indiana's undertakings to
the City pursuant to its certificate of suitability; and (v) commence
construction at the Buffington Harbor site by the later of June 30, 1995 or
such date on which all permits and approvals necessary for the development and
operation of the Buffington Harbor site have been obtained, and use best
efforts to commence gaming operations within ninety (90) days of commencement
of construction. To date, the Company and Trump Indiana have complied with the
terms of the MOU. On September 29, 1995, Trump Indiana, Barden and the City
entered into an agreement modifying the MOU (the "Amended MOU"). The Amended
MOU permits Trump Indiana and Barden to retain ownership of the 88-acre parcel
at Buffington Harbor to be utilized for their riverboat operations for a
combined payment of $5 million.
As contemplated in the Amended MOU, Trump Indiana and Barden are negotiating
a "Joint Development Agreement" with the City, which will serve to memorialize
the respective commitments made by Trump Indiana and Barden to the City during
the licensing process. The Joint Development Agreement will replace the
Amended MOU and is generally expected to include the principal terms of the
Amended MOU, subject to certain updated provisions. In addition, Trump Indiana
anticipates that the final Joint Development Agreement will include provisions
regarding the "Trump Foundation," a proposed private foundation to be
established by Trump Indiana for charitable purposes primarily within the City
and Lake County, Indiana. Trump Indiana and the City are discussing various
methods by which Trump Indiana will make charitable contributions to fund the
Trump Foundation. These methods may include one or more cash payments, the
issuance of shares or options to acquire shares of Common Stock and/or a
percentage participation in some measure of net income after payment of Trump
Indiana's operating expenses, less allowances for capital expenditures and
other reserves. While the form and amount of funding for the foundation has
not yet been determined and may require IGC approval, the Company does not
believe that such funding will be material to its or THCR Holding's financial
condition or results of operations.
On December 9, 1994, the IGC issued to Trump Indiana a certificate of
suitability for a riverboat owner's license for a riverboat to be docked in
Buffington Harbor, Indiana. The certificate of suitability constitutes
approval of the application of Trump Indiana for a riverboat owner's license.
In January 1996, the IGC extended Trump Indiana's certificate of suitability
until June 28, 1996. Pursuant to the terms of the certificate of suitability,
during such period, Trump Indiana must comply with certain statutory and other
requirements imposed by the IGC. In addition, as a condition to the
certificate of suitability, Trump Indiana has committed to invest $153 million
in the Indiana Riverboat and certain related projects and certain economic
development projects and to pay to the City a 1% of gross gaming revenue fee,
intended to be used by the City for security and public safety purposes, and
an additional fee ranging from (i) 2% to 4% of the gross gaming revenue
depending on the amount of gross gaming revenues generated or (ii) 2% to 18%
of net income before taxes depending on the amount of Trump Indiana's net
income before taxes, whichever is greater.
Failure to comply with the foregoing conditions and/or failure to commence
riverboat excursions by such time as required by the IGC could result in the
revocation of the certificate of suitability. There can be no assurance that
the Company and/or Trump Indiana will be able to comply with the terms of the
certificate of suitability, that it will be further extended if operations do
not commence by June 28, 1996 or that a riverboat
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owner's license will ultimately be granted. The riverboat owner's license will
only be issued upon satisfaction of the conditions of the certificate of
suitability and the requirements of the gaming laws, which include the
completion of the Indiana Riverboat, acquisition of necessary permits or
approvals from federal, state and local authorities and readiness to commence
operations. See "Regulatory Matters--Indiana Gaming Regulations-- Interim
Compliance Requirements." If granted, such license would be for an initial
term of five years and renewable annually thereafter. With respect to certain
land-based facilities, the Company would also be dependent on the ability of
Barden to obtain the requisite licenses and fund its portion of joint
construction costs.
Commencing in early 1994, Trump Indiana (which was then wholly owned by
Trump), through its Indiana counsel, had discussions with eight Indiana
residents regarding the potential purchase by such residents of non-voting
stock of Trump Indiana, representing a total of 7.5% of the equity in Trump
Indiana. The purchase price of the stock was to have been paid with a
promissory note secured by the stock purchased, although the purchase price
and other material terms of the proposed purchase were never agreed upon. Such
discussions did not result in an agreement for or the purchase of any stock by
the residents. It was subsequently determined to include Trump Indiana as a
wholly owned subsidiary of THCR Holdings in connection with the June 1995
Offerings. The residents have since asserted a right to purchase stock in
Trump Indiana. Trump Indiana and the Company do not agree that these
individuals have any rights with respect to the stock of Trump Indiana or
otherwise, and have so advised the residents. Discussions are ongoing with
respect to the resolution of this matter.
Trump Indiana has entered into a Sales and Construction Agreement with
Atlantic Marine, Inc. ("AMI") for the purchase and construction of the Indiana
Riverboat vessel (the "Construction Agreement") for $24 million (the "Vessel
Contract Price"). Pursuant to the Construction Agreement, to date Trump
Indiana has paid $15.6 million ($9.8 million provided by the vessel financing)
of the Vessel Contract Price to AMI. The vessel will remain the property of
AMI until the Vessel Contract Price is paid in full. All risk of damage to or
destruction of the vessel and all liability to or for labor employed during
its construction will be the responsibility of AMI. Pursuant to the
Construction Agreement, AMI will not be responsible for (i) any negligent
construction or defects in the vessel after nine months from the date of
acceptance of the vessel by Trump Indiana upon completion of the construction
or (ii) any incidental or consequential damages.
Development of the Indiana Riverboat project will require the Company to (a)
acquire rights to traverse, use and/or improve certain parcels of property
owned by third parties, in order to gain direct, construction and emergency
access to the property, and (b) acquire access to water, sewer, gas, electric
and other necessary utility services which presently cannot provide service to
the site and which may require extension of existing utility service
facilities across existing rights of way and other property owned by third
parties. There can be no assurance that the Company will obtain the rights,
utility services, licenses, permits and approvals necessary to undertake or
complete its development plans, or that such rights, utility services,
licenses, permits and approvals will be obtained within the anticipated time
frame. Before the Indiana Riverboat becomes operational, additional definitive
agreements must be negotiated and executed, gaming facilities must be
constructed and a number of further conditions must be satisfied (including
the licensing of the Company, Barden and their respective employees and the
receipt of all requisite permits). There can be no assurance that the Indiana
Riverboat will become operational. See "--Indiana Riverboat," "--Competition,"
"Risk Factors--The Indiana Riverboat" and "Regulatory Matters--Indiana Gaming
Regulations."
The Company believes that competition in the gaming industry, particularly
the riverboat and dockside gaming industry, is based on the quality and
location of gaming facilities, the effectiveness of marketing efforts, and
customer service and satisfaction. Although management of the Company believes
that the location of the Indiana Riverboat will allow the Company to compete
effectively with other casinos in the geographic area surrounding its casino,
the Company expects competition in the casino gaming industry to be intense as
more casinos are opened and new entrants into the gaming industry become
operational. See "--Competition."
The Company has no operating history in Indiana and is unable to predict
seasonality with respect to the Indiana Riverboat.
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PROPERTIES
THE COMPANY
Trump Tower. The Company 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 the Company 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, the Company will pay as additional
rent a portion of the property taxes due each year. The Company has the option
to terminate this lease upon ninety days' written notice and payment of
$32,312.50.
TRUMP PLAZA
Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is subject to the liens of the
mortgages associated with the Plaza Notes (collectively, the "Plaza
Mortgages") and certain other liens. Upon consummation of the Merger
Transaction, these parcels of land will secure the Mortgage Notes. Upon its
acquisition, Trump Plaza East would also become subject to the mortgage
securing the 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 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 Ground Leases (respectively, the "TSA Lease," "SFA
Lease" and "PHMC Lease"; the land which is subject to the Ground Leases (which
includes Additional Parcel 1, as 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 the Company.
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
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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 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.
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As of December 31, 1995, such mortgage secured indebtedness had an approximate
outstanding principal balance of $0.1 million.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet ("Additional Parcel 1")
and owns another parcel on Mississippi Avenue adjacent to Additional Parcel 1
consisting of approximately 5,750 square feet (the "Bordonaro Parcel").
Additional Parcel 1 and the Bordonaro Parcel are presently paved and used for
surface parking.
Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square feet, and subleases one parcel consisting of approximately 3,125
square feet. All of such parcels are contiguous and are located along Atlantic
Avenue, in the same block as the Plaza Garage Parcel. They are used for
signage and surface parking and are not encumbered by any mortgage liens other
than those of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey, containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1995, of approximately $1.5 million and is encumbered by the
Plaza Mortgage.
Trump Plaza East. In connection with the Merger Transaction, Plaza
Associates intends to exercise the 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--Liquidity and Capital
Resources" and "Management--Compensation Committee Interlocks and Insider
Participation--Certain Related Party Transactions of Trump--Plaza Associates."
During the years ended December 31, 1995 and 1994, Plaza Associates incurred
approximately $3.8 million and $4.9 million, respectively, of such expenses.
Under the Trump Plaza East Purchase Option, Plaza Associates has the right to
acquire the fee interest in Trump Plaza East for a purchase price of $28.0
million through December 31, 1996 increasing by $1.0 million annually
thereafter until expiration on June 30, 1998.
Plaza Associates currently intends to exercise the Trump Plaza East Purchase
Option in connection with the Merger Transaction. However, if Plaza Associates
does not exercise the Trump Plaza East Purchase Option in connection with the
Merger Transaction, up to $30.0 million of internally generated funds and/or
additional financing would be required to fund the acquisition pursuant to the
existing purchase option. There can be no assurance that such financing would
be available on attractive terms, if at all. In addition, the exercise of the
Trump Plaza East Purchase Option may require the consent of certain of Trump's
personal creditors, and there can be no assurance that such consent will be
obtained at the time Plaza Associates desires to exercise the Trump Plaza East
Purchase Option. The CCC has required that Plaza Associates exercise the Trump
Plaza East Purchase Option no later than July 1, 1996. Plaza Associates
intends to request that the CCC extend the July 1, 1996 deadline for
exercising the Trump Plaza East Purchase Option if not exercised in connection
with the Merger Transaction, although there can be no assurance that such
extension would be granted. Failure of the Company 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 the Company. See
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates."
Plaza Associates has substantially completed its renovation and integration
of Trump Plaza East. If Plaza Associates is unable to finance the purchase
price of Trump Plaza East pursuant to the Trump Plaza East Purchase Option,
any amounts expended with respect to Trump Plaza East, including payments
under the Trump Plaza East Purchase Option and the lease pursuant to which
Plaza Associates leases Trump Plaza East, and any improvements thereon, would
inure to the benefit of the owner of Trump Plaza East and not to Plaza
Associates and would increase the cost of demolition of any improvements for
which Plaza Associates would be liable. As
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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, the Company 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--Plaza
Associates."
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 rights to an exclusive easement over, in and
through the portions of the Atlantic City Convention Center to be used as the
pedestrian walkway connecting the Trump Plaza's main Tower and Trump World's
Fair. The easement is for a 25-year term and may be renewed at the option of
Plaza Associates for one additional 25-year period. In consideration of the
granting of the easement, Plaza Associates must pay to NJSEA the sum of
$2,000,000 annually, such annual payment to be adjusted every five years to
reflect changes in the consumer price index. Plaza Associates will have the
right to terminate the easement agreement at any time upon six months' notice
to NJSEA in consideration of a termination payment of $1,000,000. See also
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates" and "Regulatory
Matters--New Jersey Gaming Regulations--Approved Hotel Facilities."
Superior Mortgages. The liens securing the indebtedness on the Plaza Garage
Parcel, the Bordonaro 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 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 senior to the liens of the mortgages associated with the
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 Working Capital Facility. Upon
consummation of the Merger Transaction, these parcels of land will secure the
Working Capital Facility (or replacement facility) and the 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.
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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 of 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.
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 4,200 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 2,000
spaces.
INDIANA RIVERBOAT
See "--Indiana Riverboat."
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TRADEMARK/LICENSING
Pursuant to the License Agreement, Trump granted to the Company 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
the Company; or (iii) such time as Trump ceases to be employed or retained
pursuant to an employment, management, consulting or similar services
agreement with the Company. Upon expiration of the term of the License, Trump
will grant the Company a non-exclusive license for a reasonable period of
transition on terms to be mutually agreed upon between Trump and the Company.
Trump's obligations under the License Agreement are secured by a security
agreement, pursuant to which Trump granted the Company 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 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 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
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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 the Old Taj Bonds.
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
THE COMPANY
Mortgage Notes. Concurrently with the consummation of the Merger
Transaction, Trump Atlantic City and Trump Atlantic City Funding will issue
approximately $1.2 billion aggregate principal amount of Mortgage
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Notes which will mature in 2006. The Mortgage Notes will be the joint and
several obligations of Trump Atlantic City and Trump Atlantic City Funding.
The Mortgage Notes will be guaranteed by Plaza Associates, Taj Associates and
all other present and future subsidiaries of THCR Atlantic City, other than
Trump Atlantic City Funding. Interest on the Mortgage Notes will be payable
semiannually in arrears.
It is anticipated that the Mortgage Notes will contain customary terms and
provisions for senior secured debt of this nature, including without
limitation a requirement that the issuers offer to purchase each holder's
Mortgage Notes at 101% of the principal amount thereof, together with accrued
and unpaid interest to the date of repurchase, upon a "Change of Control" (as
defined in the Mortgage Note Indenture).
Senior Notes. 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 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 Mortgage Notes will have no liens thereon.
In addition to the foregoing, the Company's consolidated long-term
indebtedness includes approximately $3.0 million of outstanding mortgage notes
described under "--Properties" as of December 31, 1995.
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.
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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 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 Trump Atlantic City) (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 Mortgage Notes and (ii) the Senior Notes
will have an exclusive security interest in 100% of the equity of all of THCR
Holdings' direct or indirect Subsidiaries (as defined in the Senior Note
Indenture).
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.
The principal and accrued and unpaid interest on the outstanding Taj Bonds
will be paid in full in connection with the Merger Transaction. Concurrently
with the retirement of the Taj Bonds, the outstanding shares of Taj Holding
Class B Common Stock will be redeemed in accordance with the terms of the Taj
Holding Certificate of Incorporation, at a redemption price of $.50 per share.
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.
The principal and accrued and unpaid interest on the outstanding Taj Bonds
will be paid in full in connection with the Merger Transaction. Concurrently
with the retirement of the Taj Bonds, the outstanding
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shares of Taj Holding Class B Common Stock will be redeemed in accordance with
their terms, at a redemption price of $.50 per share.
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 will 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 $1,773,750 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.
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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 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
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. The holders of the Mortgage Notes will have a first priority
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
of 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 and certain other lenders
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
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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.
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 constitutes 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 occur
violations 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; or (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
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which would be available to Trump Atlantic City, 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."
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.
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The completion of the planned renovations of Trump Plaza East is not
dependent upon the utilization of CRDA funding or upon the CRDA's acquisition
of the real estate subject to the condemnation proceedings. Plaza Associates
intends to pursue this appeal vigorously and believes it will be successful,
based in part on the March 29, 1995 opinion of the New Jersey Office of
Legislative Services ("OLS"), which serves as legal counsel to the New Jersey
State Legislature, that N.J.S.A. 5:12-173.8 empowered the CRDA to approve and
fund projects such as Trump Plaza East and, in part, on the fact that Section
173.8 expressly exempts hotel development projects from the statutory
limitation with respect to any CRDA investment or project which directly and
exclusively benefits the casino hotel or related facility.
In a related matter, Vera Coking, et al. v. Atlantic City Planning Board and
Trump Plaza Associates, Docket No. ATL-L-339-94, the Atlantic City Planning
Board's approval of the Trump Plaza East renovation was challenged on various
grounds. In July 1994, a New Jersey Superior Court judge upheld the Atlantic
City Planning Board approvals with respect to the hotel renovation component
of Trump Plaza East and the new roadway but invalidated the approval of the
valet parking lot and the public park because Plaza Associates lacked site
control with respect to the small parcels of land CRDA sought to condemn.
Plaintiff appealed the court's decision upholding the approval of the hotel
renovation and new roadway and Plaza Associates cross-appealed the court's
decision invalidating the approval of the public park and valet parking area.
Plaza Associates withdrew its cross-appeal and plaintiff's appeal is pending
in the Superior Court of New Jersey, Appellate Division, Docket No. A-1511-94-
T1. Plaza Associates received land-use approval for and has constructed the
valet parking area after deletion of the small parcels.
In another related matter, Josef Banin and Vera Coking v. Atlantic City
Planning Board and Trump Plaza Associates, Docket No. L-2188-95, the land-use
approval for this area has been challenged on various grounds. Plaza
Associates filed its answer to the complaint denying the allegations of the
complaint. The land-use approval involves certain minor amendments to the
previously granted site plan approvals for the hotel renovation component of
Trump Plaza East and the new roadway. The amendments included certain design
changes with respect to the Trump Plaza East and certain design changes to the
roadway. The amendments did not require any variance relief and the amendments
fully complied with the Land Use Ordinance of the City of Atlantic City. The
plaintiffs allege the Atlantic City Planning Board acted in an arbitrary and
capricious manner in approving the amendments and further argue that the
chairperson of the Atlantic City Planning Board had a conflict of interest in
hearing the matter because of her status as an employee of the CRDA, the
entity that had approved certain funding for the project. On January 26, 1996,
the New Jersey Superior Court upheld the approval of the amendment by the
Atlantic City Planning Board and rejected the plaintiffs' claim with respect
to the chairwoman's conflict of interest. The plaintiffs may appeal the
decision of the New Jersey Superior Court.
Penthouse Litigation. On April 3, 1989, BPHC Acquisition, Inc. and BPHC
Parking Corp. (collectively, "BPHC") filed a third-party complaint (the
"Complaint") against Plaza Associates and Trump. The Complaint arose in
connection with the action entitled Boardwalk Properties, Inc. and Penthouse
International Ltd. v. BPHC Acquisition, Inc. and BPHC Parking Corp., which was
instituted on March 20, 1989 in the New Jersey Superior Court, Chancery
Division, Atlantic County.
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. The Company considers all such proceedings to be ordinary
litigation incident to the character of its business and not material to its
business or financial condition. The majority of such claims are covered by
liability insurance (subject to applicable deductibles), and the Company
believes that the resolution of these claims, to the extent not covered by
insurance, will not, individually or in the aggregate, have a material adverse
effect on the financial condition or results of operations of the Company.
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 the Company 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 and Taj Funding have 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 express, prior approval of NJDEPE to continue use of 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
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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, 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 Holding 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 Holding 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 Holding.
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 Taj Associates or on its ability to otherwise
retain or renew any casino or other licenses required under the Casino Control
Act for the operation of the Taj Mahal.
COMPETITION
Competition in the Atlantic City casino hotel market is intense. The
Atlantic City Properties 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." The Atlantic
City Properties are each 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 Atlantic City Properties, 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 "--Atlantic City Marketing Strategy" and "--Facilities and
Amenities."In addition, there are several sites on The Boardwalk and in the
Atlantic City Marina area on which casino hotels could be built in the future
and various applications for casino licenses have been filed and announcements
with respect thereto made from time to time (including a proposal by Mirage
Resorts, Inc.), although the Company 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 of the Company 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 of the
Atlantic City Properties. There also can be no assurance that the Atlantic
City development projects which are planned or underway will be completed.
The Atlantic City Properties also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, the Atlantic City Properties face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, 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
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casino hotels in Atlantic City and elsewhere, by virtue of their proximity to
each other and the common aspects of certain of their respective marketing
efforts, including the common use of the "Trump" name, the Atlantic City
Properties compete directly with each other for gaming patrons. 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 the
Taj Mahal will operate to the competitive detriment of the other.
The Company anticipates that the Indiana Riverboat will compete primarily
with riverboats and other casinos in the northern Indiana suburban and Chicago
metropolitan area and throughout the Great Lakes Market. Although northern
Indiana is part of the greater Chicago metropolitan market, which is one of
the most successful new gaming markets in the United States, the Indiana
Riverboat may be more dependent on patrons from northern Indiana than its
Illinois competitors, and the propensity of these patrons to wager cannot be
predicted with any degree of certainty. In addition to competing with Barden's
riverboat at the Buffington Harbor site, the Indiana Riverboat will compete
with a riverboat in Hammond, Indiana, which is being developed by the owner
and operator of the Empress Riverboat Casino in Joliet, Illinois, a riverboat
in East Chicago, Indiana, which is being developed by Showboat, Inc. and with
the riverboat expected to be licensed in the nearby community of Michigan
City, Indiana. To a lesser degree, the Indiana Riverboat will compete with the
six additional riverboats expected to be licensed in the rest of Indiana. At
present there are four other riverboat casino operations in the Chicago area
(three of which operate two riverboats each, with each operator limited to
1,200 gaming positions in the aggregate).
The Company believes that competition in the gaming industry, particularly
the riverboat and dockside gaming industry, is based principally on the
quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Although management believes
that the location of the Indiana Riverboat will allow the Company to compete
effectively with other casinos in the geographic area surrounding its casino,
the Company expects competition in the casino gaming industry to be intense as
more casinos are opened and new entrants into the gaming industry become
operational. Furthermore, new or expanded operations by other persons can be
expected to increase competition for existing and future operations and could
result in a saturation of the Great Lakes Market.
The Indiana riverboat will seek a competitive advantage primarily based upon
its superior location, including its proximity to and direct access from
Chicago, extensive parking facilities, name recognition, a superior gaming
vessel and gaming experience, and targeted marketing strategies. See "--
Indiana Riverboat." In addition, a casino opened during 1994 in Windsor,
Ontario, across the river from Detroit, and Detroit is considering several
proposals for casinos in its downtown area. Although the Company believes that
there is sufficient demand in the market to sustain the Indiana Riverboat,
there can be no assurance to that effect. Legislation has also been introduced
on numerous occasions in recent years to expand riverboat gaming in Illinois,
including by authorizing new sites in the Chicago area with which the Indiana
Riverboat would compete. The Company understands that there have been recent
discussions in Illinois regarding possible legislation to permit dockside
gaming and/or increase the gaming position limitations. There can be no
assurance that either Indiana or Illinois, or both, will not authorize
additional gaming licenses, including for the Chicago metropolitan area. See
"Risk Factors--The Indiana Riverboat."
In addition, the Atlantic City Properties face, and the Indiana Riverboat
will 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 the Atlantic City Properties and the Indiana
Riverboat.
In 1991, the Mashantucket Pequot Nation opened Foxwoods, a casino facility
in Ledyard, Connecticut, located in the far eastern portion of such state, an
approximately three-hour drive from New York City and an approximately two and
one-half hour drive from Boston, which currently offers 24-hour gaming and
contains over 3,100 slot machines. The Mashantucket Pequot Nation has
announced various expansion plans, including
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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.
The Pokagon Band of Potawatomi Indians of southern Michigan and northern
Indiana has been federally recognized as an Indian tribe. In September 1995,
the Pokagon Band of Potawatomi Indians signed a gaming compact with the
governor of Michigan to build a land-based casino in southwestern Michigan and
also entered into an agreement with Harrah's Entertainment, Inc. to develop and
manage the casino.
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. 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
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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. The
Company is unable to predict whether any such legislation, in New Jersey,
Indiana, Illinois or elsewhere, will be enacted or whether, if passed, it would
have a material adverse impact on the Company.
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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, the Riverboat Gambling Act of the
State of Indiana 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, the Indiana Riverboat Gambling Act and
such other laws and regulations. Unless otherwise indicated, all references to
"Trump Plaza" include (a) Trump Plaza's main tower, (b) Trump Plaza East (wich
operates pursuant to a single casino license held by Plaza Associates) and (c)
Trump World's Fair (which will operate pursuant to a separate casino license
that is expected to be issued to Plaza Associates).
Each of the Company and Taj Holding 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
operations; (ii) approved the operation of Trump World's Fair by Plaza
Associates under a separate casino
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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."
The Company 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, AC Holdings, Plaza Holding Inc., Plaza Funding,
THCR Holdings, THCR Funding or the Company is required to register with the
CCC and meet the same basic standards for approval as a casino licensee;
provided, however, that the CCC, with the concurrence of the Director of the
Division, may waive compliance by a publicly-traded
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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 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 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 "--Interim Casino Authorization."
Declaratory Rulings. Taj Associates and Plaza Associates will petition the
CCC for declaratory rulings approving the Merger Transaction and determining,
among other things, that after consummation thereof, Taj Associates and Plaza
Associates will continue to satisfy the CCC's financial stability
requirements; Trump will continue to demonstrate his financial stability; the
Regulated Companies and natural person qualifiers are qualified; the
certificates of incorporation and partnership agreements of the Regulated
Companies contain required provisions with respect to the transfer of
securities and qualification of security holders under the Casino Control Act;
the Mortgage Notes are publicly-traded securities and that CCC approval of the
issuance or subsequent transfer of the securities is not required; that the
individual holders of the Mortgage Notes need not be qualified as financial
sources and security holders, and their qualification may be waived by the
CCC; and that 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
Taj Holding Class A Common Stock or Taj Holding Class B Common Stock, Plaza
Funding, Trump Atlantic City, Plaza Holding Inc., Plaza Associates, THCR
Holdings, THCR Funding and the Company 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 Capital
Stock--Common Stock and Class B Common Stock."
Interim Casino Authorization. Interim casino authorization is a process
which permits a person who enters into a contract to obtain property relating
to a casino operation or who obtains publicly-traded securities relating to a
casino licensee to close on the contract or own the securities until plenary
licensure or qualification. During
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the period of interim casino authorization, the property relating to the
casino operation or the securities is held in trust.
Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already
licensed or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed
trust agreement in a form approved by the CCC. If, after the report of the
Division and a hearing by the CCC, the CCC grants interim authorization, the
property will be subject to a trust. If the CCC denies interim authorization,
the contract may not close or settle until the CCC makes a determination on
the qualifications of the applicant. If the CCC denies qualification, the
contract will be terminated for all purposes and there will be no liability on
the part of the transferor.
If, as the result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines that
qualification is required or declines to waive qualification. The application
must include a fully executed trust agreement in a form approved by the CCC
or, in the alternative, within 120 days after the CCC determines that
qualification is required, the person whose qualification is required must
divest such securities as the CCC may require in order to remove the need to
qualify.
The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for
residency; and (iv) interim operation will best serve the interests of the
public.
When the CCC finds the applicant qualified, the trust will terminate. If the
CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to
sell, assign, convey or otherwise dispose of the property subject to the trust
to such persons who are licensed or qualified or shall themselves obtain
interim casino authorization.
Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities
to a trust in application for interim casino authorization and the CCC
thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the
casino hotel or receive any return on its investment or debt security
holdings; and (ii) after disposition, if any, of the securities by the
trustee, proceeds distributed to the unqualified holder may not exceed the
lower of their actual cost to the unqualified holder or their value calculated
as if the investment had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit an existing licensee, such as
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 (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such bonds or twice the amount of
its investments authorized in lieu of such bond investments or made in
projects designated as eligible by the CRDA and (ii) has the option of
entering into a contract with the CRDA
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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 license 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, the Company, 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.
INDIANA GAMING REGULATIONS
Indiana Gaming Commission. The ownership and operation of riverboat gaming
operations in Indiana are subject to strict state regulation under the
Riverboat Gambling Act and the administrative rules promulgated thereunder.
The IGC is empowered to administer, regulate and enforce the system of
riverboat gaming established under the Riverboat Gambling Act and has
jurisdiction and supervision over all riverboat gaming operations in Indiana,
as well as all persons on riverboats where gaming operations are conducted.
The IGC is empowered to regulate a wide variety of gaming and non-gaming
related activities, including the licensing of suppliers to, and employees at,
riverboat gaming operations and to approve the form of ownership and financial
structure of not only riverboat owner and supplier licensees, but also their
entity qualifiers and intermediary and holding companies. Indiana is a new
gaming jurisdiction and the emerging regulatory framework is not yet complete.
The IGC has adopted certain final rules and has published others in proposed
or draft form which are proceeding through the review and final adoption
process. The IGC also has indicated its intent to publish additional proposed
rules in the future. The IGC has broad rulemaking power, and it is impossible
to predict what effect, if any, the amendment of existing rules or the
finalization of currently new rules might have on the
operations of the Indiana Riverboat or the Company. The following reflects
both adopted and proposed regulations. Further, the Indiana General Assembly
has the power to promulgate new laws and implement amendments to the Riverboat
Gambling Act, which could materially affect the operation or economic
viability of the gaming industry in Indiana.
Certificate of Suitability. On December 9, 1994, the IGC ordered that a
"Certificate of Suitability" for a riverboat owner's license for a riverboat
to be docked in Buffington Harbor, Indiana, be issued to Trump Indiana. The
certificate of suitability constitutes approval of the application of Trump
Indiana for a riverboat owner's license. The IGC extended Trump Indiana's
certificate of suitability until June 28, 1996. Pursuant to the terms of the
certificate of suitability, during such period, Trump Indiana must comply with
certain statutory and other requirements imposed by the IGC. In addition, as a
condition to the certificate of suitability, Trump Indiana has committed to
invest $153 million in the Indiana Riverboat and certain related projects and
to pay certain incentive fees to the City of Gary, Indiana. Failure to comply
with the foregoing conditions and/or failure to commence riverboat excursions
as required by the IGC may result in revocation of the certificate of
suitability. There can be no assurance that the Company and/or Trump Indiana
will be able to comply with the terms of the certificate of suitability, that
it will be further extended if operations do not commence as required by the
IGC or that a riverboat owner's license for the Indiana Riverboat will
ultimately be granted or subsequently renewed.
Riverboat Owner's License. No one may operate a riverboat gaming operation
in Indiana without holding a riverboat owner's license. The certificate of
suitability received by Trump Indiana on December 9, 1994 and
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most recently extended through June 28, 1996 means that Trump Indiana received
a written document issued by the Executive Director of the IGC that indicates
that Trump Indiana has been chosen for licensure if Trump Indiana meets
certain requirements within the interim compliance period as established by
the IGC. The interim compliance period is the period of time between the
issuance of the certificate of suitability and the issuance of a permanent
riverboat owner's license or the notice of denial thereof.
Interim Compliance Requirements. Interim compliance requires, among other
things: obtaining a permit to develop the riverboat gaming operation from the
United States Army Corps of Engineers, which permit was obtained on October
10, 1995; obtaining a valid certificate of inspection from the United States
Coast Guard for the vessel on which the riverboat gaming operation will be
conducted; applying for and receiving the appropriate permits or certificates
from the Indiana Alcoholic Beverage Commission, Indiana Fire Marshall, and
other appropriate local, state and federal agencies which issue permits
including, but not limited to, health permits, building permits and zoning
permits; closing the financing necessary to complete the development of the
gaming operation; posting a bond in compliance with the applicable law;
obtaining the insurance deemed necessary by the IGC; receiving licensure for
electronic gaming devices and other gaming equipment under applicable law;
submitting an emergency response plan in compliance with applicable laws; and
taking any other action that the IGC deems necessary for compliance under
Indiana gaming laws. Further, the IGC may place restrictions, conditions or
requirements on the permanent riverboat owner's license. An owner's initial
license expires five years after the effective date of the license, and unless
the owner's license is terminated, expires or is revoked, the owner's license
may be renewed annually by the IGC upon satisfaction of certain conditions
contained in the Riverboat Gambling Act.
Transfer of Riverboat Owner's License. Pursuant to IGC proposed rules, an
ownership interest in a riverboat owner's license shall not be transferred
unless the transfer complies with applicable rules, and no riverboat gaming
operation may operate unless the appropriate licenses and approvals are
obtained from the IGC. Under current Indiana law, a maximum of 11 owner's
licenses may be in effect at any time. No person or entity may simultaneously
own an interest in more than two riverboat owner's licenses. A person or
entity may simultaneously own up to 100% in one riverboat owner's license and
no more than 10% in a second riverboat owner's license.
A riverboat owner's licensee must possess a level of skill, experience, or
knowledge necessary to conduct a riverboat gaming operation that will have a
positive economic impact on the host site, as well as the entire State of
Indiana. Additional representative, but not exclusive, qualification criteria
with respect to the holder of a riverboat owner's license include character,
reputation, financial integrity, the facilities or proposed facilities for the
conduct of riverboat gaming including related non-gaming projects such as
hotel development, and the good faith affirmative action plan to recruit,
train and upgrade minorities and women in all employment classifications. The
IGC shall require persons holding owner's licenses to adopt policies
concerning the preferential hiring of residents of the city in which the
riverboat docks for riverboat jobs. The IGC has broad discretion in regard to
the issuance, renewal, revocation, and suspension of licenses and approvals,
and the IGC is empowered to regulate a wide variety of gaming and non-gaming
related activities, including the licensing of suppliers to, and employees at,
riverboat gaming operations, and to approve the form of ownership and
financial structure of not only riverboat owner and supplier licensees, but
also their subsidiaries and affiliates.
A riverboat owner's licensee or any other person may not lease, hypothecate,
borrow money against or loan money against a riverboat owner's license. An
ownership interest in a riverboat owner's license may only be transferred in
accordance with the regulations promulgated under the Riverboat Gambling Act.
An applicant for the approval of a transfer of a riverboat owner's license
must comply with application procedures prescribed by the IGC, present
evidence that it meets or possesses the standards, qualifications and other
criteria under Indiana gaming laws that it meets all requirements for a
riverboat owner's license, and pay an investigative fee in the amount of
$50,000 with the application. If the IGC denies the application to transfer an
ownership interest, it shall issue notice of denial to the applicant, and,
unless, specifically stated to the contrary, a notice of denial of an
application for transfer shall not constitute a finding that the applicant is
not suitable for licensure. A person who is served with notice of denial under
this rule may request an administrative hearing.
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Control Persons and Operational Matters. The IGC has implemented strict
regulations with respect to the suitability of riverboat license owners, their
key personnel and their employees similar to the CCC regulations and
precedent. The IGC utilizes a "class-based" licensing structure that subjects
all individuals associated with Trump Indiana to varying degrees of background
investigations. Likewise, comprehensive security measures, including video
surveillance by both random and fixed cameras, are required in the casino and
money counting areas. Additionally, the IGC has delineated procedures for the
reconciliation of the daily revenues and tax remittance to the state as
further detailed below.
Tax. Under Indiana gaming law, a tax is imposed on admissions to gaming
excursions at a rate of three dollars for each person admitted to the gaming
excursion. This admission tax is imposed upon the license owner conducting the
gaming excursion on a per-person basis without regard to the actual fee paid
by the person using the ticket, with the exception that no tax shall be paid
by admittees who are actual and necessary officials, employees of the licensee
or other persons actually working on the riverboat. The IGC may suspend or
revoke the license of a riverboat owner's licensee that does not submit the
payment or the tax return form regarding admission tax within the required
time established by the IGC.
A tax is imposed on the adjusted gross receipts received from gaming
authorized under the Riverboat Gambling Act at a rate of 20% of the amount of
the adjusted gross receipts. Adjusted gross receipts is defined as the total
of all cash and property (including checks received by a licensee), whether
collected or not, received by a licensee from gaming operations less the total
of all cash paid out as winnings to patrons including a provision for
uncollectible gaming receivables as is further set forth in the Riverboat
Gambling Act. The IGC may, from time to time, impose other fees and
assessments on riverboat owner licensees. In addition, all use, excise and
retail taxes apply to sales aboard riverboats.
Excursions. Generally, gaming may not be conducted while a riverboat is
docked, other than during the 30-minute periods for passenger embarkation and
disembarkation. The Riverboat Gambling Act, as originally enacted, provided an
exception if weather conditions or water conditions present a danger to the
riverboat and authorized the IGC to adopt rules to provide other exceptions.
In October 1994, the U.S. Attorney General's Office in Indiana notified the
IGC that a federal law passed in 1951, commonly known as the Johnson Act,
prohibits gaming vessels from cruising within federal maritime jurisdiction
and prohibits gaming on such vessels. The Department of Justice has expressed
concern that the Johnson Act may prohibit gaming on vessels on the Great Lakes
because it has contended that the Great Lakes are within federal maritime
jurisdiction. The Company understands that the Department of Justice is still
considering the issue, however, and has not reached a definitive conclusion.
Currently, Congress has legislation pending that contains a related amendment
to the Johnson Act. The Coast Guard Authorization bill, which contains a
provision that would amend the Johnson Act specifically to allow gaming on
vessels in the Indiana waters of Lake Michigan, was passed by the House of
Representatives. The Senate-passed version of the Coast Guard Authorization
bill does not contain a similar provision. Because the House of
Representatives and the Senate passed different versions of the Coast Guard
Authorization bill, a conference committee composed of House and Senate
members is expected to be formed later in the Second Session of the 104th
Congress (1996) to resolve differences in these versions. The Johnson Act also
contains an exception to such prohibitions if a state adopts a law that
permits gaming vessels to depart and return to ports within its jurisdiction
and engage in gaming outside federal maritime jurisdiction. The Indiana
legislature has taken certain actions with respect to gaming on vessels and
the IGC has determined that the legislature thereby modified Indiana law to
allow gaming on vessels while the vessels are docked under certain conditions.
Notwithstanding the IGC's determination, there can be no assurance that
commencement of gaming operations by Trump Indiana when the riverboat is
docked would not be challenged as a violation of Indiana law. See "Risk
Factors--The Indiana Riverboat".
Restricted Contracts. Under proposed IGC rules, no riverboat licensee or
riverboat license applicant may enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods or services rendered or
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received as determined at the time the contract is executed. Any contract
entered into by a riverboat licensee or riverboat license applicant that
exceeds the total dollar amount of $50,000 shall be a written contract. A
riverboat license applicant means an applicant for a riverboat owner's license
that has been issued a certificate of suitability.
Pursuant to IGC proposed rules, riverboat licensees and riverboat license
applicants must submit an internal control procedure regarding purchasing
transactions which must contain provisions regarding ethical standards,
compliance with state and federal laws, and prohibitions on the acceptance of
gifts and gratuities by purchasing and contracting personnel from suppliers of
goods or services. The proposed rules also require any riverboat licensee or
applicant to submit any contract, transaction, or series of transactions
greater than $500,000 in any 12-month period to the IGC within 10 days of the
execution, and to submit a summary of all contracts or transactions greater
than $50,000 in any 12-month period on a quarterly basis. The proposed rules
provide that contracts submitted to the IGC are not submitted for approval by
the IGC, but grant the IGC authority to cancel or terminate any contract not
in compliance with Indiana law and the IGC rules.
Finance. Pursuant to IGC proposed rules, any person (other than an
institutional investor) acquiring 5% or more of any class of voting securities
of a publicly traded corporation that owns a riverboat owner's license or 5%
or more of the beneficial interest in a riverboat licensee, directly or
indirectly, through any class of the voting securities of any holding or
intermediary company of a riverboat licensee shall apply to the IGC for
finding of suitability within 45 days after acquiring the securities. Each
institutional investor who, individually or in association with others,
acquires, directly or indirectly, 5% or more of any class of voting securities
of a publicly-traded corporation that owns a riverboat owner's license or 5%
or more of the beneficial interest in a riverboat licensee through any class
of the voting securities of any holding or intermediary company
of a riverboat licensee shall notify the IGC within 10 days after the
institutional investor acquires the securities and shall provide additional
information and may be subject to a finding of suitability as required by the
IGC.
Under proposed IGC rules, an institutional investor who would otherwise be
subject to a suitability finding shall, within 45 days after acquiring the
interests, submit the following information: a description of the
institutional investor's business and a statement as to why the institutional
investor satisfies the definitional requirements of an institutional investor
under Indiana gaming rule requirements; a certification made under oath that
the voting securities were acquired and are held for investment purposes only
and were acquired and are held in the ordinary course of business as an
institutional investor; the name, address, telephone number, social security
number or federal tax identification number of each person who has the power
to direct or control the institutional investor's exercise of its voting
rights as a holder of voting securities of the riverboat licensee; the name of
each person who beneficially owns 5% or more of the institutional investor's
voting securities or equivalent; a list of the institutional investor's
affiliates; a list of all securities of the riverboat licensee that are or
were beneficially owned by the institutional investor or its affiliates within
the preceding one year; a disclosure of all criminal and regulatory sanctions
imposed during the preceding ten years; a copy of any filing made under 16
U.S.C. 18(a); and any other additional information the IGC may request to
insure compliance with Indiana gaming laws.
Each institutional investor who, individually or in association with others,
acquires, directly or indirectly, the beneficial ownership of 15% or more of
any class of voting securities of a publicly-traded corporation that owns a
riverboat owner's license or 15% or more of the beneficial interest in a
riverboat licensee through any class of voting securities of any holding
company or intermediary company of a riverboat licensee shall apply to the IGC
for a finding of suitability within 45 days after acquiring the securities.
The Certificate of Incorporation provides that the Company may redeem any
shares of the Company's capital stock held by any person or entity whose
holding of shares may cause the loss or nonreinstatement of a governmental
license held by the Company. As defined in the Certificate of Incorporation,
such redemption shall be at the lesser of the market price of the stock or the
price at which the stock was purchased.
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Under Indiana gaming laws, an institutional investor means any of the
following: a retirement fund administered by a public agency for the exclusive
benefit of federal, state, or local public employees; an investment company
registered under the Investment Company Act of 1940; a collective investment
trust organized by banks under Part 9 of the Rules of the Comptroller of the
Currency; a closed end investment trust; a chartered or licensed life
insurance company or property and casualty insurance company; a banking,
chartered or licensed lending institution; an investment adviser registered
under the Investment Advisers Act of 1940; and any other entity the IGC
determines constitutes an institutional investor. The IGC may in the future
promulgate regulations with respect to the qualification of other financial
backers, mortgagees, bond holders, holders of indentures, or other financial
contributors.
Minority and Women Business Participation. Indiana gaming laws provide that
the opportunity for full minority and women's business enterprise
participation in the riverboat industry in Indiana is essential to social and
economic parity for minority and women business persons. The IGC has the power
to review compliance with the goals of participation by minority and women
business persons and impose appropriate conditions on licensees to insure that
goals for such business enterprises are met.
Under Indiana gaming laws, a riverboat licensee or a riverboat license
applicant shall designate certain minimum percentages of the value of its
contracts for goods and services to be expended with minority business
enterprises and women's business enterprises such that 10% of the dollar value
of the riverboat licensee's or the riverboat license applicant's contracts be
expended with minority business enterprises and 5% of the dollar value of the
riverboat licensee's or the riverboat license applicant's contracts be
expended with women's business enterprises. Expenditures with minority and
women's business enterprises are not mutually exclusive.
IGC Action. All licensees subject to the jurisdiction of the IGC have a
continuing duty to maintain suitability for licensure. The IGC may initiate an
investigation or disciplinary action or both against a licensee whom the
commission has reason to believe is not maintaining suitability for licensure,
is not complying with licensure conditions, and/or is not complying with
Indiana gaming laws or regulations. The IGC may suspend, revoke, restrict, or
place conditions on the license of a licensee; require the removal of a
licensee or an employee of a licensee; impose a civil penalty or take any
other action deemed necessary by the IGC to insure compliance with Indiana
gaming laws.
CLEAN WATER REGULATIONS
Operation of the Indiana Riverboat must be in conformance with state and
federal clean water requirements, including the Federal Water Pollution
Control Act ("FWPCA") and the Oil Pollution Act of 1990 ("OPA"). OPA
establishes an extensive regulatory and liability regime for the protection
and cleanup of the environment from oil spills and affects all owners and
operators whose vessels operate in United States waters, which include the
Great Lakes. OPA requires vessel owners and operators to establish and
maintain with the U.S. Coast Guard evidence of financial responsibility
sufficient to meet their potential liabilities under OPA. U.S. Coast Guard
regulations also implement the financial responsibility requirements of the
Comprehensive Environmental Response, Compensation and Liability Act by
requiring evidence of financial responsibility in an amount of $300 per gross
ton, in addition to any required under OPA. The Company and Trump Indiana are
in the process of obtaining insurance coverage and a Certificate of Financial
Responsibility as required by OPA. The Company and Trump Indiana expect that
the insurance coverage obtained will be adequate to protect against liability
that may arise under OPA. However, in the case of a catastrophic spill or a
spill in a sensitive environment, there can be no assurance that such
occurrence would not result in liability in excess of the insurance coverage.
OTHER LAWS AND REGULATIONS
The U.S. Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit, withdrawal,
exchange of currency, gambling tokens or chips, or other payments or transfers
by, through or to such casino which involve a transaction in currency of more
than $10,000 per patron, per gaming day. Such reports are required to be made
on forms prescribed by the Secretary of the Treasury and are filed with the
Commissioner of the Internal Revenue Service (the "Service"). In addition, the
Company and Taj Associates are each required to maintain detailed records
(including the names, addresses, social security
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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.
The Indiana Riverboat site is located near, or adjacent to and may include
protected wetlands which may subject the Company to obligations or liabilities
in connection with wetlands mitigation or protection.
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 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.
The Company and Taj Associates are 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 of the Company and
Taj Holding believe all required licenses and permits necessary to conduct the
business of the Company and Taj Associates have been obtained for operations
in the State of New Jersey.
The Company expects to be subject to similar rigorous regulatory standards
in each other jurisdiction in which it seeks to conduct gaming operations.
There can be no assurance that regulations adopted, permits required or taxes
imposed by other jurisdictions will permit profitable operations by the
Company in those jurisdictions.
In addition, the federal Merchant Marine Act, 1936 and the federal Shipping
Act, 1916 and the applicable regulations thereunder contain provisions
designed to prevent persons who are not citizens of the United States, as
defined therein, from beneficially owning more than 25% of the capital stock
of any entity operating a vessel on the Great Lakes.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company'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
the Company 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 the Company,
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 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
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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 the Company 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 the Company, THCR Holdings and THCR Funding since January
1996, and has been the Corporate Treasurer of the Company, 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 the
Company 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 the Company
since June 1995. He has also been the Senior Vice President of Corporate
Affairs of the Pepsi-Cola Bottling Co. of New York since January 1985. Mr.
Thomas was the Acting Chairman, and a Commissioner, of the CRDA from 1985
through 1987, and a Commissioner of the CCC from 1980 through 1984. Mr. Thomas
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.
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Peter M. Ryan--Mr. Ryan, 58 years old, has been a director of the Company
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 the Company serve at the pleasure of the Board of Directors.
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.
The Company is the general partner of THCR Holdings. As the managing general
partner of THCR Holdings, the Company 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. See "Description of the THCR Holdings
Partnership Agreement."
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 (the "Independent Directors"). The
Amex rules define "independent directors" as those who are not officers of the
company, 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 the Company.
Barry J. Cregan--Mr. Cregan, 41 years old, has been Chief Operating Officer
of Plaza Associates since September 19, 1994 and President since March 1995.
Since February 21, 1995, Mr. Cregan has been Vice President of Plaza Funding
and Plaza Holding Inc. Prior to accepting these positions at Trump Plaza, Mr.
Cregan was President of the Plaza Hotel in New York for approximately three
years. Prior to joining The Plaza Hotel, he was Vice President of Hotel
Operations at Trump's Castle in Atlantic City. In addition, Mr. Cregan has
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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 Greater 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. Following the consummation of the Merger
Transaction, Trump Atlantic City 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 key employees of Taj Associates other
than those who are also directors or executive officers of the Company.
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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 September 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 and Vice President
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
Caesar's 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
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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. 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 the Company was formed in 1995, there was no salary or
bonus paid to, deferred or accrued for the benefit of, the Company'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 the
Company 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 the Company 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 the Company since its inception was paid and
will continue to be paid by THCR Holdings in accordance with the THCR Holdings
Partnership Agreement. See "Description of the THCR Holdings Partnership
Agreement."
1995 Stock Incentive Plan. The Board of Directors of the Company adopted the
1995 Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which,
directors, employees and consultants of the Company 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 the Company (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 Common Stock on the date of
grant and a minimum price in the case of NQSOs of the par value of Common
Stock. In the discretion of the Stock Incentive Plan Committee, the option
exercise price may be paid in cash or in shares of 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 the Company a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company 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. A SAR entitles its holder
to be paid an amount equal to the fair market value of 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 a SAR granted in connection with a stock
option, or the fair market value of one
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share of stock on the date the SAR was granted, in the case of a SAR granted
independent of an option. Shares of 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 the same rights as an owner of 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 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 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 SARs 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.
The Company has reserved 1,000,000 shares of 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 the Company, 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 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 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 $14.00 per share.
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Summary Compensation Table. The following table sets forth information
regarding compensation paid to or accrued by all the executive officers of the
Company for each of the last three completed fiscal years. Compensation
accrued during one year and paid in another is recorded under the year of
accrual. Because the Company was formed in 1995, compensation for the years
ended December 31, 1994 and 1993 reflect solely the compensation paid to or
accrued by these individuals as executive officers of Plaza Associates and Taj
Associates. Compensation for the year ended December 31, 1995 includes
compensation paid to or accrued by these individuals as executive officers of
the Company, Plaza Associates and Taj Associates.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS ($) 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>
- ---------------------
(1) Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for income
taxes. Following SEC (as defined) 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. 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 "--Compensation Committee Interlocks and Insider
Participation--Certain Related Party Transactions of Trump--Plaza
Associates" and "--Taj Associates and Affiliates." 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 Statements of Trump Atlantic City and
Plaza Associates.
(4) Mr. Ribis devotes a majority of his time to the affairs of the Company.
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 the Company.
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 the Company (i) because
of his death or disability, (ii) by the Company 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 the Company under circumstances which do
not constitute constructive termination or if he is terminated by the
Company 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
the 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.
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The following table sets forth options granted to Mr. Ribis in 1995. No
other member of the Executive Group received stock options in 1995. The
Company 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 Common Stock, continued employment with the Company 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 $2,960,580
</TABLE>
- ---------------------
(1) The options vest at the rate of 20% per year on each anniversary of the
date of the grant subject to acceleration in certain circumstances. See
"--Employment Agreements."
The following table sets forth the number of shares covered by options held
by Mr. Ribis and the value of the options as of December 31, 1995. Mr. Ribis
was the only member of the Executive Group who held options in 1995. None of
these options were exercisable in 1995.
FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END ($)(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 Common Stock on December
31, 1995.
EMPLOYMENT AGREEMENTS
Trump serves as the Chairman of the Board of Directors of the Company
pursuant to the Executive Agreement dated as of June 12, 1995, among Trump,
the Company 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 the Company, from time to time, when reasonably requested,
marketing, advertising, professional and other similar and related services
with respect to the operation and business of the Company. 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 the Company
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" and "Description of the THCR Holdings Partnership Agreement--
Contribution Agreement."
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
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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, the
Company 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 the Company 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 the Company, 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
$998,250, which is 50% of the aggregate current annual base salary
($1,996,500) that Mr. Ribis receives as Chief Executive Officer of the Company
($998,250), 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 the Company, 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 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 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 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 the Company 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 the Company 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" 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 the Company, (ii) the majority of the Board of Directors of the
Company 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) the Company adopts and implements a plan of liquidation or
(iv) all or substantially all of the assets or business of the Company are
disposed of in a sale or business combination in which shareholders of the
Company 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 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 the Company for a period of up to one year.
Mr. Ribis also has an employment agreement with Taj Associates (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
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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 to 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 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 the Company, and
following the consummation of the Merger Transaction, Mr. Ribis will devote
approximately 75% of his professional time to the Company. 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.
COMPENSATION OF DIRECTORS
Directors of the Company who are also employees or consultants of the
Company 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 the Company by THCR Holdings in accordance with the
THCR Holdings Partnership Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company 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 the Company. 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 the 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
the Company, including affiliated transactions. See "Description of the THCR
Holdings Partnership Agreement."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Trump and certain affiliates have engaged in certain related party
transactions. See "Certain Transactions."
In general, the compensation of executive officers of the Company is
determined by the Compensation Committee of the Board of Directors of the
Company, which consists of Messrs. Trump, Ribis, Askins and
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Thomas. No officer or employee of the Company, other than Messrs. Trump and
Ribis, who serve on the Board of Directors of the Company, participated in the
deliberations of the Board of Directors of the Company concerning executive
compensation.
Certain Related Party Transactions of Trump--The Company. 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--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 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>
The Company 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 the
Company 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, the Company will pay as additional rent, among other
things, a portion of the property taxes due each year. The Company 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 the Company 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
Common Stock and Class B Common Stock beneficially owned by Trump in favor of
the approval of the Merger Transaction. The Company agreed to use reasonable
efforts to fulfill, and cause to be fulfilled, those obligations owed to Trump
in connection with the Merger Transaction.
Certain Related Party Transactions of Trump--Plaza Associates. 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
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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--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 the
Company, Trump or their respective affiliates. Pursuant to an agreement
between Trump Crystal and ACFH, Trump Crystal granted ACFH a non-exclusive
license to use the "Trump" name in connection with such property. Plaza
Associates repaid the Regency Note with a portion of the proceeds from the
sale of the Plaza Notes and PIK Notes.
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical and ACFH. The Original Chemical
Option Agreement granted to Trump an option to purchase (i) the former Trump
Regency Hotel (including the land, improvements and personal property used in
the operation of the hotel) and (ii) certain promissory notes (including a
personal promissory note of Trump payable to Chemical for $35.9 million (the
"Trump Note")) made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate
assets located in New York, unrelated to Plaza Associates, including the Trump
Note which was made by Trump on July 20, 1987. As of September 30, 1995, the
aggregate amount owed by Trump and his affiliates under the Chemical Notes
(none of which constitutes an obligation of Plaza Associates) was
approximately $65.8 million. In connection with exercise of the Trump World's
Fair Purchase Option, as discussed below, the Trump Note was canceled.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $80 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option
by January 5, 1994. In addition, the Original Chemical Option Agreement
provided for an expiration of the option on May 8, 1994, subject to an
extension until June 30, 1994 upon payment of an additional $250,000 on or
before May 8, 1994. The Original Chemical Option Agreement did not allocate
the purchase price among the assets subject to the option or permit the option
to be exercised for some, but not all, of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Plaza Associates was to make the initial $1 million payment, and, in
consideration of such payment to be made by Plaza Associates, Trump agreed
with Plaza Associates that, if Trump was able to acquire the former Trump
Regency Hotel pursuant to the
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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. The Company is currently in the process
of renovating and integrating Trump World's Fair into Trump Plaza. See
"Business--Atlantic City Properties--Trump Plaza--The Trump Plaza Expansion."
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. On June 24, 1993, in connection with the 1993 refinancing of Trump
Plaza, (i) Trump transferred title to Trump Plaza East to Boardwalk, a wholly
owned subsidiary of Midlantic, in exchange for a reduction in indebtedness to
Midlantic in an amount equal to the sum of fair market value of Trump Plaza
East and all rent payments made to Boardwalk by Trump under the Trump Plaza
East Lease (as defined), (ii) Boardwalk leased Trump Plaza East to Trump (the
"Trump Plaza East Lease") for a term of five years, which expires on June 30,
1998, during which time Trump was obligated to pay Boardwalk $260,000 per
month in lease payments, and (iii) Plaza Associates acquired the Trump Plaza
East Purchase Option. In October 1993, Plaza Associates assumed the Trump
Plaza East Lease and related expenses. In addition, Plaza Associates has the
Right of First Offer upon any proposed sale of all or any portion of the fee
interest in Trump Plaza East during the term of the Trump Plaza East Purchase
Option. Pursuant to the Right of First Offer, Plaza Associates has ten days
after receiving written notice from the grantor of the proposed sale to commit
to exercise the Right of First Offer. If Plaza Associates commits to exercise
the Right of First Offer, it has ten days from the date of commitment to
deposit $3,000,000 with the grantor, to be credited towards the purchase price
or to be retained by the grantor if the closing, through no fault of the
grantor, does not occur within 90 days (or, subject to certain conditions, 120
days) of the date of the commitment. If Plaza Associates determines not to
timely exercise the Right of First Offer, the grantor thereof may sell Trump
Plaza East to a third party, subject, however, to the Trump Plaza East
Purchase Option and the lease associated with Trump Plaza East. Trump,
individually, also has been granted by such lender the Right of First Offer
upon a proposed sale of all or any portion of Trump Plaza East during the term
of the Trump Plaza East Purchase Option. Trump has agreed with Plaza
Associates that his Right of First Offer will be subject to Plaza Associates'
prior exercise of its Right of First Offer (with any decision of Plaza
Associates requiring the approval of the independent directors of Plaza
Funding, acting as the managing general partner of Plaza Associates).
Acquisition of Trump Plaza East by Plaza Associates would under certain
circumstances (provided there are no events of default under the Trump Plaza
East Lease or the Trump Plaza East Purchase Option and provided that certain
other events had not theretofore or do not thereafter occur) discharge Trump's
approximately $18 million obligation to Midlantic in full.
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On June 24, 1993, Plaza Associates and TPM entered into an agreement (the
"TPM Services Agreement") which amended and restated an earlier services
agreement. Pursuant to the TPM Services Agreement, TPM is required to provide
to Plaza Associates, from time to time when reasonably requested, consulting
services on a non-exclusive basis, relating to marketing, advertising,
promotional and other similar and related services (the "TPM Services") with
respect to the business and operations of Plaza Associates. In addition, the
TPM Services Agreement contains a non-exclusive "license" of the "Trump" name.
TPM is not required to devote any prescribed amount of time to the performance
of its duties. In consideration for the TPM Services, Plaza Associates pays
TPM an annual fee of $1.0 million in equal monthly installments. In addition
to such annual fee, Plaza Associates reimburses TPM on a monthly basis for all
reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under the TPM Services Agreement. Plaza Associates paid TPM
$1,321,000, $1,288,000 and $1,247,000 in 1995, 1994 and 1993, respectively,
for the TPM Services. Pursuant to the TPM Services Agreement, Plaza Associates
has agreed to hold TPM, its officers, directors and employees harmless from
and against any loss arising out of or in connection with the performance of
the TPM Services and to hold Trump harmless from and against any loss arising
out of the license of the "Trump" name. The TPM Services Agreement provides
that its term is coextensive with the period during which any Plaza Notes
remain outstanding.
Payments received under the TPM Services Agreement are currently pledged by
TPM to secure lease payments for a helicopter that TPM makes available to
Plaza Associates. Pending approval by the lessor of the helicopter, it is
currently contemplated that the stock of TPM will be transferred by Trump to
THCR Holdings, which will in turn assume the lease and related obligations, as
well as become entitled to all amounts payable under the TPM Services
Agreement.
John Barry, Trump's brother-in-law, is a partner of Barry & McMoran, a New
Jersey law firm which provides, from time to time, legal services to Plaza
Associates.
Certain Related Party Transactions of Trump--Taj Associates and
Affiliates. On January 8, 1996, as an inducement for Taj Holding, the Company
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--
Certain Indebtedness--Taj Association--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 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 the Company, have served on the boards 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.
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 the Company. Messrs. Ribis and
Burke
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are not compensated by the foregoing entities, however, they are compensated
by Plaza Associates for their service as executive officers.
Messrs. Ribis, Pickus and Burke serve on the Board of Directors of Taj
Holding, which holds an indirect equity interest in Taj Associates, the
partnership that owns the Taj Mahal, of which Trump is an executive officer.
Such persons also serve on the Board of Directors of TM/GP, the managing
general partner of Taj Associates, of which Messrs. Trump and Ribis are
executive officers. Mr. Ribis is compensated by Taj Associates for his
services as its Chief Executive Officer. 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 the Company, THCR
Holdings, Plaza Associates, Taj Holdings, Taj Associates and certain of their
affiliated entities.
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CERTAIN TRANSACTIONS
Payments to affiliates in connection with any such transactions are governed
by the provisions of the Plaza Note Indenture and the Senior Note Indenture,
and may also be governed by the provisions of the Mortgage Note Indenture,
which provisions generally require that such transactions be on terms as
favorable as would be obtainable from an unaffiliated party, and require the
approval of a majority of the independent directors of the Company for certain
affiliated transactions.
THE COMPANY
Trump and certain affiliates have engaged in certain related party
transactions with respect to the Company and Plaza Associates. See
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--The Company, "--Plaza Associates"
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 the Company's and its subsidiaries' employment agreements (see
"Management--Employment Agreements"), certain former and current Directors of
Plaza Funding entered into separate indemnification agreements in May 1992
with Plaza Associates pursuant to which such persons are afforded the full
benefits of the indemnification provisions of the partnership agreement
governing Plaza Associates. Plaza Associates also entered into an
Indemnification Trust Agreement in November 1992 (the "Trust Agreement") with
Midlantic (the "Indemnification Trustee") pursuant to which the sum of
$100,000 was deposited by Plaza Associates with the Indemnification Trustee
for the benefit of the Directors of Plaza Funding and certain former Directors
of Trump Plaza GP to provide a source for indemnification for such persons if
Plaza Associates, Plaza Funding or Trump Plaza GP, as the case may be, fails
to immediately honor a demand for indemnification by such persons. The
indemnification agreements with the directors of Plaza Funding and directors
of Trump Plaza GP were amended in June 1993 to provide, among other things,
that Plaza Associates would maintain directors' and officers' insurance
covering such persons during the ten-year term (subject to extension) of the
indemnification agreements; provided, however, that if such insurance would
not be available on a commercially practicable basis, Plaza Associates could,
in lieu of obtaining such insurance, annually deposit an amount in the
Indemnification Trust Fund equal to $500,000 for the benefit of such
directors; provided, however, that deposits relating to the failure to obtain
such insurance shall not exceed $2.5 million. Such directors are covered by
directors' and officers' insurance maintained by Plaza Associates.
TAJ HOLDING 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--Certain Related Party
Transactions of Trump--Taj Associates and Affiliates" 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.
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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 Common Stock by (i) each of
the Company's executive officers, (ii) each director of the Company, (iii)
each person who is known to the Company to own beneficially more than 5% of
the Common Stock and (iv) all officers and directors of the Company as a
group. Such information is based, in part, upon information provided by
certain stockholders of the Company. In the case of persons other than members
of the officers and directors of the Company, 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. ................................. 1,490,075(/9/) 14.8
All officers and directors of the Company (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 Common Stock, into which Trump's
limited partnership interest in THCR Holdings is convertible, subject to
certain adjustments. See "Description of the THCR Holdings Partnership
Agreement." These shares include 300 shares of 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 Class B Common Stock (1,000 shares). The 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 Common Stock, the corresponding voting power of the Class B
Common Stock will be proportionately diminished. See "Description of
Capital Stock."
(2) Represents a stock bonus awarded to the President of the Company 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 also 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 rating 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 CAPITAL STOCK
The following summary description of the capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to
the Certificate of Incorporation and the By-Laws, copies of which are filed as
exhibits to this Registration Statement of which this Prospectus is a part.
GENERAL
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, of which 10,066,667 shares are currently issued and
outstanding, (ii) 1,000 shares of Class B Common Stock, all of which are
currently issued and outstanding, and (iii) 1,000,000 shares of Preferred
Stock, par value $1.00 per share (the "Preferred Stock"), none of which are
issued and outstanding. Upon consummation of the Merger Transaction (assuming
all of the holders of Taj Holding Class A Common Stock elect Cash
Consideration and assuming a price of $24.00 per share of Common Stock as the
Market Value in connection with the Merger and as the public offering price in
the Stock Offering), there will be 23,066,667 shares of Common Stock
outstanding.
COMMON STOCK AND CLASS B COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Subject to the rights of the holders of the Class B Common Stock
described below, holders of a majority of the shares of Common Stock are
entitled to vote in any election of directors, may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock and Class B Common Stock will
share ratably, out of the assets of the Company legally available for
distribution to its stockholders, to the extent of their par value, $.01 per
share. After such payment is made, the holders of the Common Stock will be
entitled to participate ratably in all of the remaining assets of the Company
available for distribution. Holders of Common Stock have no subscription,
redemption or conversion rights. Holders of Common Stock have no preemptive
rights to subscribe to any additional securities that the Company may issue,
nor is the Common Stock subject to calls or assessments by the Company. All
the outstanding shares of Common Stock are, and the shares of Common Stock to
be issued in connection with the Merger Transaction, when issued and paid for
will be, fully paid and non-assessable. The rights, preferences and privileges
of holders of Common Stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of Preferred Stock that the
Company may designate and issue in the future.
Trump currently is the beneficial owner of all 1,000 outstanding shares of
Class B Common Stock. The Class B Common Stock votes together with the Common
Stock as a single class on all matters submitted to stockholders of the
Company for a vote or in respect of which consents are solicited (other than
in connection with certain amendments of the Certificate of Incorporation
described below). The number of votes represented by the Class B Common Stock
held by any holder equals the number of shares of Common Stock issuable to the
holder upon the conversion of such holder's partnership interest in THCR
Holdings into Common Stock. Upon such conversion, the corresponding voting
power of shares of Class B Common Stock (equal in voting power to the number
of shares of Common Stock issued upon such conversion) will be proportionately
diminished. The Class B Common Stock provides Trump with a voting interest in
the Company which is proportionate to his equity interest in THCR Holdings'
assets represented by his limited partnership interest. Except for the right
to receive par value upon liquidation, the Class B Common Stock has no right
to receive any dividend or other distribution in respect of the equity of the
Company. In addition, the Certificate of Incorporation provides that the Class
B Common Stock is not entitled to a separate class vote on any matters
submitted to the stockholders of the Company for their approval, except for
any amendment of the terms of the Class B Common Stock, which require (x) the
affirmative vote of the Class B Common Stock, voting as a separate class, and
(y) the affirmative vote of a majority of the shares of Common Stock held by
persons who are not beneficial owners of Class B Common Stock, voting as a
separate class.
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In accordance with the requirements of the Casino Control Act and the
Indiana Riverboat Gambling Act, the Certificate of Incorporation provides that
all securities of the Company are held subject to the condition that, if a
holder thereof is found to be disqualified, such holder shall: (a) dispose of
his interest in the Company; (b) not receive any dividends or interest upon
any such securities; (c) not exercise, directly or indirectly or through any
trustee or nominee, any right conferred by such securities; and (d) not
receive any remuneration in any form from the casino license for services
rendered or otherwise. The Certificate of Incorporation further provides that
the Company may redeem any shares of the Company's capital stock held by any
person or entity whose holding of shares may cause the loss or non-
reinstatement of a governmental license held by the Company. Such redemption
shall be at the lesser of fair market value (as defined in the Certificate of
Incorporation), or the purchase price of such capital stock. The Certificate
of Incorporation may also contain other provisions required by the gaming laws
of other jurisdictions.
The Transfer Agent for the Company's Common Stock is Continental Stock
Transfer & Trust Company, Jersey City, New Jersey.
PREFERRED STOCK
The Board of Directors may, without further action by the Company's
stockholders, issue Preferred Stock in one or more series and fix the rights,
preferences, privileges, qualifications, limitations and restrictions of the
Preferred Stock including dividend rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders
and may adversely affect the voting and other rights of the holders of Common
Stock. At present, the Company has no plans to issue any of the Preferred
Stock.
PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECTS
The Certificate of Incorporation and the By-Laws contain provisions that
could have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the Board of
Directors and in the policies formulated by the Board of Directors and to
discourage certain types of transactions which may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company that does not contemplate the acquisition of all of
its outstanding shares or an unsolicited proposal for the restructuring or
sale of all or part of the Company. The provisions are also intended to
discourage certain tactics that may be used in proxy fights. The Board of
Directors believes that, as a general rule, such takeover proposals would not
be in the best interest of the Company and its stockholders. Set forth below
is a description of such provisions in the Certificate of Incorporation and
the By-Laws. The Board of Directors has no current plans to formulate or
effect additional measures that could have an anti-takeover effect.
The Certificate of Incorporation provides that directors, other than those,
if any, elected by the holders of the Preferred Stock, can be removed from
office only for cause and only by the affirmative vote of the holders of at
least 66 2/3% of the combined voting power of the then outstanding shares of
capital stock entitled to vote thereon ("Voting Stock"). Pursuant to the By-
Laws, newly created directorships resulting from any increase in the
authorized number of directors and any vacancies on the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors.
Except as otherwise provided for with respect to the rights of the holders
of Preferred Stock, the Certificate of Incorporation provides that the whole
Board of Directors will consist of that number of directors determined from
time to time by the Board of Directors.
The By-Laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors
and with regard to certain other matters to be brought before an annual
meeting of stockholders of the Company. In general, notice must be received by
the Company not later than 10 days after the public announcement of the
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meeting date and must contain certain specified information concerning the
matters to be brought before the meeting and the stockholder submitting the
proposal.
In addition, the Certificate of Incorporation provides that whenever any
vote of Voting Stock is required by law to amend, alter, repeal or rescind any
provision thereof, then, in addition to any affirmative vote required by law
or any required vote of the holders of Preferred Stock, the affirmative vote
of at least a majority of the combined voting power of the then-outstanding
shares of Voting Stock and approval by at least a majority of the then-
authorized number of directors of the Company is required to amend certain
provisions of the Certificate of Incorporation; provided, however, that if any
such amendment, alteration, repeal, or rescission (a "Change") relates to
those provisions or to removal of directors, such Change must also be approved
by the affirmative vote of the holders of at least 66 2/3% of the combined
voting power of the then-outstanding shares of Voting Stock, voting together
as a single class and, if at the time there exist one or more Related Persons
(as defined), such Change must also be approved by the affirmative vote of the
holders of at least a majority of the combined voting power of the
Disinterested Shares (defined in the Certificate of Incorporation as, to any
Related Person, shares of Voting Stock that are beneficially owned and owned
of record by stockholders other than such Related Person). A "Related Person"
means any person, entity or group which beneficially owns 10% or more of the
outstanding voting stock of the Company; provided, however, that Trump and his
affiliates are not deemed to be a Related Person.
The Certificate of Incorporation provides that the vote(s) required by the
immediately preceding provision shall not be required if such Change has been
first approved by at least two-thirds of the then- authorized number of
directors of the Company and, if at the time there exist one or more Related
Persons, by a majority of the Continuing Directors (as defined with respect to
any Related Person to be any member of the Board of Directors who (i) is
unaffiliated with and is not the Related Person and (ii) became a member of
the Board of Directors prior to the time that the Related Person became a
Related Person, and any successor of a Continuing Director who is recommended
to succeed a Continuing Director by a majority of Continuing Directors then on
the Board of Directors).
The Certificate of Incorporation provides that the By-Laws may be adopted,
altered, amended or repealed by the stockholders of the Company or by a
majority vote of the entire Board of Directors.
The Certificate of Incorporation provides that, except as otherwise provided
for with respect to the rights of the holders of Preferred Stock, no action
that is required or permitted to be taken by the stockholders of the Company
at any annual or special meeting of stockholders may be effected by written
consent of stockholders in lieu of a meeting of stockholders, unless the
action to be effected by written consent of stockholders and the taking of
such action by such written consent have expressly been approved in advance by
the Board of Directors and, if such action involves a "business combination"
within the meaning of Section 203 of the DGCL, such written consent shall have
expressly been approved in advance by the affirmative vote of at least a
majority of the Continuing Directors then in office.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the DGCL. Section
203 of the DGCL prohibits a publicly held Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years did own, 15% of the corporation's voting stock. Neither Trump nor any of
his affiliates is deemed to be an "interested stockholder" for purposes of
Section 203 of the DGCL.
The Certificate of Incorporation contains certain provisions permitted under
the DGCL relating to the liability of directors. The provisions eliminate a
director's liability for monetary damages for a breach of
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fiduciary duty, except in certain circumstances involving wrongful acts, such
as the breach of a director's duty of loyalty or acts or omissions which
involve intentional misconduct or a knowing violation of law. Furthermore, the
Certificate of Incorporation and the By-Laws contain provisions to indemnify
Company's directors and officers to the fullest extent permitted by the DGCL,
including payment in advance of a final disposition of a director's or
officer's expenses and attorneys' fees incurred in defending any action, suit
or proceeding. The Company believes that these provisions assist the Company
in attracting and retaining qualified individuals to serve as directors.
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DESCRIPTION OF THE THCR HOLDINGS PARTNERSHIP AGREEMENT
The following summary of the Amended and Restated Agreement of Limited
Partnership of THCR Holdings (the "THCR Holdings Partnership Agreement"), and
the description of certain provisions set forth elsewhere in this Prospectus,
is qualified in its entirety by reference to such partnership agreement, which
is filed as an exhibit to the Registration Statement of which this Prospectus
is a part. THCR Holdings was formed in 1995 under the Delaware Revised Uniform
Limited Partnership Act, as amended (the "Delaware RULPA"). Stockholders of
the Company are neither general nor limited partners of THCR Holdings, and
influence or control of THCR Holdings solely through their ownership of Common
Stock.
DISTRIBUTIONS AND ALLOCATIONS OF PROFITS AND LOSSES
THCR Holdings makes any required distributions to each partner of THCR
Holdings (each, a "Partner") for taxes ("Tax Amounts") in one or more payments
from time to time during each year, but in no event later than March 1 of the
year immediately following such year, in an aggregate cash sum equal to such
Partner's percentage interest in Tax Amounts in respect of such year. In
general, Tax Amounts for any year are the product of the highest marginal tax
rate applicable to any of the Partners (subject to certain limitations) and
THCR Holdings' taxable income for such year. The THCR Holdings Partnership
Agreement provides that after making the required tax distributions,
additional distributions will be made from time to time as determined by a
majority of the Board of Directors, but in any case pro rata in accordance
with the Partners' percentage interests. THCR Holdings' ability to make
distributions (including tax distributions) is subject to, among other things,
limitations set forth in the Senior Note Indenture. See "Risk Factors--
Restrictions on Certain Activities."
Profits and losses for tax purposes are generally allocated among the
partners in accordance with their percentage interests, subject to compliance
with the provisions of Section 704(b) and 704(c) of the Internal Revenue Code
(the "Code") and the Treasury Regulations thereunder governing special
allocations of certain partnership items, including the "ceiling rule" set
forth in Treasury Regulations Section 1.704-3 (which are not subject to cure
by special allocation except as specifically provided in the THCR Holdings
Partnership Agreement).
THCR Holdings has agreed that all expenses of the Company shall, to the
maximum extent practicable, be paid directly by THCR Holdings. Any other
expenses paid directly by the Company are required to be reimbursed promptly
by THCR Holdings and are deemed to be expenses of THCR Holdings.
MANAGEMENT
As the sole general partner of THCR Holdings, the Company generally has the
exclusive rights, responsibilities and discretion in the management and
control of THCR Holdings. The limited partners of THCR Holdings (the "Limited
Partners") have no authority, as Limited Partners, to transact business or
take any acts on behalf of, or make any decision for, THCR Holdings. Trump,
however, has the right to control the management of Plaza Associates. In
connection with the Merger Transaction, the THCR Holdings Partnership
Agreement will be amended to give Trump the right to control the resolution of
tax matters affecting or relating to Taj Associates in respect of periods
ending on or prior to the date on which Taj Holding acquired its interest in
Taj Associates, including requiring THCR Holdings, Trump Atlantic City and Taj
Associates to adjust the tax basis of assets held by Taj Associates in
connection with the resolution of such tax matters to the extent such basis
adjustments shall not reduce the Company's share of federal income tax
depreciation and cost recovery deductions in respect of assets held by Taj
Associates as of the date of the Merger and contributions of the interests in
Taj Associates to Trump Atlantic City (on behalf, and at the direction, of
THCR Holdings).
The THCR Holdings Partnership Agreement provides that the Company shall not,
without the consent of a majority-in-interest of the Limited Partners,
undertake actions relating to any of the following during such time as the
Limited Partners own more than 10% of the outstanding partnership interests in
THCR Holdings: the dissolution of THCR Holdings under the Delaware RULPA, the
institution of any proceedings for bankruptcy on
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behalf of THCR Holdings, the making of a general assignment for the benefit of
creditors or the appointment of a custodian, receiver or trustee for all or
any part of the assets of THCR Holdings.
TRANSFERABILITY OF INTERESTS
The THCR Holdings Partnership Agreement provides that the Company may not
withdraw as general partner of THCR Holdings, or transfer without the consent
of a majority-in-interest of the Limited Partners (other than the Company), so
long as the Limited Partners hold at least a 10% interest in THCR Holdings;
provided, however, that such consent right shall not apply to a determination
by the Company or THCR Holdings to enter into a merger, sale, consolidation,
combination or similar transaction. A Limited Partner may transfer all or any
portion of his interests in THCR Holdings, provided that (i) the Company
including a majority of the Special Committee (as defined) consents to such
transfer, which consent may not be unreasonably withheld or delayed, except no
such consent is required for (a) a transfer of Partnership interests described
below under "Exchange and Registration Rights," (b) a transfer to a Permitted
Holder (which term includes the spouse and other descendants of such Limited
Partner (including any related trusts controlled by, and established and
maintained for the sole benefit of, such Limited Partner or such spouse or
descendant) and the estate of any of the foregoing), or (c) a transfer upon
foreclosure on an interest of a Limited Partner pursuant to certain permitted
liens and (ii) such transfer does not violate certain other restrictions on
transfer contained in the THCR Holdings Partnership Agreement. No transferee
is admitted as a substitute Limited Partner of THCR Holdings having the rights
of a Limited Partner without the consent of the Company, including a majority
of the Special Committee.
ADDITIONAL CAPITAL CONTRIBUTIONS; ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS
No Partner is required under the terms of the THCR Holdings Partnership
Agreement to make additional capital contributions to THCR Holdings, except as
described below in connection with the issuance of additional partnership
interests.
The THCR Holdings Partnership Agreement provides that no additional
Partnership interests will be issued, except in the case of (i) an additional
partnership interest to the Company in exchange for a contribution of value
from the Company and (ii) an additional limited partnership interest to Trump
or his Permitted Holders in exchange for a contribution of value from Trump or
his Permitted Holders (as defined in the THCR Holdings Partnership Agreement),
as determined by a majority of the Special Committee. The Special Committee is
composed of directors who are not officers or employees of the Company and who
are not affiliates of Trump or any of his affiliates.
The THCR Holdings Partnership Agreement currently provides that the Company
will not issue additional debt or equity securities, unless the proceeds of
such issuance are contributed to THCR Holdings and that it will not issue any
additional shares of Class B Common Stock, except to Trump or his Permitted
Holders. In connection with, and in light of the structure necessary to
consummate the Merger Transaction, the THCR Holdings Partnership Agreement
will be amended to provide that the Company may contribute to Trump Atlantic
City the indirect interests in Taj Associates that the Company acquires in the
Merger and the proceeds from the Stock Offering, rather than make such
contributions directly to THCR Holdings. Furthermore, the THCR Holdings
Partnership Agreement will be amended to provide that THCR Holdings may issue
limited partnership interests to TTMI and TM/GP in exchange for the
contribution of their respective 49.995% equity interest in Taj Associates.
EXCHANGE AND REGISTRATION RIGHTS
The Company entered into an exchange and registration rights agreement (the
"Exchange Rights Agreement") with Trump, pursuant to which, among other
things: (i) Trump and his permitted successors and assigns are able to
exchange all or any portion of their interest in THCR Holdings for Common
Stock and (ii) a majority of the Special Committee has the right to require
any holder of a limited partnership interest (other than
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Trump and his Permitted Holders) to exchange their Partnership interests for
Common Stock. The number of shares of Common Stock issuable upon exchange of
limited partnership interests is adjusted from time to time to reflect stock
dividends, stock splits, reverse stock splits, reclassifications and
recapitalizations.
The exchange of limited partnership interests for shares of Common Stock
under the Exchange Rights Agreement is subject to (i) the expiration or
termination of the applicable waiting period, if any, under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and (ii) the
satisfaction of certain other conditions contained in the Exchange Rights
Agreement.
The Exchange Rights Agreement provides that, upon a transfer of limited
partnership interests in THCR Holdings, the transferee will obtain the
benefits of, and be subject to, all of the provisions of the Exchange Rights
Agreement.
The Exchange Rights Agreement contains certain registration rights under the
Securities Act in favor of the holders of the Common Stock issuable upon the
exchange of limited partnership interests. The holders of
securities representing a majority of the Common Stock issuable upon the
exchange of limited partnership interests shall have the right to require the
Company, at the Company's expense (other than with respect to underwriting
discounts, commissions and fees attributable to the sale of any such Common
Stock), subject to certain limitations, to file two registration statements
relating to the resale to the public of all or a portion of their Common
Stock.
In addition, in the event the Company proposes to register any of its Common
Stock pursuant to a registration statement under the Securities Act (other
than on Forms S-4 or S-8 or other similar successor forms), such holders may,
by giving written notice to the Company, request that the Company, at the
Company's expense (other than with respect to underwriting discounts,
commissions and fees attributable to the sale of any such Common Stock),
include in such registered offering all or any part of their Common Stock. The
Company is required to include the securities covered by such notice or
notices in such registered offering unless the Company determines for any
reason not to proceed with the underlying offering of its equity securities
or, in the case of an underwritten offering, if the managing underwriter
determines that the amount of Common Stock requested to be included in such
registration exceeds the amount which can be sold in such offering without
adversely affecting the distribution of the securities being offered.
In connection with the Merger Transaction, the Exchange Rights Agreement
will be amended to, among other things, extend to TTMI registration rights
with respect to the shares of Common Stock into which its limited partnership
interests will be convertible and to make certain accommodations of the
interests of certain of Trump's lenders should they foreclose on THCR Holdings
limited partnership interests.
TAX MATTERS PARTNER
Pursuant to the THCR Holdings Partnership Agreement, the Company is the tax
matters partner of THCR Holdings and, as such, has authority to make tax
elections under the Code on behalf of THCR Holdings, subject to certain notice
and consultation rights in favor of the Limited Partners.
TERM
The term of the THCR Holdings Partnership Agreement continues until December
31, 2035, or until sooner dissolved upon (i) the dissolution, bankruptcy or
termination of the Company, (ii) the election of the Company and a majority-
in-interest of the Limited Partners, (iii) the sale or other disposition of
all or substantially all the assets of THCR Holdings (but in the event of such
sale or transfer, such time of dissolution may be extended, at the option of
the Company, until the receipt of substantially all of the proceeds thereof,
or a determination by the Company that no material additional proceeds will
likely be received), or (iv) the entry of a decree of judicial dissolution of
THCR Holdings pursuant to the provisions of the Delaware RULPA, which decree
is final and not subject to approval; provided, however, the Limited Partners
may elect to continue THCR Holdings. An election to continue THCR Holdings
must be unanimous unless the Delaware RULPA permits such election pursuant to
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the vote of a lesser percentage in interest of the Limited Partners, in which
event such election may be by such lesser percentage in interest as is
permitted in the Delaware RULPA, but in no event shall such election be by a
vote of less than a majority-in-interest of the Limited Partners.
CONTRIBUTION AGREEMENT
Trump received his limited partnership interest in THCR Holdings in exchange
for a contribution of, among other things, all of his beneficial interest in
Plaza Associates and all of his other existing interests and rights to gaming
activities in both emerging and established jurisdictions, including Trump
Indiana, but excluding the Taj Mahal and Trump's Castle. Such contribution was
made pursuant to the terms of the Contribution Agreement between Trump and
THCR Holdings. Under the Contribution Agreement, Trump agreed to pursue,
develop and conduct all new casino and gaming opportunities only on behalf of
the Company. Trump further agreed not to engage in certain actions in
connection with casino and gaming activities, including, without limitation,
casino hotels and related services and products. For purposes of this grant
and without limiting its application with respect to other properties, any
hotel with gaming conducted on its premises will be considered a casino hotel
and any business or activity engaged in by Trump and located in Nevada,
Atlantic City (other than the Taj Mahal (prior to the Merger Transaction) and
Trump's Castle) or within one mile of a casino will be presumed to be an
activity to which these restrictions will apply. Such a presumption may be
rebutted by a vote of the majority of the Special Committee. The agreement to
offer new gaming opportunities to the Company is for a term of the later of
(i) June 12, 2015, (ii) such time as Trump and his affiliates no longer hold a
15% or greater voting interest in the Company or (iii) such time as Trump
ceases to be employed or retained pursuant to an employment, management,
consulting or similar services agreement with the Company. Trump may generally
continue to engage in business as currently conducted or proposed to be
conducted at the Taj Mahal (prior to the Merger Transaction) and Trump's
Castle. For as long as Trump owns beneficially 20% or more of the voting power
of the Company and no other holder owns more voting power of the Company, or
such shorter period ending on the date on which no Plaza Notes remain
outstanding, to the extent required under the Plaza Note Indenture, Trump
shall retain the right (x) to designate for election a majority of the Board
of Directors of Plaza Funding and its successors and assigns and any other
managing general partner of Plaza Associates and (y) to control the management
of Plaza Associates. See "Risk Factors--Conflicts of Interest" and "--Control
and Involvement of Trump."
INDEMNIFICATION
THCR Holdings indemnifies and holds harmless each Partner and its
affiliates, and all officers, directors, employees and agents 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 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, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, relating to the operations
of THCR Holdings, 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 officer, director, employee, or
agent of a Partner or an affiliate of a Partner at the time any such liability
or expense is paid or incurred, but only if the act or omission giving rise to
such proceeding does not constitute gross negligence or willful misconduct;
provided, however, that such indemnification or agreement to hold harmless,
will be recoverable only out of assets of THCR Holdings and not from the
Partners. The indemnification provided by the THCR Holdings Partnership
Agreement is 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 an
affiliate of a Partner and as to any action in another capacity, and will
continue, with respect to actions relating to the operations of THCR Holdings,
as to an Indemnitee who has ceased to serve in such capacity and will inure to
the benefit of the heirs, successors, assigns and administrators of the
Indemnitee. No Indemnitee may be denied indemnification in whole or in part
under the THCR Holdings Partnership Agreement by reason of the fact that the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the
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transaction was approved in accordance with the THCR Holdings Partnership
Agreement. No officer, employee or agent of THCR Holdings has any liability to
THCR Holdings or any of its partners for monetary damages for action taken, or
any failure to take any action, in such capacity, with certain exceptions.
CERTAIN REGULATORY MATTERS
The THCR Holdings Partnership Agreement provides that it is subject to the
provisions of the Casino Control Act and the Indiana Riverboat Gambling Act.
The THCR Holdings Partnership Agreement further provides that THCR Holdings
may redeem the partnership interest held by any person or entity whose holding
of such interest may cause the loss or non-reinstatement of any governmental
license or permit of THCR Holdings or any of its subsidiaries. Such redemption
will be on the terms set forth in the THCR Holdings Partnership Agreement.
OTHER
The THCR Holdings Partnership Agreement provides that, unless a majority-in-
interest of the Limited Partners otherwise consents, all business activities
of the Company must be conducted through THCR Holdings or its subsidiaries.
THCR Holdings is authorized to enter into transactions with partners or
their affiliates, as long as the terms of such transactions are fair and
reasonable and no less favorable to THCR Holdings than would be obtained from
an unaffiliated third party.
Except for certain technical amendments, the THCR Holdings Partnership
Agreement may only be amended by the Company, upon the approval of a majority
of the Special Committee with the consent of a majority-in- interest of the
Limited Partners.
Except for Trump's agreement to conduct all new gaming activities through
the Company as described above and under "--Contribution Agreement" and
"Management--Employment Agreements," the THCR Holdings Partnership Agreement
provides that any Limited Partner may engage in other business activities
outside THCR Holdings, including business activities that directly compete
with THCR Holdings; provided, however, that no such other activities
discriminate against THCR Holdings. See "Risk Factors--Conflicts of Interest"
and "--Control and Involvement of Trump."
THCR Holdings has agreed to indemnify Trump in the event of the non-payment
by THCR Holdings of certain liabilities assumed by THCR Holdings in connection
with its formation.
The THCR Holdings Partnership Agreement also provides that no additional
compensation shall be paid directly or indirectly to Trump under the Trump
Executive Agreement or otherwise, unless approved by the Special Committee.
Other than the TPM Services Agreement and notwithstanding the foregoing, the
Company (including each of its subsidiaries) may not enter into any
management, services, consulting or similar agreements with Trump or any of
his affiliates, except for employment agreements in the ordinary course of
business consistent with industry practice and approved by the Special
Committee.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately following completion of the Stock Offering there will be
23,066,667 shares of Common Stock outstanding (assuming all of the holders of
Taj Holding elect Cash Consideration and a Market Value of $24.00 per share in
connection with the Merger and as the public offering price in the Stock
Offering) (24,941,667 shares if the Underwriters' over-allotment options are
exercised in full), excluding (i) 8,354,167 shares of Common Stock (subject to
certain adjustment) issuable upon conversion of Trump's and TTMI's limited
partnership interest in THCR Holdings, (ii) the 66,666 shares of Common Stock
underlying phantom stock units issued to the Chief Executive Officer of the
Company, (iii) 133,333 shares of Common Stock issuable upon exercise of
options granted to the Chief Executive Officer of the Company pursuant to the
1995 Stock Plan (iv) an additional 933,334 shares of Common Stock reserved for
issuance pursuant to the 1995 Stock Plan, (v) 1.8 million shares of Common
Stock reserved for issuance in connection with the warrant to be issued Trump
and (vi) the Class B Common Stock, which shares are not entitled to dividends
or distributions and represent Trump's and TTMI's respective voting interest
and become nonvoting to the extent of a conversion of Trump's and TTMI's
respective interests in THCR Holdings. In the event that holders of Taj
Holding Class A Common Stock elect to receive shares of Common Stock in the
Merger, the Company may or may not reduce the size of the Stock Offering, in
which case such additional shares issued in the Merger would also be
outstanding following the Merger Transaction. In addition to the 12,500,000
shares of Common Stock offered hereby, the Company may issue up to an
additional 20% of such number of shares to fund working capital. Of those
shares outstanding, the Offered Shares will be freely tradable without
restriction or future registration under the Securities Act unless acquired by
an "affiliate" (as defined in the Securities Act) of the Company, which shares
will be subject to resale limitations of Rule 144. The remaining 66,667 shares
outstanding upon completion of the Stock Offering will not have been
registered under the Securities Act and are Restricted Shares, except that
such shares and the shares of Common Stock issuable upon conversion of Trump's
limited partnership interest in THCR Holdings, will have certain registration
rights. See "Description of the THCR Holdings Partnership Agreement--Exchange
and Registration Rights."
The 8,354,167 shares of Common Stock issuable upon conversion of limited
partnership interest in THCR Holdings are restricted securities, and may not
be resold except pursuant to an effective registration statement or an
exemption from registration, such as Rule 144. The Company has granted certain
registration rights with respect to such shares to the holders of limited
partnership interests in THCR Holdings. See "Description of THCR Holdings
Partnership Agreement--Exchange and Registration Rights."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) including an affiliate of the Company who has
beneficially owned his or her Restricted Shares for at least two years from
the later of the date such securities were acquired from the Company or (if
applicable) the date they were acquired from an affiliate of the Company,
would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of the Common Stock (approximately 230,667 shares of Common Stock
immediately after the Stock Offering, or 249,417 shares assuming exercise of
the Underwriters over-allotment option) and (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding the date
on which notice of the sale on Form 144 is filed with the SEC. Sales under
Rule 144 are also subject to certain manner-of-sale provisions, notice
requirements and the availability of current public information about the
Company and certain other limitations and restrictions. Under Rule 144,
however, a person who is deemed not to have been an affiliate of the Company
at any time during the 90 days preceding a sale of Restricted Shares by such
person, and who has beneficially owned such Restricted Shares for a minimum of
three years from the later of the date such securities were acquired from the
Company or an affiliate of the Company, such person is free to sell such
shares in the public market under Rule 144(k) without regard to the volume,
manner-of-sale and certain other limitations contained in Rule 144.
It is expected that the Company and certain stockholders will agree not to
sell or otherwise dispose of such shares or securities convertible into or
exercisable or exchangeable for Common Stock for days after the
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date of this Prospectus without the prior written consent of DLJ as the lead
Underwriter of the Stock Offering. Upon expiration of the applicable lock-up
agreement with the Underwriters, the shares subject to and covered thereby
will be eligible for sale subject to the restrictions contained in the
Securities Act and the rules and regulations promulgated thereunder, including
Rule 144.
Sales of substantial amounts of Common Stock in the public market may have
an adverse impact on the market price of the shares and could make it more
difficult for the Company to sell equity securities in the future at a time
and place it deems appropriate.
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SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships and foreign
trusts and estates (collectively, "Non-U.S. Shareholders") are complex, and
the following discussion is intended only as a summary of such rules.
Prospective Non-U.S. Shareholders should consult with their own tax advisers
to determine the impact of federal, state and local income tax laws on an
investment in the Company, including any reporting requirements, as well as
the tax treatment of such an investment under their home country laws.
In general, Non-U.S. Shareholders will be subject to regular United States
federal income tax with respect to their investment in the Company if such
investment is "effectively connected" with the Non-U.S. Shareholder's conduct
of a trade or business in the United States. A corporate Non-U.S. Shareholder
that receives income or gain from the sale or disposition of Common Stock that
is (or is treated as) effectively connected with the conduct of a United
States trade or business may also be subject to the branch profits tax under
Section 884 of the Code, which is payable in addition to regular United States
corporate income tax. The following discussion will apply to Non-U.S.
Shareholders whose investment in the Company is not so effectively connected.
The Company expects to withhold United States federal income tax, as described
below, on the gross amount of any distributions paid to a Non-U.S. Shareholder
unless (i) a lower treaty rate applies and the required form evidencing
eligibility for that reduced rate is filed with the Company or (ii) the Non-
U.S. Shareholder files an IRS Form 4224 with the Company, claiming that the
distribution is "effectively connected" income.
DIVIDENDS
Generally, dividends paid by the Company will be subject to a United States
withholding tax equal to 30% of the gross amount of the distribution unless
such tax is reduced or eliminated by an applicable tax treaty. A distribution
of cash in excess of the Company's earnings and profits will be treated first
as a return of capital that will reduce a Non-U.S. Shareholder's basis in its
shares of the Company's stock (but not below zero) and then as gain from the
disposition of such shares, the tax treatment of which is described under the
rules discussed below with respect to dispositions of shares. A Non-U.S.
Shareholder will have to file refund claims to obtain a refund of tax withheld
on distributions in excess of the dividend portion of any distribution.
GAIN ON DISPOSITION
A Non-U.S. Shareholder will generally not be subject to United States
federal income tax on gain recognized on a sale or other disposition of Common
Stock unless (i) as noted above, the gain is effectively connected with the
conduct of a trade or business within the United States by the Non-U.S.
Shareholder, (ii) in the case of a Non-U.S. Shareholder who is a nonresident
alien individual and holds the Common Stock 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 or (iii) the Non-U.S. Shareholder is
subject to tax under the United States real property holding company rules
discussed below.
The Company may be, or may subsequently become, a United States real
property holding company for United States federal income tax purposes because
of its ownership of substantial real estate assets in the United States. If
the Company were to be treated as a United States real property holding
company, then a Non-U.S. Shareholder who holds, directly or indirectly, more
than 5% of Common Stock will be subject to United States federal income
taxation on any gain realized from the sale or exchange of such stock, unless
an exemption is provided under an applicable treaty.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for United States federal estate tax
purposes) of the United States at the date of death will be included in such
individual's estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
Under temporary United States Treasury regulations, United States
information reporting requirements and backup withholding tax will generally
not apply to dividends paid on Common Stock to a Non-U.S. Shareholder at an
address outside the United States. Payments by a United States office of a
broker of the proceeds of a sale of Common Stock is subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies its Non-U.S. Shareholder status under penalties of perjury or
otherwise establishes an exemption. Information reporting requirements (but
not backup withholding) will also apply to payments of the proceeds of sales
of Common Stock by foreign offices of United States brokers or foreign brokers
with certain types of relationships to the United States, unless the broker
has documentary evidence in its records that the holder is a Non-U.S.
Shareholder and certain other conditions are met, or the holder otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules will be refunded or
credited against the Non-U.S. Shareholder's United States federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service.
These information reporting and backup withholding rules are under review by
the United States Treasury and their application to Common Stock could be
changed by future regulations.
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UNDERWRITING
Subject to certain conditions contained in the Underwriting Agreement, a
syndicate of underwriters named below (the "Underwriters"), for whom
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Salomon Brothers
Inc and BT Securities Corporation ("BT Securities") are acting as
representatives (the "Representatives"), have severally agreed to purchase
from the Company shares of Common Stock. The number of shares of Common
Stock that each Underwriter has agreed to purchase is set forth opposite its
name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...............
Salomon Brothers Inc..............................................
BT Securities Corporation.........................................
----------
Total......................................................... 12,500,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
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 shares of Common Stock offered hereby (other than in connection
with the over-allotment option described below) if any are taken.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock 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 $ per share.
Any Underwriter may allow, and such dealers may reallow, a discount not in
excess of $ per share to any other Underwriter and to certain other dealers.
After the initial public offering of the shares of Common Stock, the public
offering price and other selling terms may be changed by the Representatives.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to an additional 1,875,000 shares of Common Stock
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at the public offering price less the underwriting discounts and commissions
set forth on the cover page hereof. The Underwriters may exercise such option
to purchase additional shares solely for the purpose of covering over-
allotments, if any, made in connection with the sale of the shares of Common
Stock offered hereby. To the extent such over-allotment option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase the same percentage of such additional shares as the number set forth
next to such Underwriter's name in the preceding table bears to the total
number of shares set forth on the cover page hereof.
It is expected that the Company and certain stockholders will agree with the
Underwriters not to offer, sell, grant any other option to purchase or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for or
warrants, rights or options to acquire Common Stock or enter into any
agreement to do any of the foregoing for a period of days after the date of
this Prospectus without the prior written consent of DLJ.
The Company and its direct and indirect 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 Representatives from time to time performs investment banking
and other financial services for the Company and its affiliates for which the
Representatives 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 Representatives are also acting as underwriters for the
Mortgage Note Offering. In addition, DLJ has acted as the Company's financial
advisor in connection with the Merger Transaction, for which services the
Company 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 the
Company) 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--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 the Company. Bankers Trust held a
$500,000 unsecured demand note owed by Trump Indiana. 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 to the Trump Indebtedness. In
exchange for such payment, Bankers Trust will consent to the Merger
Transaction and release its lien on Trump's direct and indirect equity
interests in Taj Associates and related guarantees, and the pledge of the TTMI
Note.
LEGAL MATTERS
Certain legal matters in connection with the securities offered hereby are
being passed upon for the Company 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 Company. 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.
The statements as to matters of law and legal conclusions concerning Indiana
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 Tabbert Hahn & Zanetis, P.C.,
Indianapolis, Indiana, gaming counsel for the Company. Tabbert Hahn & Zanetis,
P.C. 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.
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EXPERTS
The audited financial statements and schedules of Trump Hotels & Casino
Resorts, Inc., Trump Atlantic City Associates and Trump Plaza Associates and
Trump Taj Mahal Associates and Subsidiary 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
The Company has filed with the office of the SEC in Washington, D.C. 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 the Company,
reference is made to the Registration Statement, including the exhibits filed
as parts thereof.
The Company, THCR Holdings, Plaza Associates, Taj Holding, Taj Funding and
Taj Associates are, and Trump Atlantic City and Trump Atlantic City Funding
will be, subject to the informational reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, have
filed, and Trump Atlantic City and Trump Atlantic City Funding will file,
reports and other information with the SEC. Reports, proxy statements and
other information of the Company, 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 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. The Common Stock is
listed on the New York Stock Exchange, and reports and other information
concerning the Company and THCR Holdings can be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Trump Hotels & Casino Resorts, Inc.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheet as of December 31, 1995...................... F-3
Consolidated Statement of Operations for the period from inception (June
12, 1995) through December 31, 1995.................................... F-4
Consolidated Statement of Stockholders' Equity for the period from
inception (June 12, 1995) through December 31, 1995.................... F-5
Consolidated Statement of Cash Flows for the period from inception (June
12, 1995) through December 31, 1995.................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Trump Atlantic City Associates and Trump Plaza Associates
Report of Independent Public Accountants................................ F-20
Consolidated Balance Sheets as of December 31, 1994 and June 12, 1995... F-21
Consolidated Statements of Operations for the years ended December 31,
1993 and 1994
and for the period from January 1, 1995 through June 12, 1995.......... F-22
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1993 and 1994
and for the period from January 1, 1995 through June 12, 1995.......... F-23
Consolidated Statements of Cash Flows for the years ended December 31,
1993 and 1994
and for the period from January 1, 1995 through June 12, 1995.......... F-24
Notes to Consolidated Financial Statements.............................. F-25
Trump Taj Mahal Associates and Subsidiary
Report of Independent Public Accountants................................ F-37
Consolidated Balance Sheets as of December 31, 1994 and 1995............ F-38
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995.................................................... F-39
Consolidated Statements of Capital (Deficit) for the years ended Decem-
ber 31, 1993, 1994
and 1995............................................................... F-40
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994
and 1995............................................................... F-41
Notes to Consolidated Financial Statements.............................. F-42
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited the accompanying consolidated balance sheet of Trump Hotels &
Casino Resorts, Inc. (a Delaware Corporation) and Subsidiaries as of December
31, 1995 and the related consolidated statements of operations, stockholders'
equity and cash flows for the period from inception (June 12, 1995) through
December 31, 1995. These consolidated financial statements are the
responsibility of the management of Trump Hotels & Casino Resorts, Inc. Our
responsibility is to express an opinion on these financial statements 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 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 audit provides 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 Hotels & Casino Resorts,
Inc. and Subsidiaries as of December 31, 1995 and the results of their
operations and their cash flows for the period from inception (June 12, 1995)
through December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Roseland, New Jersey
February 21, 1996
F-2
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents........................................ $ 19,208,000
Restricted cash (Note 8)....................................... 12,013,000
Trade receivables, net of allowances for doubtful accounts of
$8,077,000.................................................... 7,576,000
Accounts receivable, other (Note 6)............................ 6,884,000
Inventories.................................................... 2,609,000
Prepaid expenses and other current assets...................... 5,171,000
------------
Total current assets......................................... 53,461,000
------------
INVESTMENT IN BUFFINGTON HARBOR (Note 10)........................ 21,823,000
PROPERTY AND EQUIPMENT (Notes 4, 6 and 8):
Land and land improvements..................................... 48,308,000
Buildings and building improvements............................ 350,366,000
Furniture, fixtures and equipment.............................. 91,033,000
Leasehold improvements......................................... 2,434,000
Construction in progress....................................... 63,379,000
Less--accumulated depreciation and amortization................ (147,289,000)
------------
Net property and equipment................................... 408,231,000
------------
CASH RESTRICTED FOR FUTURE CONSTRUCTION (Note 8)................. 40,030,000
LAND RIGHTS, net of accumulated amortization of $4,149,000 (Note
2).............................................................. 29,320,000
NOTE RECEIVABLE (Note 9)......................................... 3,000,000
DEFERRED LOAN COSTS, net of accumulated amortization of
$5,827,000...................................................... 20,026,000
OTHER ASSETS..................................................... 8,654,000
------------
Total assets................................................. 584,545,000
============
LIABILITIES & CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3).................. $ 2,901,000
Accounts payable............................................... 9,478,000
Accrued payroll................................................ 6,815,000
Accrued interest payable ...................................... 2,498,000
Due to affiliates (Note 8)..................................... 278,000
Other accrued expenses......................................... 6,924,000
Self insurance reserves........................................ 3,750,000
Other current liabilities...................................... 2,658,000
------------
Total current liabilities.................................... 35,302,000
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 3)............. 494,471,000
Deferred income taxes.......................................... 4,181,000
------------
Total liabilities............................................ 533,954,000
------------
COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 10)
STOCKHOLDERS' EQUITY
Common Stock $.01 par value, 50,000,000 shares authorized,
10,066,667 issued and outstanding............................. 101,000
Class B Common Stock $.01 par value 1,000 shares authorized,
issued and outstanding --
Additional paid-in capital..................................... 52,411,000
Accumulated deficit............................................ (1,921,000)
------------
Total stockholders' equity................................... 50,591,000
------------
Total liabilities & stockholders' equity..................... $584,545,000
============
</TABLE>
The accompanying notes to the financial statements are an integralpart of this
consolidated financial statement.
F-3
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES:
Gaming......................................................... $175,208,000
Rooms.......................................................... 12,310,000
Food and Beverage.............................................. 26,065,000
Other.......................................................... 6,284,000
------------
Gross Revenues............................................... 219,867,000
Less--Promotional allowances................................... 24,394,000
------------
Net Revenues................................................. 195,473,000
------------
COSTS AND EXPENSES:
Gaming......................................................... 95,533,000
Rooms.......................................................... 1,305,000
Food and Beverage.............................................. 11,178,000
General and Administrative..................................... 42,826,000
Depreciation and Amortization.................................. 9,219,000
Other.......................................................... 1,966,000
------------
162,027,000
------------
Income from operations....................................... 33,446,000
------------
NON-OPERATING INCOME AND (EXPENSES):
Interest income................................................ 3,741,000
Interest expense............................................... (35,014,000)
Other non-operating expense.................................... (4,094,000)
------------
(35,367,000)
------------
Net loss......................................................... $ (1,921,000)
============
Loss Per Share................................................... $ (.19)
============
Average Number of Shares Outstanding............................. 10,133,333
============
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-4
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION
(JUNE 12, 1995) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------ ADDITIONAL
CLASS B PAID IN RETAINED
COMMON COMMON AMOUNT CAPITAL EARNINGS TOTAL
---------- ------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 12, 1995.. 1,000 $ -- $(75,543,000) $ -- $(75,543,000)
Proceeds from issuance
of Common Stock........ 10,000,000 -- 100,000 126,748,000 -- 126,848,000
Issuance of Stock Grant
Award.................. 66,667 -- 1,000 933,000 -- 934,000
Accretion of Phantom
Stock Units............ -- -- -- 273,000 -- 273,000
Net Loss................ -- -- -- -- (1,921,000) (1,921,000)
---------- ----- -------- ------------ ----------- ------------
Balance, December 31,
1995................... 10,066,667 1,000 $101,000 $ 52,411,000 $(1,921,000) $ 50,591,000
========== ===== ======== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................... $ (1,921,000)
Adjustments to reconcile net income to net cash flows used in
operating activities:
Non Cash Charges:
Issuance of stock grant awards and phantom stock units....... 1,207,000
Depreciation and amortization................................ 9,219,000
Accretion of discount on mortgage notes and amortization of
loan costs.................................................. 818,000
Provisions for losses on receivables......................... 559,000
Deferred income taxes........................................ 161,000
Utilization of CRDA credits and donations.................... 320,000
Valuation allowance of CRDA investments...................... (1,249,000)
-------------
Sub-total................................................... 9,114,000
Increase in receivables...................................... (1,722,000)
Decrease in inventories...................................... 815,000
Increase in advances from affiliates......................... 367,000
Decrease in other current assets............................. 6,518,000
Decrease in other assets..................................... 346,000
Decrease in accounts payable, accrued expenses, and other
current liabilities......................................... (5,123,000)
Decrease in accrued interest payable......................... (19,534,000)
-------------
Net cash flows used in operating activities................. (9,219,000)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net........................ (115,430,000)
Restricted cash for short-term operating needs................. (12,013,000)
Cash restricted for future construction........................ (40,030,000)
Purchase of CRDA investments................................... (1,677,000)
Investment in Buffington Harbor LLC............................ (21,823,000)
-------------
Net cash flows used in investing activities................. (190,973,000)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, net.................................. 126,848,000
Issuance of Senior Secured Notes, net.......................... 144,258,000
Retirement of PIK Notes........................................ (81,746,000)
Issuance of note receivable.................................... (3,000,000)
Payment of current maturities of long term debt................ (4,186,000)
Additional Borrowings.......................................... 9,040,000
-------------
Net cash flows provided by financing activities............. 191,214,000
-------------
Net decrease in cash and cash equivalents....................... (8,978,000)
-------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................ 28,186,000
=============
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1995.................. $ 19,208,000
=============
</TABLE>
The accompanying notes to the financial statements are an integral part of this
consolidated statement.
F-6
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION AND OPERATIONS
Trump Hotels & Casino Resorts, Inc. ("THCR"), which commenced operations on
June 12, 1995, was formed on March 28, 1995 to own and operate the Trump Plaza
Hotel and Casino ("Trump Plaza"), a luxury casino hotel located on The
Boardwalk in Atlantic City, New Jersey. In addition, THCR, through Trump
Indiana, Inc. ("Trump Indiana"), a wholly owned subsidiary of Trump Hotels &
Casino Resorts Holdings, L.P. ("THCR Holdings"), approximately 60.2% owned by
THCR , is in the process of developing a riverboat gaming facility at
Buffington Harbor, Indiana (the "Indiana Riverboat"). THCR, through THCR
Holdings and its subsidiaries, will be the exclusive vehicle through which
Donald J. Trump ("Trump") will engage in new gaming activities in emerging or
established gaming jurisdictions.
The accompanying consolidated financial statements include those of THCR and
THCR Holdings and its subsidiaries, Trump Atlantic City Associates ("Trump
Atlantic City"), Trump Indiana, Trump Plaza Funding, Inc. ("Plaza Funding") and
Trump Plaza Holding, Inc. ("Plaza Holding Inc."). Trump Atlantic City is the
parent of Trump Plaza Associates ("Plaza Associates"), which owns and operates
Trump Plaza. All significant intercompany balances and transactions have been
eliminated in the accompanying consolidated financial statements.
On June 12, 1995, THCR completed a public offering of 10,000,000 shares of
its common stock (the "THCR Common Stock") at $14.00 per share (the "June 1995
Stock Offering") for gross proceeds of $140,000,000. Concurrently with the June
1995 Stock Offering, THCR Holdings, together with its subsidiary, Trump Hotels
& Casino Resorts Funding, Inc. ("THCR Funding"), issued 15 1/2% Senior Secured
Notes due 2005 (the "Senior Notes") for gross proceeds of $155,000,000 (the
"June 1995 Note Offering" and, together with the June 1995 Stock Offering, the
"June 1995 Offerings"). THCR contributed the gross proceeds of the June 1995
Stock Offering to THCR Holdings.
Prior to the June 1995 Offerings, Trump was the sole stockholder of THCR and
sole beneficial owner of THCR Holdings. Concurrent with the June 1995
Offerings, Trump contributed to THCR Holdings all of his beneficial interest in
Plaza Associates, which consisted 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 Plaza Holding Inc., which owns the remaining 1%
equity interest in Trump Atlantic City. Trump also contributed all of his
existing interests 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, to THCR Holdings. In exchange for Trump's contributions
to THCR Holdings, Trump received an approximately 39.8% limited partnership
interest in THCR Holdings.
The proceeds of the June 1995 Stock Offering were contributed by THCR to THCR
Holdings in exchange for an approximate 60.2% general partnership interest in
THCR Holdings.
Trump's limited partnership interest in THCR Holdings represents his economic
interest in the assets and operations of THCR Holdings. Accordingly, such
limited partnership interest is convertible at Trump's option into 6,666,667
shares of THCR Common Stock (subject to certain adjustments) representing
approximately 39.8% of the outstanding shares of THCR Common Stock.
Trump received shares of Class B Common Stock of THCR (the "THCR Class B
Common Stock"). The THCR Class B Common Stock votes together with the THCR
Common Stock as a single class on all matters submitted to stockholders of THCR
for a vote or in respect of which consents are solicited (other than in
connection with certain amendments to THCR's Amended and Restated Certificate
of Incorporation). The number of votes represented by the THCR Class B Common
Stock held by any holder is equal to the number of shares of THCR Common Stock
issuable to the holder upon conversion of such holder's partnership interest in
THCR Holdings into THCR Common Stock. Upon such conversion, the corresponding
voting power of shares of THCR Class B Common Stock provides Trump with a
voting
F-7
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
interest in THCR which is proportionate to his equity interest in THCR
Holdings' assets represented by his limited partnership interest. Except for
the right to receive par value upon liquidation, the THCR Class B Common Stock
has no right to receive any dividend or other distribution in respect of the
equity of THCR. In addition, Trump has agreed to waive (except as set forth
under the Amended and Restated Certificate of Incorporation of THCR) state law
rights to vote the THCR Class B Common Stock as a separate class in the event
of merger or sale of substantial assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
THCR, through its subsidiaries operates, Trump Plaza, a luxury casino hotel,
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. Revenues from
hotel and other services are recognized at the time the related service is
performed.
THCR provides an allowance for doubtful accounts arising from casino, hotel
and other services, which is based upon a specific review of certain
outstanding receivables as well as historical collection information. In
determining the amount of the allowance, management is required to make certain
estimates and assumptions regarding the timing and amount of collection. Actual
results could differ from those estimates and assumptions.
PROMOTIONAL ALLOWANCES
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenue and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in gaming costs and expenses as follows:
<TABLE>
<CAPTION>
FROM
INCEPTION
TO
DECEMBER 31,
1995
------------
<S> <C>
Rooms......................................................... $ 3,075,000
Food and Beverage............................................. 10,301,000
Other......................................................... 2,574,000
-----------
$15,950,000
===========
</TABLE>
F-8
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
INVENTORIES
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and is depreciated on the straight-
line method using rates based on the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and building improvements............................ 40 years
Furniture, fixtures and equipment.............................. 3-10 years
Leasehold improvements......................................... 10-40 years
</TABLE>
Interest of $88,000 associated with borrowings used to finance construction
projects has been capitalized and is being amortized over the estimated useful
lives of the assets.
During 1995, THCR adopted the provisions of Statement of Financial Accounting
Standard No. 121 "Accounting for the Impairment of Long-Lived Assets" ("SFAS
No. 121"). SFAS No. 121 requires, among other things, that an entity review its
long-lived assets and certain related intangibles for impairment whenever
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. Impairment of long-lived assets exist, 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, THCR does not believe that any impairment exists in the
recoverability of its long-lived 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 the Plaza Associates. These rights are being amortized over the period of
the underlying operating leases which extend through 2078.
INCOME TAXES
Income taxes are recorded under the provision of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
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.
Under the New Jersey Casino Control Commission (the "CCC") regulations, Plaza
Associates is required to file a New Jersey corporation business tax return. As
of December 31, 1995, Trump Atlantic City and Plaza Associates has 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 $2,800,000 which has been offset by a valuation allowance of
$2,800,000 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.
F-9
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, THCR considers all highly
liquid debt instruments purchased with a maturity of three months or less at
the time of acquisition to be cash equivalents. The following supplemental
disclosures are made to the statements of cash flows.
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Cash paid during the year for interest........................ $48,786,000
===========
Cash paid for state and Federal income taxes.................. $ --
===========
</TABLE>
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding (unless antidilutive),
including shares granted to the President, Chief Executive Officer and Chief
Financial Officer (See Note 5). The shares of the THCR Class B Common Stock
owned by Trump have no economic interest and are therefore not considered in
the calculation of weighted average shares outstanding. Stock options have not
been considered since their effect would be antidilutive.
MINORITY INTEREST
As there is no minority interest basis in THCR Holdings as of December 31,
1995, no benefit relating to minority interest in THCR Holdings' loss has been
reflected.
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
10 7/8% Mortgage Notes due 2001 net of unamortized discount of
$3,348,000 (A)............................................... $326,652,000
15 1/2% Senior Secured Notes due 2005 (B)..................... 155,000,000
Mortgage notes payable (C).................................... 2,953,000
Other (D)..................................................... 12,767,000
------------
497,372,000
Less--Current maturities...................................... 2,901,000
------------
$494,471,000
============
</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 and loaned the proceeds to Plaza Associates. 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)) 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 Notes 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
F-10
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
on each June 15 and December 15, commencing December 15, 1993 and are
secured by substantially all of Plaza Associates' assets. The
accompanying consolidated financial statements reflect interest expense
at the effective interest rate of 11.12% per annum.
The indenture governing the Plaza Notes (the "Plaza Note Indenture")
contains certain covenants limiting the ability of Plaza Associates to
incur indebtedness, including indebtedness secured by liens on Trump
Plaza. In addition, Plaza Associates may, under certain circumstances,
incur up to $25,000,000 of indebtedness to finance the expansion of its
facilities, which indebtedness may be secured by a lien on 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"). The Plaza Notes represent the senior
indebtedness of Plaza Funding. The note from Plaza Associates to Plaza
Funding in the same principle amount of the Plaza Notes (the "Plaza
Associates Note") and the guarantee of the Plaza Notes (the "Plaza
Guarantee") 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 12, 1995, THCR Holdings and THCR Funding issued $155,000,000
principal amount of Senior Notes. The Senior Notes are redeemable in
cash at the option of THCR Holdings and THCR Funding, in whole or in
part, at any time on or after June 15, 2000 at redemption prices, as
defined. Interest on these notes is payable semi-annually in arrears on
June 15 and December 15 of each year, commencing December 15, 1995, and
are secured by substantially all of the assets of THCR Holdings. Costs
associated with the issuance of these notes totalling approximately
$10,742,000 have been deferred and are being amortized over the life of
the Senior Notes.
(C) Interest on these notes are payable with interest rates ranging from
10.0% to 11.0%. The notes are due at various dates between 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.............................................. 491,750,000(1)
------------
$500,720,000
============
</TABLE>
---------------------
(1) Includes accretion to maturity of $3,348,000. However, this does
not give effect to the proposed Merger Transaction (See Note 12).
(D) Interest on these notes and leases are payable with interest rates
ranging from 7.9% to 13.5%. The notes and 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
F-11
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
and other factors, many of which are beyond the control of Plaza
Funding or Plaza Associates. There can be no assurance that the future
operating performance of Plaza Associates will be sufficient to meet
these repayment obligations or that the general state of the economy,
the status of the capital markets generally or the receptiveness of the
capital markets to the gaming industry will be conducive to refinancing
or other attempts to raise capital.
(4) LEASES
THCR leases property (primarily land), certain parking space, and various
equipment under operating leases. Rent expense for 1995 was $2,751,000, of
which $1,275,000 was paid 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............................................. $ 7,013,000 $ 2,450,000
1997............................................. 7,015,000 2,494,000
1998............................................. 5,370,000 2,494,000
1999............................................. 3,649,000 2,450,000
2000............................................. 3,647,000 2,525,000
Thereafter....................................... 484,507,000 404,925,000
------------ ------------
$511,201,000 $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) STOCK INCENTIVE PLAN
In connection with the June 1995 Offerings, the Board of Directors of THCR
(the "Board of Directors") adopted the 1995 Stock Incentive Plan (the "1995
Stock Plan"). Pursuant to the 1995 Stock Plan, 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 a committee appointed by the Board of
Directors (the "Stock Incentive Plan Committee").
Options granted under the 1995 Stock Plan may be incentive stock options
("ISO"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (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 THCR Common Stock on the date of the grant and a minimum
price, in the case of NQSOs, of the par value of THCR Common Stock.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant stock
appreciation rights ("SARs") either alone or in connection with an option. An
SAR granted as an alternative or a supplement to
F-12
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
a related stock option will entitle 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 or
such other price as the Stock Incentive Plan Committee may determine at the
time of the grant of the SAR (which may not be less than the lowest price which
the Stock Incentive Plan Committee may determine under the 1995 Stock Plan for
such stock option).
The 1995 Stock Plan also provides that phantom stock and performance unit
awards may be settled in cash, at 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 the shares on such date.
Subject to adjustment in the event of changes in the outstanding stock or the
capital structure of THCR, THCR has reserved 1,000,000 shares of THCR Common
Stock for issuance under the 1995 Stock Plan.
In connection with the June 1995 Offerings, the Stock Incentive Plan
Committee granted to the President, Chief Executive Officer and Chief Financial
Officer of THCR a stock bonus award of 66,667 shares of THCR Common Stock under
the 1995 Stock Plan, which was fully vested upon issuance. Compensation expense
of approximately $934,000 associated with the stock bonus award is reflected in
the accompanying statement of operations of THCR. A phantom stock unit award
was also issued to the President, Chief Executive Officer and Chief Financial
Officer of THCR. This award entitles the President, Chief Executive Officer and
Chief Financial Officer of THCR to receive 66,667 shares of THCR Common Stock
two years following such award, subject to certain conditions. The compensation
expense associated with the phantom stock award is approximately $933,000 and
this amount is being amortized over the two-year vesting period and was
approximately $273,000 for the period from inception to December 31, 1995. The
President, Chief Executive Officer and Chief Financial Officer of THCR also
received an award of NQSOs for the purchase of 133,333 shares of 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.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation." The new standard specifies permissible methods of valuing
compensation attributable to stock options as well as certain required
disclosures. THCR is required to adopt the new standard no later than December
31, 1996. THCR has not yet determined which method it will follow for measuring
compensation cost attributable to stock options or the impact of the new
standard on its consolidated financial statements.
(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 CCC renewed Plaza Associates, license to operate Trump
Plaza. This license must be renewed in June 1999, is not transferable and will
require a determination of the financial stability of Plaza Associates. Upon
revocation, suspension for more than 120 days, or failure to renew the casino
license, the Casino Control Act provides for the mandatory appointment of a
conservator to take possession of the hotel and casino's business and property,
subject to all valid liens, claims and encumbrances.
F-13
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
LEGAL PROCEEDINGS
THCR and certain of its employees, have been involved in various legal
proceedings. In general, THCR 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 THCR. THCR considers all
such proceedings to be ordinary litigation incident to the character of its
business. THCR 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. THCR 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 amount of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the normal course of business. These
reserves are established by management based upon a 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 in 1991 after the date of opening of Trump Plaza in May 1984, and
continuing for a period of thirty 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
depositing funds which may be converted to bonds by the Casino Reinvestment
Development Authority (the "CRDA"), both of which bear interest at below market
interest rates. Plaza Associates is required to make quarterly deposits with
the CRDA based on 1.25% of its gross revenue. For the period from inception
(June 12, 1995) through December 31, 1995, THCR charged to operations $670,000,
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, as such
bonds are not marketable.
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 has recorded a receivable
from the CRDA of $6,022,000 which is included in Accounts Receivable, Other. A
lawsuit has been filed to prevent the CRDA from returning to Plaza Associates
such deposits. Although the court has ruled that such deposits cannot be
returned, Plaza Associates has appealed this decision. Management believes that
this decision will be overturned. In the event that the decision is not
overturned, the receivable will be reclassified as a CRDA deposit and a charge
to operations of approximately $2,000,000 would be required to reestablish the
valuation allowance.
F-14
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
CONCENTRATIONS OF CREDIT RISKS
In accordance with casino industry practice, Plaza Associates extends credit
to a limited number of casino patrons, after extensive background checks and
investigations of credit worthiness. At December 31, 1995, approximately 27%
of Plaza Associates' casino receivables (before allowances) were from
customers whose primary residence is outside the United States with no
significant concentration in any one foreign country.
TRUMP PLAZA EAST
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. On June 24, 1993, in connection with the 1993 refinancing of Trump
Plaza, (i) Trump transferred title to Trump Plaza East to Missouri Boardwalk,
Inc. ("Boardwalk"), a wholly owned subsidiary of Midlantic National Bank
("Midlantic"), in exchange for a reduction in indebtedness to Midlantic in an
amount equal to the sum of the fair market value of Trump Plaza East and all
rent payments made to Boardwalk by Trump under the Trump Plaza East Lease,
(ii) Boardwalk leased Trump Plaza East to Trump under the Trump Plaza East
Lease for a term of five years, which expires on June 30, 1998, during which
time Trump was obligated to pay Boardwalk $260,000 per month in lease
payments, and (iii) Plaza Associates acquired a five-year option to purchase
Trump Plaza East (the "Trump Plaza East Purchase Option"). In October 1993,
Plaza Associates assumed the Trump Plaza East Lease and related expenses. In
addition, Plaza Associates has a right of first refusal (the "Right of First
Offer") upon any proposed sale of all or any portion of the fee interest in
Trump Plaza East during the term of the Trump Plaza East Purchase Option.
Acquisition of Trump Plaza East by Plaza Associates would under certain
circumstances (provided there are no events of default under the Trump Plaza
East Lease or the Trump Plaza East Purchase Option and provided that certain
other events had not theretofore or do not thereafter occur) discharge Trump's
obligation to Midlantic in full.
Until such time as the Trump Plaza East Purchase Option is exercised or
expires, Plaza Associates will be obligated, from and after the date it
entered into the Trump Plaza East Purchase Option, to pay the net expenses
associated with Trump Plaza East. During 1995, THCR incurred approximately
$2,340,000 of such expenses of which $2,045,000 are included in non-operating
expenses in the accompanying consolidated financial statements. Under the
Trump Plaza East Purchase Option, Plaza Associates has the right to acquire
Trump Plaza East for a purchase price of $28,000,000 through 1996, increasing
by $1,000,000 annually thereafter until expiration on June 30, 1998. The CCC
has required that Plaza Associates exercise the Trump Plaza East Purchase
Option or its right of first refusal no later than July 1, 1996.
If Plaza Associates defaults in making payments due under the Trump Plaza
East Purchase Option, Plaza Associates would be liable to the lender for the
sum of (a) the present value of all remaining payments to be made by Plaza
Associates pursuant to the Trump Plaza East Purchase Option during the term
thereof and (b) the cost of demolition of all improvements then located on
Trump Plaza East.
Plaza Associates has commenced construction at Trump Plaza East pursuant to
rights granted to Plaza Associates by its lessor. 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 received approximately $1,519,000 in
CRDA credit as of December 31, 1995. As of December 31, 1995, Plaza Associates
had capitalized approximately $35,700,000 in construction costs related to
Trump Plaza East including a $1,000,000 consulting fee paid to Trump (See Note
8). Plaza Associates' ability to acquire Trump Plaza East pursuant to the
Trump Plaza East Purchase Option is dependent upon its ability to obtain
financing to acquire the property. The ability to incur such indebtedness is
restricted by the Plaza Note
F-15
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Indenture. Plaza Associates' ability to purchase Trump Plaza East is dependent
upon its ability to use existing cash on hand and generate cash flow from
operations sufficient to fund development costs. No assurance can be given that
such cash on hand will be available to Plaza Associates for such purposes or
that it will be able to generate sufficient cash flow from operations. In
connection with the Merger Transaction (as defined) (See Note 12), Plaza
Associates expects to exercise the Trump Plaza East Purchase Option.
The accompanying consolidated financial statements do not include any
adjustments that may be necessary should Plaza Associates be unable to exercise
the Trump Plaza East Purchase Option.
(7) EMPLOYEE BENEFIT PLANS
Plaza Associates has a retirement savings plan (the "Plan") for its nonunion
employees under Section 401(k) of the Internal Revenue Code. Employees are
eligible to contribute up to 15% of their earnings to the Plan and Plaza
Associates will match 50% of an eligible employee's contributions up to a
maximum of 5% of the employee's earnings. In connection with this Plan, THCR
recorded charges of $410,000 in 1995.
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 $4,000 were received from Trump's Castle
Associates in 1995.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1995, THCR
expensed $553,000 to Seashore Four Associates and paid $723,000 to Trump
Seashore Associates.
SERVICES AGREEMENT
Pursuant to the terms of a services agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Trump, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of
$1,000,000 in equal monthly installments and reimburses TPM on a monthly basis
for all reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under such services agreement, up to certain amounts. Under this
agreement, THCR charged approximately $718,000 to expense in 1995.
EXECUTIVE AGREEMENT
Trump serves as the Chairman of the Board of Directors pursuant to an
Executive Agreement entered into between Trump, THCR and THCR Holdings (the
"Executive Agreement"). In consideration for Trump's services under the
Executive Agreement, Trump receives a salary of $1,000,000 per year, payable in
equal monthly installments.
EMPLOYMENT AGREEMENT
Nicholas L. Ribis ("Ribis"), the President, Chief Executive Officer and Chief
Financial Officer of THCR entered into a five-year employment agreement (the
"Revised Ribis Agreement") with THCR and THCR
F-16
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Holdings on June 12, 1995. Pursuant to the Revised Ribis Agreement, Ribis shall
be employed as the President and Chief Executive Officer of THCR and Chief
Executive Officer of THCR Holdings and shall receive a base salary of $907,500
annually.
RESTRICTED CASH
As a condition to the June 1995 Note Offering, THCR Holdings and THCR Funding
entered into a Cash Collateral and Disbursement Agreement (the "Cash Collateral
Agreement") with First Bank National Association in its respective capacities
as Trustee and Disbursement Agent (each as defined therein). The Cash
Collateral Agreement called for initial deposits to custodial accounts which
are restricted in use for (a) Trump Indiana for the ship and land projects, (b)
Trump Plaza construction projects, including the exercise of the option (the
"Trump World's Fair Purchase Option") to purchase the former Trump Regency
Hotel ("Trump World's Fair") and construction projects at Trump Plaza East and
Trump World's Fair, and (c) the first two interest payments on the Senior
Notes. As of December 31, 1995, $12,013,000 is restricted for the 1996 interest
payment on the Senior Notes and is reflected as Restricted Cash in the
accompanying balance sheet. The balance of funds restricted for Trump Indiana,
Trump Plaza East and Trump World's Fair is approximately $40,030,000, at
December 31, 1995, and is reflected as Restricted Cash for Future Construction
in the accompanying balance sheet.
TRUMP WORLD'S FAIR
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel) and (ii) certain
promissory notes made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate assets
located in New York, unrelated to Plaza Associates. In connection with such
Option Agreement, Trump assigned his rights to Plaza Associates.
On June 12, 1995, the Trump World's Fair Purchase Option was exercised. The
option price of $60,000,000 was funded with $58,150,000 from the capital
contributed by THCR Holdings (See Note 1), and $1,850,000 of option payments
made by Plaza Associates.
(9) NOTE RECEIVABLE
Prior to consummation of the June 1995 Offerings, Trump incurred $3,000,000
relating to expenditures for the development of Trump Indiana and other gaming
ventures. Concurrently with the June 1995 Offerings, THCR Holdings loaned Trump
$3,000,000 and Trump issued to THCR Holdings a five-year promissory note (the
"Trump Note") bearing interest at a fixed rate of 10% per annum, payable
annually. The Trump Note will be automatically canceled in the event that at
any time during the period defined in the Trump Note, the THCR Common Stock
trades at a price per share equal to or greater than the prices set forth in
the Trump Note (subject to adjustment in certain circumstances). During the
period from inception to December 31, 1995, the trading price of the THCR
Common Stock did not reach the defined prices.
(10) INVESTMENT IN BUFFINGTON HARBOR
Trump Indiana and The Majestic Star Casino, LLC ("Barden") entered into an
agreement (the "BHR Agreement") relating to the joint ownership, development
and operation of all common land-based and waterside operations in support of
each of their separate riverboat casinos at Buffington Harbor. Each will be
equally responsible for the development and operating expenses at Buffington
Harbor and THCR will be dependent on the ability of Barden to pay for its share
of all future expenses. There can be no assurance that
F-17
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
THCR or Trump Indiana will be able to fund from operations or to finance on
terms satisfactory to THCR or Trump Indiana any such required expenditures, or,
if available, whether such other indebtedness would be permitted under existing
debt instruments of THCR. Furthermore, there can be no assurance that Barden
will be able to fund its portion of such expenses.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments approximates fair
value, as follows: (a) cash and cash equivalents, accrued interest receivables
and payables are based on the short-term nature of these financial instruments;
and (b) CRDA bonds and deposits are based on the allowances to give effect to
the below market interest rates.
The estimated fair values of other financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------
CARRYING
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
10 7/8% Mortgage Notes........................... $326,652,000 $341,550,000
15 1/2% Senior Secured Notes..................... 155,000,000 165,773,000
</TABLE>
The fair value of the Plaza Notes and the Senior Notes is based on quoted
market prices obtained by THCR 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.
(12) MERGER AGREEMENT
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by Amendment to Agreement and Plan of Merger, dated as of January 31,
1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with and
into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding (the "Taj Holding
Class A Common Stock") (other than Dissenting Shares (as defined in the Proxy
Statement-Prospectus)) 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
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 (the "Merger Transaction"):
(a) the consummation of the offering by THCR of up to $12,500,000 shares
of THCR Common Stock (and an amount to be issued pursuant to the
underwriters' over-allotment option) (the "THCR Stock Offering") and the
consummation of the offering by Trump Atlantic City and its wholly owned
finance subsidiary Trump Atlantic City Funding, Inc. of up to $1,100,000,000
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 Trump Taj Mahal
Associates ("Taj Associates"), the owner
F-18
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
and operator of the Taj Mahal, 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, 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 of its indirect
ownership interests in Taj Associates acquired in the Merger.
In connection with the Merger Transaction, THCR may issue up to an
additional 20% of the number of shares offered in the THCR Stock Offering to
fund working capital
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: (i) the high leverage and fixed charges of THCR; (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 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 Proxy Statement-Prospectus for a discussion of these and
other factors.
F-19
<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 June
12, 1995, and the related consolidated statements of operations, capital
(deficit) and cash flows for each of the two years in the period ended December
31, 1994 and for the period from January 1, 1995 through June 12, 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 June 12, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994 and for the period from January 1, 1995
through June 12, 1995, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Roseland, New Jersey
February 21, 1996
F-20
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND JUNE 12, 1995
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 12,
1994 1995
ASSETS ------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................... $ 11,144,000 $ 28,125,000
Trade receivables, net of allowances for
doubtful accounts of $8,493,000 and
$8,490,000, respectively...................... 6,685,000 7,295,000
Accounts receivable, other..................... 112,000 --
Inventories.................................... 2,477,000 3,424,000
Prepaid expenses and other current assets...... 4,280,000 4,419,000
Due from affiliates, net....................... -- 89,000
------------- -------------
Total current assets......................... 24,698,000 43,352,000
------------- -------------
Property and Equipment (Notes 4, 6 and 8):
Land and land improvements..................... 36,463,000 36,462,000
Buildings and building improvements............ 297,573,000 299,483,000
Furniture, fixtures and equipment.............. 84,709,000 84,989,000
Leasehold improvements......................... 2,404,000 2,404,000
Construction in progress....................... 14,864,000 21,263,000
------------- -------------
436,013,000 444,601,000
Less--Accumulated depreciation and amortiza-
tion.......................................... (137,659,000) (143,285,000)
------------- -------------
Net property and equipment................... 298,354,000 301,316,000
------------- -------------
Land Rights, net of accumulated amortization of
$3,780,000 and $3,945,000, respectively......... 29,688,000 29,524,000
------------- -------------
Other Assets:
Deferred bond issuance costs, net of
accumulated amortization of $3,270,000 and
$5,827,000, respectively (Note 3)............. 14,125,000 12,105,000
Other Assets................................... 8,778,000 7,788,000
------------- -------------
Total other assets........................... 22,903,000 22,173,000
------------- -------------
Total assets................................. $ 375,643,000 $ 394,085,000
============= =============
LIABILITIES AND CAPITAL
Current Liabilities:
Current maturities of long-term debt (Note 3).. $ 2,969,000 $ 87,797,000
Accounts payable............................... 9,156,000 9,303,000
Accrued payroll................................ 4,026,000 3,998,000
Self insurance reserves (Note 6)............... 4,039,000 4,041,000
Accrued interest payable (Note 3).............. 1,871,000 22,032,000
Other accrued expenses......................... 7,693,000 5,253,000
Other current liabilities...................... 1,868,000 1,112,000
Due to affiliates, net (Note 8)................ 206,000 --
------------- -------------
Total current liabilities.................... 31,828,000 133,536,000
------------- -------------
Non-Current Liabilities:
Long-term debt, net of discount and current ma-
turities (Note 3)............................. 403,214,000 331,142,000
Distribution payable to Trump Plaza Funding,
Inc........................................... 3,822,000 3,822,000
Deferred state income taxes.................... 359,000 198,000
------------- -------------
Total non-current liabilities................ 407,395,000 335,162,000
------------- -------------
Total liabilities............................ 439,223,000 468,698,000
------------- -------------
Commitments and Contingencies (Notes 4 and 6).... -- --
Capital (Deficit):
Partner's Deficit.............................. (78,772,000) (78,772,000)
Retained Earnings.............................. 15,192,000 4,159,000
------------- -------------
Total Capital (Deficit)...................... (63,580,000) (74,613,000)
------------- -------------
Total liabilities and capital................ $ 375,643,000 $ 394,085,000
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-21
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE PERIOD FROM JANUARY
1, 1995 THROUGH JUNE 12, 1995
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, FOR THE PERIOD
-------------------------- FROM JANUARY 1, 1995
1993 1994 THROUGH JUNE 12, 1995
------------ ------------ ---------------------
<S> <C> <C> <C>
Revenues:
Gaming..................... $264,081,000 $261,451,000 $122,865,000
Rooms...................... 18,324,000 18,312,000 7,676,000
Food and Beverage.......... 41,941,000 40,149,000 18,537,000
Other...................... 8,938,000 8,408,000 3,310,000
------------ ------------ ------------
Gross Revenues........... 333,284,000 328,320,000 152,388,000
Less--Promotional
allowances................ 32,793,000 33,257,000 14,540,000
------------ ------------ ------------
Net Revenues............. 300,491,000 295,063,000 137,848,000
------------ ------------ ------------
Costs and expenses:
Gaming..................... 136,895,000 139,540,000 69,467,000
Rooms...................... 2,831,000 2,715,000 958,000
Food and Beverage.......... 18,093,000 17,050,000 7,128,000
General and Administrative. 71,624,000 73,075,000 30,081,000
Depreciation and
Amortization.............. 17,554,000 15,653,000 6,999,000
Other...................... 3,854,000 3,615,000 1,397,000
------------ ------------ ------------
250,851,000 251,648,000 116,030,000
------------ ------------ ------------
Income from operations... 49,640,000 43,415,000 21,818,000
------------ ------------ ------------
Non-operating income
(expense):
Interest income............ 546,000 842,000 403,000
Interest expense (Note 3).. (40,435,000) (49,061,000) (22,516,000)
Other non-operating expense
(Note 5).................. (3,873,000) (4,931,000) (1,649,000)
------------ ------------ ------------
Non-operating expense,
net..................... (43,762,000) (53,150,000) (23,762,000)
------------ ------------ ------------
Income (loss) before
state income taxes and
extraordinary items..... 5,878,000 (9,735,000) (1,944,000)
Provision (benefit) for state
income taxes................ 660,000 (865,000) (161,000)
------------ ------------ ------------
Income (loss) before
extraordinary items......... 5,218,000 (8,870,000) (1,783,000)
Extraordinary gain (loss)
(Note 5).................... 4,120,000 -- (9,250,000)
------------ ------------ ------------
Net income (loss)............ $ 9,338,000 $ (8,870,000) $(11,033,000)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-22
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
AND FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH JUNE 12, 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 Trump Plaza Associates In-
terest Distribution................ (6,317,000) -- (6,317,000)
Distribution to Donald J. Trump to
repay certain personal
indebtedness....................... (52,500,000) -- (52,500,000)
Distribution to Donald J. Trump to
redeem Trump Plaza Funding, Inc.
Preferred Stock Units.............. (35,000,000) -- (35,000,000)
Conversion of Preferred Trump Plaza
Associates Interest into General
Trump Plaza Associates Interest.... 18,407,000 -- 18,407,000
------------ ------------ ------------
Balance, December 31, 1993.......... (78,772,000) 24,062,000 (54,710,000)
Net Loss............................ -- (8,870,000) (8,870,000)
------------ ------------ ------------
Balance, December 31, 1994.......... $(78,772,000) $ 15,192,000 $(63,580,000)
Net Loss............................ -- (11,033,000) (11,033,000)
------------ ------------ ------------
Balance, June 12, 1995.............. $(78,772,000) $ 4,159,000 $(74,613,000)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-23
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
AND FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH JUNE 12, 1995
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED FROM
DECEMBER 31, JANUARY 1, 1995
--------------------------- THROUGH
1993 1994 JUNE 12, 1995
------------- ------------ ---------------
<S> <C> <C> <C>
Cash flow from operating
activities:
Net Income (loss).................. $ 9,338,000 $ (8,870,000) $(11,033,000)
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 of
property and equipment......... 17,177,000 15,276,000 6,999,000
Accretion of discount on
indebtedness................... 862,000 1,916,000 894,000
Amortization of other assets.... 377,000 377,000 --
Provision for losses on
receivables.................... 90,000 396,000 498,000
Deferred state income taxes..... 729,000 (865,000) (161,000)
Utilization of CRDA credits and
donations...................... -- 1,062,000 127,000
Valuation allowance of CRDA
investments.................... 1,047,000 394,000 67,000
------------- ------------ ------------
25,500,000 9,686,000 6,641,000
Decrease (increase) in
receivables.................... 823,000 (236,000) (996,000)
Decrease (increase) in
inventories.................... (498,000) (91,000) 233,000
Increase in prepaid expenses and
other current assets........... (199,000) (1,385,000) (139,000)
(Increase) decrease in other
assets......................... 2,530,000 1,504,000 (744,000)
Increase (decrease) in amounts
due to affiliates.............. 188,000 109,000 (295,000)
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities...... (6,524,000) 10,464,000 18,058,000
Decrease in distribution payable
to Trump Plaza Funding, Inc.... -- (101,000) --
------------- ------------ ------------
Net cash flows provided by
operating activities........... $ 21,820,000 $ 19,950,000 $ 22,758,000
------------- ------------ ------------
Cash flows from investing
activities:
Purchases of property and
equipment....................... $ (10,052,000) $(20,489,000) (7,364,000)
Purchases of CRDA investments.... (2,823,000) (2,525,000) --
Cash refund of CRDA deposits..... 196,000 1,323,000 --
Investment in TPA/THCR........... -- -- --
------------- ------------ ------------
Net cash flows used in investing
activities...................... (12,679,000) (21,691,000) (7,364,000)
------------- ------------ ------------
Cash flows from financing
activities:
Deferred financing costs......... (17,342,000) -- --
Distributions to Donald J. Trump. (87,500,000) -- --
Distributions to Trump Plaza
Funding, Inc. .................. (40,000,000) -- --
Preferred Trump Plaza Associates
Interest Distribution........... (6,282,000) -- --
Borrowings....................... 386,147,000 375,000 1,928,000
Payments and current maturities
of long-term debt............... (248,573,000) (1,883,000) (341,000)
------------- ------------ ------------
Net cash flows used in financing
activities...................... (13,550,000) (1,508,000) 1,587,000
------------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents.......... (4,409,000) (3,249,000) 16,981,000
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 $ 28,125,000
============= ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-24
<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 (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.
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 of
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.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Plaza Associates operates a luxury casino hotel, Trump Plaza Hotel and Casino
("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
F-25
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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. Revenues 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 FOR THE PERIOD FROM
DECEMBER 31, JANUARY 1, 1995
--------------- THROUGH
1993 1994 JUNE 12, 1995
------- ------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Rooms............................. $ 4,190 $ 4,311 $ 1,761
Food and Beverage................. 14,726 15,373 6,866
Other............................. 3,688 4,169 1,502
------- ------- -------
$22,604 $23,853 $10,129
======= ======= =======
</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.
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>
F-26
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Interest associated with borrowings used to finance construction projects has
been capitalized and is being amortized over the estimated useful lives of the
assets.
LAND RIGHTS
Land rights represent the fair value of such rights, at the time of
contribution to Plaza Associates by the Trump Plaza Corporation, an affiliate
of Plaza Associates. These rights are being amortized over the period of the
underlying operating leases which extend through 2078.
LONG LIVED ASSETS
During 1995, Plaza Associates adopted the provisions of Statement of
Financial Accounting Standard No. 121 "Accounting for the Impairment of Long-
Lived Assets" ("SFAS"). SFAS 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an asset
may not be fully recoverable. Impairment of long-lived assets exists, if, at a
minimum the future expected cash flows (undiscounted and 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.
INCOME TAXES
Plaza Funding, Trump Atlantic City's 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. As
of June 11, 1995, Trump Atlantic City and Plaza Associates had state tax net
operating loss carryforwards of approximately $32,800,000 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
$2,900,000 which has been offset by a valuation allowance of $2,900,000 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.
F-27
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Plaza Funding, 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>
FOR THE PERIOD FROM
FOR THE YEARS ENDED DECEMBER 31, JANUARY 1, 1995
--------------------------------- THROUGH
1993 1994 JUNE 12, 1995
---------------- ---------------- -------------------
<S> <C> <C> <C>
Cash paid during the year
for interest............ $ 41,118,000 $ 36,538,000 $265,000
================ ================ ========
Cash paid for state and
Federal income taxes.... $ 81,000 $ -- $ --
================ ================ ========
Issuance of debt in ex-
change for accrued in-
terest.................. $ 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, 1994 JUNE 12, 1995
----------------- -------------
<S> <C> <C>
Plaza Associates Note (10 7/8% Mortgage
Notes, due 2001 net
of unamortized discount of $3,766,000 and
$3,597,000,
respectively) (A)........................... $326,234,000 $326,403,000
Mortgage notes payable (C)................... 5,494,000 5,289,000
Other notes payable.......................... 468,000 3,501,000
PIK Notes (12 1/2% Notes, due 2003 net of
discount of $9,769,000 at December 31, 1994)
(B)......................................... 73,987,000 83,746,000
------------ ------------
406,183,000 418,939,000
Less--Current maturities..................... 2,969,000 87,797,000
------------ ------------
$403,214,000 $331,142,000
============ ============
</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) Pay-In-Kind
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-28
<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 $25,000,000 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 (the "Plaza Guarantee") 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% PIK Notes, due 2003, together with PIK Note Warrants
to acquire an additional $12,000,000 of PIK Notes at no additional
cost. The PIK Note Warrants are exercisable following the earlier of
certain triggering events or June 15, 1996.
The PIK Notes mature on June 15, 2003 and bear interest at the rate of
12 1/2% per annum from the date of issuance, payable semi-annually on
each June 15 and December 15, commencing December 15, 1993. At the
option of Trump Atlantic City, interest is payable in whole or in part,
in cash or, in lieu of cash, through the issuance of additional PIK
Notes valued at 100% of their principal amount. The ability of Plaza
Holding to pay interest in cash on the PIK Notes is entirely dependent
on the ability of Plaza Associates to distribute available cash, as
defined, to Trump Atlantic City for such purpose.
As of December 31, 1994 Plaza Associates has elected to issue in lieu
of cash a total of $11,756,000 in PIK Notes to satisfy its semi-annual
PIK Note interest obligation.
The PIK Notes are structurally subordinate to the Plaza Notes and any
other indebtedness of Plaza Associates and are secured by a pledge of
Trump Atlantic City's 99% equity interest in Plaza Associates. The
indenture to which the PIK Notes were issued (the "PIK Note Indenture")
contains covenants prohibiting Trump Atlantic City from incurring
additional indebtedness and engaging in other activities, and other
covenants restricting the activities of Plaza Associates substantially
similar to those set forth in the Plaza Note Indenture. The PIK Notes
and the PIK Note Warrants are non-recourse to the Partners of Trump
Atlantic City, including Trump, and to all other persons and entities
(other than Trump Atlantic City). Upon an event of default, holders of
PIK Notes or PIK Note Warrants will have recourse only to the assets of
Trump Atlantic City which consist solely of its equity interest in
Plaza Associates. The PIK Notes were redeemed on June 12, 1995 (See
Note 10).
(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 1995 and
1998 and are secured by real property.
F-29
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt for the period from June 12,
1995 through December 31, 1995 and in each of the years subsequent to
1995 are:
<TABLE>
<S> <C>
For the period from June 12, 1995 through December 31,
1995................................................. $ 87,797,000
1996.................................................. 921,000
1997.................................................. 3,335,000
1998.................................................. 483,000
1999.................................................. --
Thereafter............................................ 330,000,000
------------
$422,536,000(1)
============
</TABLE>
---------------------
(1) Includes accretion to maturity of $3,597,000.
The ability of Plaza Associates and Plaza Funding to repay their long-
term debt when due will depend on their ability to either generate cash
from operations sufficient for such purposes or to refinance such
indebtedness. Management does not currently anticipate that cash flow
will be sufficient and that repayment will likely depend upon the
ability to refinance such indebtedness. The future operating
performance and the ability to refinance such indebtedness will be
subject to the then prevailing economic conditions, industry conditions
and numerous other financial, business and other factors, many of which
are beyond the control of Plaza Funding or Plaza Associates. There can
be no assurance that the future operating performance of Plaza
Associates will be sufficient to meet these repayment obligations or
that the general state of the economy, the status of the capital
markets generally or the receptiveness of the capital markets to the
gaming industry will be conducive to refinancing or other attempts to
raise capital.
(4) LEASES
Plaza Associates leases property (primarily land), certain parking space, and
various equipment under operating leases. Rent expense for the years ended
December 31, 1993, 1994 and for the period from January 1, 1995 through June
12, 1995 was $4,338,000, $3,613,000 and $1,466,000, respectively, of which
$2,513,000, $1,900,000 and $850,000, 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>
For the period from June 12, 1995 through
December 31, 1995............................ $ 1,939,000 $ 1,276,000
1996.......................................... 6,770,000 2,450,000
1997.......................................... 6,814,000 2,494,000
1998.......................................... 5,254,000 2,494,000
1999.......................................... 3,533,000 2,450,000
Thereafter.................................... 487,450,000 407,450,000
------------ ------------
$511,760,000 $418,614,000
============ ============
</TABLE>
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms. At December 31, 1994, the aggregate
option price for these leases was approximately $58,000,000.
F-30
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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--
"Commitments and Contingencies Future Expansion."
(5) EXTRAORDINARY GAIN (LOSS) AND NON-OPERATING EXPENSE
The extraordinary loss of $9,250,000 for the period January 1, 1995 through
June 12, 1995 related to the redemption of the PIK Notes and the PIK Note
Warrants and the write-off of related deferred financing costs (See Note 10).
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.
Non-operating expense consists of costs associated with Trump Plaza East
(See Note 6). In 1993, 1994 and the period January 1, 1995 through June 12,
1995 these costs were $3,873,000, $4,931,000 and $1,533,000, respectively, net
of miscellaneous non-operating credits.
(6) COMMITMENTS AND CONTINGENCIES
CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the
Casino Control Act, Plaza Associates is required to maintain certain licenses.
In June 1995, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates license to operate Trump Plaza. This license must be renewed in
June 1999, is not transferable and will require a determination of the
financial stability of Plaza Associates. Upon revocation, suspension for more
than 120 days, or failure to renew the casino license, the Casino Control Act
provides for the mandatory appointment of a conservator to take possession of
the hotel and casino's business and property, subject to all valid liens,
claims and encumbrances.
LEGAL PROCEEDINGS
Plaza Associates, its Partners, certain members of its former Executive
Committee, and certain of its employees, have been involved in various legal
proceedings. In general, Plaza Associates has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, judgements, fines and penalties)
incurred by them in said legal proceedings. Such persons and entities are
vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
Various legal proceedings are now pending against 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
F-31
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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 and 1994 and for the period from January 1,
1995 through June 12, 1995, Plaza Associates charged to operations $1,047,000,
$838,000 and $471,000 respectively, to give effect to the below market interest
rates associated with CRDA bonds that have either been issued or are expected
to be issued from funds deposited.
In connection with Trump Plaza East (see below), the CRDA has approved the
use of up to $1,519,000 in deposits made by Plaza Associates for site
improvements. Such deposits are being capitalized as part of property and
equipment as funds are appropriated by the CRDA. At June 12, 1995, Plaza
Associates has recorded a receivable from the CRDA of $288,000, which is
included in Accounts Receivable Other.
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, 1994 approximately 28% 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,
Trump transferred title of Trump Plaza East to a lender in exchange for a
reduction in indebtedness to such lender in an amount equal to the sum of the
fair market value of Trump Plaza East and all rent payments to be made to such
lender by Trump under Trump Plaza East Lease. At that time, the lender 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. In October 1993, Plaza Associates assumed the Trump Plaza
East Lease and related expenses.
On June 25, 1993, Plaza Associates acquired a five-year option to purchase
Trump Plaza East (the "Trump Plaza East Purchase Option"). 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 Trump Plaza East during the term of the
Trump Plaza East Purchase Option. 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 1994, Plaza
Associates incurred $4,900,000 of such expenses. The CCC has required that
Plaza Associates exercise the Trump Plaza East Purchase Option or its Right of
First Offer no later than July 1, 1996. Plaza Associates has petitioned the CCC
to extend such date to July 1, 1996; however, no assurance can be given that
such waiver will be granted or that any condition imposed by the CCC would be
acceptable to Plaza Associates. If Plaza
F-32
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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. In
order for Plaza Associates to exercise the Trump Plaza East Purchase Option, it
would be required to pay $27,000,000 through June 30, 1995, increasing by
$1,000,000 annually thereafter until expiration on June 30, 1998. If Plaza
Associates is unable to exercise the option, it would be required to expense
any capitalized costs associated with Trump Plaza East.
As of December 31, 1994, Plaza Associates had capitalized approximately
$11,700,000 in construction costs related to Trump Plaza East including a
$1,000,000 consulting fee paid to Trump (Note 8). Plaza Associates might have
to close all or a portion of the expanded casino in order to comply with
regulatory requirements, which could have a material adverse effect on the
results of operations and financial condition of the Plaza Associates. Plaza
Associates' ability to acquire Trump Plaza East pursuant to the Trump Plaza
East Purchase Option is dependent upon its ability to obtain financing to
acquire the property. The ability to incur such indebtedness is restricted by
the Plaza Note Indenture and the PIK Note Indenture. Plaza Associates' ability
to purchase Trump Plaza East is dependent upon its ability to use existing cash
on hand and generate cash flow from operations sufficient to fund development
costs. No assurance can be given that such cash on hand will be available to
Plaza Associates for such purposes or that it will be able to generate
sufficient cash flow from operations.
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 $476,000 for matching contributions for the years ended
December 31, 1993 and 1994 and for the period from January 1, 1995 through June
12, 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"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), which terminated on March 19, 1993. Lease payments of $138,000
were paid to Taj Associates in 1993.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1993, 1994 and
for the period from January 1, 1995 through June 12, 1995, Plaza Associates
paid $900,000, $900,000 and $227,000, respectively, to Seashore Four
Associates, and paid $1,000,000, $1,000,000 and $622,000 in 1993, 1994 and for
the period from January 1, 1995 through June 12, 1995, respectively, to Trump
Seashore Associates.
F-33
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SERVICES AGREEMENT
Pursuant to the terms of a services agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Trump, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of
$1,000,000 in equal monthly installments, and reimburses TPM on a monthly basis
for all reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under such services agreement, up to certain amounts. Under such
services agreement, approximately $1,200,000, $1,300,000 and $582,000 was
charged to expense for the years ended December 31, 1993, 1994 and for the
period from January 1, 1995 through June 12, 1995, respectively.
TRUMP WORLD'S FAIR OPTION
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical Bank ("Chemical") and ACFH Inc.
("ACFH") a wholly owned subsidiary of Chemical. The Original Chemical Option
Agreement granted to Trump an option to purchase (i) the former 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.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $60 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option by
January 5, 1994. In addition, the Original Chemical Option Agreement provided
for an expiration of the option on May 6, 1994, subject to an extension until
June 30, 1994 upon payment of an additional $250,000 on or prior to May 6,
1994. The Original Chemical Option Agreement did not allocate the purchase
price among the assets subject to the option or permit the option to be
exercised for some, but not all of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Trump agreed with Plaza Associates that, if Trump is able to acquire Trump
World's Fair pursuant to the exercise of the option, he would make Trump
World's Fair 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 of the
option to purchase Trump World's Fair. On January 5, 1994, Plaza Associates
obtained the approval of the CCC to make the $1,000,000 payment, which was made
on that date.
On June 16, 1994, Trump, Chemical and ACFH entered into, amended and restated
the Original Chemical Option Agreement (the "First Amended Chemical Option
Agreement"). The First Amended Chemical Option Agreement provided for an
extension of the expiration of the Option through September 30, 1994, upon
payment of $250,000. Such payment was made on June 27, 1994. The First Amended
Chemical Option Agreement also provided for a $60 million option price for
Trump World's Fair and one of the Chemical Notes. On August 30, 1994, Trump,
Chemical and ACFH entered into an amendment to the First Amended Chemical
Option Agreement (the "Second Amended Chemical Option Agreement"). The Second
Amended Chemical Option Agreement provides for an extension of the expiration
of the option through March 31, 1995 upon the payment of $50,000 a month for
the period October through December 1994, and $150,000 a month for the period
January through March 1995. Plaza Associates received the approval of the CCC
and has made such payments.
As of December 31, 1994 and June 12, 1995, respectively, $1,550,000,
representing option payments, is included in other assets in the accompanying
consolidated balance sheet. On June 12, 1995, the option to purchase Trump's
World Fair was exercised (See Note 10).
F-34
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 June 12, 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 of Plaza Funding,
Trump Atlantic City and Plaza Associates 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, 1994 JUNE 12, 1995
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
12 1/2% PIK Notes....... $ 73,987,000 $ 51,791,000 -- --
10 7/8% Mortgage Notes.. $326,234,000 $247,122,000 $326,403,000 $298,650,000
</TABLE>
The fair values of the PIK 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 June 12, 1995 three newly formed entities owned by Trump--Trump Hotels &
Casino Resorts, Inc. ("THCR"), Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") and Trump Hotels & Casino Resorts Funding, Inc.--completed
the offering and sale of $155,000,000 of 15 1/2% Senior Secured Notes and
$140,000,000 of equity (the "June 1995 Offerings").
In connection with the June 1995 Offerings, Trump contributed 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.) to THCR
Holdings. Trump also contributed all of his existing interests and rights to
new gaming activities in both emerging and established gaming jurisdictions to
THCR Holdings.
The net proceeds of the June 1995 Offerings were used to repurchase or redeem
the PIK Notes and PIK Note Warrants (Notes 3 and 5), finance the expansion of
Trump Plaza (Notes 6 and 8) as well as to fund casino development costs in
certain jurisdictions outside of Atlantic City.
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 the 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
F-35
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 Proxy
Statement-Prospectus)) will be converted into the right to receive, at each
holder's election, either (a) $30.00 in cash or (b) that number of shares of
Common Stock of THCR (the "THCR Common Stock") as shall have a market value
equal to $30.00. No fractional shares of THCR Common Stock will be issued in
the Merger. The Merger Agreement also contemplates the following transactions
occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to 12,500,000 shares of
THCR Common Stock (and an amount to be issued pursuant to the underwriters'
over-allotment option) (the "THCR Stock Offering") and the consummation of
the offering by Trump 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") 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, 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 of its indirect
ownership interests in Taj Associates acquired in the Merger.
The connection with the Merger Transaction, THCR may issue up to an
additional 20% of the shares offered in the THCR Stock Offering to fund working
capital.
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: (i) the high leverage and fixed charges of THCR
(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 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 Trump Plaza's or the Taj
Mahal's operations will be successful. See "Risk Factors" included elsewhere in
this Proxy Statement-Prospectus for a discussion of these and other factors.
F-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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-42
<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 $150,000,000 for New Jersey State Income Tax purposes. No 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-43
<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-44
<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-45
<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 First Fidelity 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-46
<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 (see Note 5).
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-47
<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-48
<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-49
<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
Proxy Statement-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 ("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 2,500,000 shares of
THCR Common Stock (and an amount to be issued pursuant to the underwriters'
over-allotment option) (the "THCR Stock Offering") and the consummation of the
offering by Trump 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.
THCR may issue up to an additional 20% of the number of shares offered in the
THCR Stock Offering to fund working capital.
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-50
<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 Proxy Statement-Prospectus for a
discussion of these 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-51
<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 COMPANY OR ANY OF THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITA-
TION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITA-
TION 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.......................................................... 38
Price Range of Common Stock.............................................. 39
Dividend Policy.......................................................... 39
Capitalization........................................................... 40
Selected Historical Combined Financial Information....................... 41
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 44
Unaudited Pro Forma Financial Information................................ 55
Business................................................................. 61
Regulatory Matters....................................................... 92
Management............................................................... 105
Certain Transactions..................................................... 122
Security Ownership of Certain Beneficial Owners and Management........... 124
Description of Capital Stock............................................. 125
Description of the THCR Holdings Partnership Agreement................... 129
Shares Eligible for Future Sale.......................................... 134
Special Tax Considerations for Foreign Shareholders...................... 136
Underwriting............................................................. 138
Legal Matters............................................................ 139
Experts.................................................................. 139
Available Information.................................................... 140
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
12,500,000 SHARES
(LOGO)
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
, 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 Common Stock being registered, all of which will be paid by THCR
Holdings. All amounts are estimates except the registration fee, the NASD
filing fee and the NYSE listing fee.
<TABLE>
<S> <C>
Registration Fee.................................................... $123,103
NASD Filing Fee..................................................... 30,500
Blue Sky Fees and Expenses.......................................... *
New York Stock Exchange Listing Fee................................. 52,063
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.
Article IX of Certificate of Incorporation provides that the Company 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 the Company) by reason of the fact
that he is or was a director, officer, incorporator, employee or agent of the
Company, or is or was serving at the request of the Company 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 the
Company, 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 the
Company, 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 the Company) or may (in the case of any action, suit or proceeding
against an officer, trustee, employee or agent) be paid by the Company 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 the Company as
authorized in Article IX.
No director or officer shall be personally liable to the Company 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
II-1
<PAGE>
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 the Company 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 the
Company 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 the Company and the Ribis
Revised Plaza Agreement among Mr. Ribis, the Company 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.
Pursuant to the Merger Agreement, for a period of six years after the
Effective Time, each of Taj Holding, as the Surviving Corporation of the
Merger, and TM/GP will, and the Company will cause each of Taj Holding, as the
Surviving Corporation of the Merger, and TM/GP to, provide to the former
officers and directors of Taj Holding (the "Taj Holding Indemnified Parties")
indemnification as provided in the Certificate of Incorporation and By-Laws in
effect as of the date of the Merger Agreement. In addition, the Company has
agreed, and has agreed to cause Taj Holding, as the Surviving Corporation of
the Merger, and TM/GP to agree, that until six years from the Effective Time,
unless otherwise required by law, the certificate of incorporation and by-laws
of the Surviving Corporation of the Merger and TM/GP shall not be amended,
repealed or modified to reduce or limit the rights of indemnity afforded to
the present and former directors, officers and employees of Taj Holding and
TM/GP (including, without limitation, with respect to the Merger Transaction)
or the ability of Taj Holding, as the Surviving Corporation, or TM/GP to
indemnify such persons, nor to hinder, delay or make more difficult the
exercise of such rights of indemnity or the ability to indemnify. The Merger
Agreement further provides that for such six years after the Effective Time,
Taj Holding, as the Surviving Corporation of the Merger, and TM/GP shall, and
the Company shall cause Taj Holding, as the Surviving Corporation of the
Merger, and TM/GP to purchase and maintain in effect directors' and officers'
liability insurance policies covering the Taj Holding Indemnified Parties on
terms no less favorable than the terms of the current insurance policies'
coverage or, if such directors' and officers' liability insurance is
unavailable for an amount not greater than 150% of the premium paid by Taj
Holding (on an annualized basis) for directors' and officers' liability
insurance during the period from January 1, 1996 to the Effective Time, Taj
Holding, as the Surviving Corporation of the Merger, and TM/GP shall obtain as
much insurance as can be obtained for a premium not in excess (on an
annualized basis) of such amount.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation and capitalization of the Company, on March
29, 1995, the Company sold to Donald J. Trump 100 shares of its Common Stock
for $300.00. In connection with the June 1995 public offering of its Common
Stock, on June 6, 1995, the Company issued to Donald J. Trump 1,000 shares of
its Class B Common Stock in exchange for Mr. Trump's contribution to THCR
Holdings.
On June 12, 1995, the Company issued to Nicholas L. Ribis, under its 1995
Stock Incentive Plan, (a) a stock bonus award of 66,667 shares of its Common
Stock, (b) a phantom stock unit award of 66,666 units, entitling Mr. Ribis to
receive 66,666 shares of its Common Stock and (c) an award of nonqualified
stock options entitling Mr. Ribis to purchase 133,333 shares of its Common
Stock. The options have an exercise price of $14.00 per share.
II-2
<PAGE>
The foregoing sales were exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended.
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 Hotels & Casino
Resorts, Inc., 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(14) 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(12) Amended and Restated Certificate of Incorporation of Trump
Hotels & Casino Resorts, Inc.
3.2(12) Amended and Restated By-Laws of Trump Hotels & Casino Resorts,
Inc.
4.1(7) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Trump Plaza Associates, as guarantor, and First Bank
National Association, as trustee.
4.2(7) Indenture of Mortgage, between Trump Plaza Associates, as
mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
4.3(7) Assignment Agreement between Trump Plaza Funding, Inc., and
First Bank National Association, as trustee.
4.4(7) Assignment of Operating Assets from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.5(7) Assignment of Leases and Rents from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.6(7) Indenture of Mortgage between Trump Plaza Associates and First
Bank National Association, as trustee.
4.7(7) Assignment of Leases and Rents from Trump Plaza Associates to
First Bank National Association, as trustee.
4.8(7) Assignment of Operating Assets from Trump Plaza Associates to
First Bank National Association, as trustee.
4.9(7) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
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.
4.12-4.16 Intentionally omitted.
4.17(12) Senior Secured Note Indenture between Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc., as issuers, and First Bank National Association,
as trustee.
4.18(12) Senior Secured Note Certificate (included in Exhibit 4.17).
4.19.1(12) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P., as pledgor to First Bank National
Association as collateral agent, on behalf of First Bank
National Association in its respective capacities as trustees.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
4.19.2(12) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P., as pledgor to First Bank National
Association as trustee.
4.19.3(12) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding
Associates, as pledgor to First Bank National Association as
collateral agent, on behalf of First Bank National Association
in its respective capacities as trustees.
4.19.4(12) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding,
Inc. as pledgor to First Bank National Association as collateral
agent, on behalf of First Bank National Association in its
respective capacities as trustees.
4.20 Intentionally omitted.
4.21-4.23 Intentionally omitted.
4.24(12) Cash Collateral and Disbursement Agreement, dated June 12, 1995,
among First Bank National Association, as disbursement agent,
First Bank National Association, as trustee, and Trump Hotels &
Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc., as issuers.
4.25(11) Certificate of Common Stock of Trump Hotels & Casino Resorts,
Inc.
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.
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.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
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(13) 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(11) Sales and Construction Agreement, dated May 1, 1995, between
Trump Indiana, Inc. and Atlantic Marine, Inc.
10.49(11) Agreement of Sale, dated May 10, 1995, between Trump Indiana,
Inc. and Lehigh Portland Cement Company.
10.50(11) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
10.51(11) Amended and Restated Partnership Agreement of Trump Hotels &
Casino Resorts Holdings, L.P.
10.52(12) Exchange and Registration Rights Agreement, dated June 12, 1995,
between Trump Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.53(12) Contribution Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump.
10.54(12) Trademark License Agreement, dated June 12, 1995, between Donald
J. Trump and Trump Hotels & Casino Resorts, Inc.
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 Intentionally omitted.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.58(12) Promissory Note of Donald J. Trump in favor of Trump Hotels &
Casino Resorts Holdings, L.P.
10.59(15) First Amended and Restated Operating Agreement of Buffington
Harbor Riverboat, L.L.C. by and between Trump Indiana, Inc. and
Barden-Davis Casinos, L.L.C., dated as of October 31, 1995.
10.60(15) Form of Loan and Security Agreement, by and between debis
Financial Services, Inc. and Trump Indiana, Inc., dated August
30, 1995.
10.61(15) Voting Agreement between Donald J. Trump and Trump Hotels &
Casino Resorts, Inc., dated January 8, 1996.
21(11) List of Subsidiaries of Trump Hotels & Casino Resorts, Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Intentionally omitted.
23.3 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
23.4 Consent of Sterns & Weinroth.
23.5 Consent of Tabbert Hahn & Zanetis, P.C.
24.1** Power of Attorney.
</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.
II-6
<PAGE>
(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 on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated February 1, 1996.
(15) Incorporated herein by reference to the identically numbered Exhibit to
the Registration Statement on Form S-4, Registration No. 333-153, of
Trump Hotels & Casino Resorts, Inc.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--Valuation and Qualifying Accounts of Trump Hotels & Casino
Resorts, Inc. for the period from inception (June 12, 1995) to
December 31, 1995.
SCHEDULE II--Valuation and Qualifying Accounts of Trump Atlantic City
Associates and Trump Plaza Associates for the years ended
December 31, 1993, 1994 and 1995.
SCHEDULE II--Valuation and Qualifying Accounts of Trump Taj Mahal
Associates and Trump Taj Mahal Funding, Inc. 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-7
<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 HOTELS & CASINO RESORTS, INC.
/s/ Nicholas L. Ribis
By __________________________________
Name: Nicholas L. Ribis
Title: President, Chief Executive
Officer and Director
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.
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
- ------------------------------------- and Director
NICHOLAS L. RIBIS (principal
executive and
financial officer)
* Director
- ------------------------------------- March 5, 1996
WALLACE B. ASKINS
* Director
- ------------------------------------- March 5, 1996
DON M. THOMAS
* Director
- ------------------------------------- March 5, 1996
PETER M. RYAN
* Senior Vice
- ------------------------------------- President of March 5, 1996
JOHN P. BURKE Corporate Finance
(principal
accounting officer)
/s/ Nicholas L. Ribis
*By: ________________________________
NICHOLAS L. RIBIS
ATTORNEY-IN-FACT
II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Hotels & Casino Resorts, Inc. ("THCR")
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 THCR'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.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 21, 1996
S-1
<PAGE>
SCHEDULE II
TRUMP HOTELS & CASINO RESORTS, INC.
VALUATION AND QUALIFYING ACCOUNTS FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995)
TO DECEMBER 31, 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, 1995
Allowances for doubtful
accounts.................... $8,490,000 $ 559,000 $(972,000) $8,077,000
========== =========== ========= ==========
Valuation allowance for
interest differential on
CRDA bonds.................. $2,144,000 $(1,249,000) $ 182,000 $1,077,000
========== =========== ========= ==========
</TABLE>
S-2
<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.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 21, 1996
S-3
<PAGE>
SCHEDULE II
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES VALUATION AND
QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND FOR THE
PERIOD FROM JANUARY 1, 1995 THROUGH JUNE 12, 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
=========== ========== =========== ===========
FOR THE PERIOD FROM JANUARY
1, 1995 THROUGH JUNE 12,
1995
Allowances for doubtful
accounts................. $ 8,493,000 $ 396,000 $ (399,000)(A) $ 8,490,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 2,174,000 $ 67,000 $ (97,000)(B) $ 2,144,000
=========== ========== =========== ===========
</TABLE>
- ---------------------
(A) Write-off of uncollectible accounts.
(B) Adjustment of allowance applicable to contribution of CRDA deposits.
S-4
<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.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 16, 1996
S-5
<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-6
<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
23.5 Consent of Tabbert Hahn & Zanetis, P.C.
</TABLE>
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
March 4, 1996
Trump Hotels & Casino Resorts, Inc.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Re: Registration Statement on Form S-1
File No. 333-639
----------------------------------
Dear Sirs:
We have acted as counsel for Trump Hotels & Casino Resorts, Inc. (the
"Company") in connection with the registration pursuant to the Securities Act
of 1933, as amended (the "Act"), of up to 14,875,000 shares of Common Stock,
par value $.01 per share, of the Company (the "Common Stock") (including
1,875,000 shares subject to the Underwriters' over-allotment option) (the
"Initial Offering") and no more than 20% of the maximum aggregate offering
price of the Initial Offering which may be offered pursuant to Rule 462(b)
promulgated under the Act ("Rule 462(b)").
In connection therewith, we have participated in the preparation of the
Registration Statement on Form S-1 relating to the Common Stock (File No.
333-639) heretofore filed with the Securities and Exchange Commission (as
amended, the "Registration Statement"), and we are familiar with the corporate
proceedings taken to date in connection with the authorization and issuance of
the Common Stock.
In so acting, we have examined original, reproduced or certified copies of
such records of the Company relevant and necessary for the opinions hereinafter
set forth including, but not limited to, the Registration Statement, the
Amended and Restated Certificate of Incorporation of the Company, the Amended
and Restated By-Laws of the Company and the relevant minutes of the Company. 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
Company and public officials.
<PAGE>
Trump Hotels & Casino Resorts, Inc.
March 4, 1996
Page 2
Based on the foregoing and assuming that the Common Stock being registered
will be issued as described in the Registration Statement, we are of the
opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The shares of Common Stock to be sold by the Company pursuant to the
Registration Statement and Rule 462(b) have been duly authorized by all
requisite corporate action and, upon issuance and delivery therefor as set
forth in the Registration Statement, will be validly issued, fully paid and
nonassessable.
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 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 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 4, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF STERNS & WEINROTH
We hereby consent to being named as New Jersey gaming counsel for Trump
Hotels & Casino Resorts, Inc. (the "Company") in the Company's Registration
Statement on Form S-1 (No. 333-00639), 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 5, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF TABBERT HAHN & ZANETIS, P.C.
We hereby consent to being named as Indiana gaming counsel for Trump Hotels
& Casino Resorts, Inc. (the "Company") in the Company's Registration Statement
on Form S-1 (No. 333-00639) 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.
Tabbert Hahn & Zanetis, P.C.
/s/ Don A. Tabbert
Indianapolis, Indiana
March 5, 1996
