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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NO.: 1-13794
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TRUMP HOTELS & CASINO RESORTS, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE 13-3818402
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
COMMISSION FILE NO.: 33-90786
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TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
(Exact Name of Registrant as specified in its charter)
DELAWARE 13-3818402
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
COMMISSION FILE NO.: 33-90786
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TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE 13-3818402
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock of Trump Hotels & Casino New York Stock Exchange
Resorts, Inc., par value $.01 per share
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock of Trump Hotels & Casino
Resorts, Inc. held by non-affiliates as of March 27, 1998 was approximately:
$192,502,997.
As of March 27, 1998, there were 22,195,256 shares of Trump Hotels & Casino
Resorts, Inc. Common Stock outstanding.
Documents Incorporated by Reference--Not applicable
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FORM 10-K
TABLE OF CONTENTS
<TABLE>
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ITEM PAGE
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PART I
ITEM 1. BUSINESS............................................................................ 1
Recent Events....................................................................... 1
General............................................................................. 1
Trump Plaza......................................................................... 3
The Taj Mahal....................................................................... 8
Trump Marina........................................................................ 12
Indiana Riverboat................................................................... 17
Trademark/Licensing................................................................. 19
Certain Indebtedness of THCR........................................................ 19
Atlantic City Market................................................................ 22
Competition......................................................................... 23
Gaming and Other Laws and Regulations............................................... 27
ITEM 2. PROPERTIES.......................................................................... 39
THCR................................................................................ 39
Trump Plaza......................................................................... 39
Taj Mahal........................................................................... 41
Trump Marina........................................................................ 43
Indiana Riverboat................................................................... 44
ITEM 3. LEGAL PROCEEDINGS................................................................... 44
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................. 47
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............... 48
ITEM 6. SELECTED FINANCIAL DATA............................................................. 49
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................ 51
Results of Operations for the Years Ended December 31, 1995 and 1996................ 54
Results of Operations for the Years Ended December 31, 1996 and 1997................ 55
Liquidity and Capital Resources..................................................... 55
Seasonality......................................................................... 57
Inflation........................................................................... 57
Recently Issued Accounting Standards................................................ 57
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................... 57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................................... 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE........................................................................ 57
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................. 58
Directors, Executive Officers, Promoters and Control Persons........................ 58
Compliance with Section 16(a) of the Securities Exchange Act of 1934................ 64
ITEM 11. EXECUTIVE COMPENSATION.............................................................. 65
Employment Agreements............................................................... 67
Compensation of Directors........................................................... 68
Committees of the Board of Directors................................................ 68
Compensation Committee Interlocks and Insider Participation......................... 69
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................... 73
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................... 74
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..................... 76
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS..................................................... 83
SIGNATURES................................................................................................... 84
SIGNATURE--TRUMP HOTELS & CASINO RESORTS, INC................................................................ 84
SIGNATURE--TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P....................................................... 85
SIGNATURE--TRUMP HOTELS & CASINO RESORTS FUNDING, INC........................................................ 86
</TABLE>
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PART I
ITEM 1. BUSINESS.
RECENT EVENTS
Management announced in the first quarter of 1998 that it had retained
Donaldson, Lufkin & Jenrette, Inc. and Bear, Stearns & Co. to explore
transactions involving Trump Hotels & Casino Resorts, Inc. ("THCR"), including
the possible sale of all or a portion of the company.
GENERAL
Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"), Trump Hotels
& Casino Resorts Funding, Inc. ("THCR Funding") and THCR were organized under
the laws of the State of Delaware in March 1995. The partnership agreement
governing THCR Holdings provides that all business activities of THCR must be
conducted through THCR Holdings or subsidiary partnerships or corporations. As
the sole general partner of THCR Holdings, THCR generally has exclusive rights,
responsibilities and discretion in the management and control of THCR Holdings.
THCR, through THCR Holdings and its wholly owned subsidiaries, owns and operates
the Trump Plaza Hotel and Casino ("Trump Plaza"), which also includes Trump
World's Fair, and the Trump Taj Mahal Casino Resort (the "Taj Mahal"), each
located on The Boardwalk in Atlantic City, New Jersey, the Trump Marina Hotel
Casino ("Trump Marina"), located in the marina district of Atlantic City, New
Jersey (the "Marina District"), as well as a riverboat casino located at
Buffington Harbor on Lake Michigan in Indiana (the "Indiana Riverboat"), making
THCR one of the largest casino entertainment companies in the United States. In
addition, THCR continues to be the exclusive vehicle through which Donald J.
Trump ("Trump") engages in new gaming activities in both emerging and
established gaming jurisdictions.
- TRUMP PLAZA. In May 1996, THCR completed an expansion program which
further enhanced Trump Plaza's gaming space and hotel capacity (the "Trump
Plaza Expansion") while maintaining its commitment to first class customer
service. This strategy was designed to capitalize on Trump Plaza's
reputation for excellence, as well as to meet both existing and
anticipated demand for the increased number of rooms and infrastructure
improvements that are currently being implemented to enhance further the
"vacation destination appeal" of Atlantic City. As part of the Trump Plaza
Expansion, THCR renovated and integrated into Trump Plaza a hotel adjacent
to Trump Plaza's main tower ("Trump Plaza East") and renovated and
integrated into Trump Plaza the former Trump Regency Hotel, located on The
Boardwalk adjacent to the original Atlantic City Convention Center, which
is next to Trump Plaza and is now known as Trump World's Fair. The
renovations at Trump Plaza East were completed in February 1996 and at
Trump World's Fair in May 1996. Trump Plaza has 138,305 square feet of
gaming space, housing a total of approximately 4,090 slot machines and 117
table games, making Trump Plaza's casino the largest in Atlantic City (in
terms of square footage). Trump Plaza's hotel capacity consists of 1,404
guest rooms, making Trump Plaza's guest room inventory one of the largest
in Atlantic City.
- TAJ MAHAL. Management believes that the acquisition of the Taj Mahal on
April 17, 1996 (the "Taj Acquisition") has strengthened THCR's position as
a leader in the casino entertainment industry through its ownership of two
successful land-based casino hotels on The Boardwalk. Furthermore, the Taj
Acquisition has enhanced THCR's presence in the growing Atlantic City
gaming market (the "Atlantic City Market"). After giving effect to the Taj
Acquisition and the Trump Plaza Expansion, THCR had acquired approximately
one-quarter of Atlantic City's casino square footage, slot machines, table
games and hotel room inventory. The combination of the Taj Mahal with
Trump Plaza's operations has provided opportunities for operational
efficiencies, economies of scale and benefits from the talent, expertise
and experience of management at the operating entities. In July 1997, THCR
completed an expansion plan at the Taj Mahal (the "Taj Mahal Expansion"),
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which included construction of a new bus terminal, expansion of parking
facilities and expansion of casino floor space.
- TRUMP MARINA. The acquisition of Trump's Castle Casino Resort ("Trump's
Castle") on October 7, 1996 (the "Castle Acquisition"), has further
strengthened THCR's position as an industry leader. During the second
quarter of 1997, Trump's Castle Associates, L.P. ("Castle Associates")
rethemed the property with a nautical emphasis and renamed it Trump Marina
Hotel Casino. The Castle Acquisition has provided THCR with a significant
presence in the Marina District, the principal focus of expansion in the
Atlantic City Market. In addition, the Castle Acquisition has provided
further opportunities for operational efficiencies and economies of scale
and eliminated the perceived conflict of interest caused by the differing
ownership of Trump Marina and the other THCR properties in Atlantic City.
Ownership of Trump Marina will enable THCR to retain patrons that may be
drawn from The Boardwalk to the Marina District by new casino development
in the Marina District. The Castle Acquisition has also enabled THCR to
benefit from (i) the excellent condition of the current facilities at
Trump Marina, which have been designed to accommodate additional
development with minimal disruption to existing operations, (ii) the
proximity of Trump Marina to the "H-Tract," an approximately 150-acre
parcel of land proposed to be Atlantic City's newest area of casino hotel
development (the "H-Tract"), and (iii) a proposed expansion plan at Trump
Marina (the "Trump Marina Expansion"), which would, among other things,
enable THCR to capitalize on the expected increase in gaming activity in
the Marina District.
- INDIANA RIVERBOAT. Trump Indiana, Inc. ("Trump Indiana"), which owns and
operates the Indiana Riverboat at Buffington Harbor, on Lake Michigan,
approximately 25 miles southeast of downtown Chicago, commenced operations
on June 8, 1996. 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. Trump Indiana and The Majestic Star Casino, LLC
("Barden") are the two holders of riverboat owner's licenses to operate at
Buffington Harbor. Trump Indiana and Barden entered into an agreement (the
"BHR Agreement") relating to the formation of Buffington Harbor
Riverboats, L.L.C. ("BHR") and 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. The Indiana Riverboat has approximately 37,000 square
feet of gaming space and features 1,369 slot machines and 69 table games,
and is one of the largest riverboat casinos in the United States. The
Indiana Riverboat's principal market is the approximately 6.8 million
people residing within 50 miles of the Indiana Riverboat 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.
- THE "TRUMP" NAME. THCR capitalizes on the widespread recognition of the
"Trump" name and its association with high quality amenities and first
class service. To this end, THCR provides a broadly diversified gaming and
entertainment experience consistent with the "Trump" name and reputation
for quality, tailored to the gaming patron in each market. THCR 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.
THCR explores opportunities to establish additional gaming operations,
particularly in jurisdictions where the legalization of casino gaming is
relatively new or anticipated.
The following table profiles THCR's current casino and hotel capacity:
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TRUMP TAJ TRUMP INDIANA
PLAZA MAHAL MARINA RIVERBOAT TOTAL
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<S> <C> <C> <C> <C> <C>
Gaming square footage....................................... 138,305 147,720 75,900 37,000 398,925
Slot machines............................................... 4,090 4,136 2,198 1,393 11,817
Table games (including poker)............................... 117 218 91 59 485
Hotel rooms................................................. 1,404 1,250 728 -- 3,382
</TABLE>
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Trump Casino Services, L.L.C., a New Jersey limited liability company
("TCS"), was formed on June 27, 1996 for the purpose of realizing cost savings
and operational synergies by consolidating certain administrative functions of,
and providing certain services to, each of Trump Plaza Associates ("Plaza
Associates") and Trump Taj Mahal Associates ("Taj Associates"), the owner and
operator of Trump Plaza and the Taj Mahal, respectively. Trump Atlantic City
Associates ("Trump AC") and Trump Atlantic City Corporation ("TACC"), a wholly
owned subsidiary of Trump AC, own a 99% and 1% interest, respectively, in TCS.
In June 1996, the New Jersey Casino Control Commission (the "CCC") granted TCS
an initial casino license which, in July 1997, was renewed through July 1998. On
July 8, 1996, TCS, Plaza Associates and Taj Associates entered into an agreement
(the "TCS Services Agreement") pursuant to which TCS provides to each of Taj
Associates and Plaza Associates certain management, financial and other
functions and services necessary and incidental to the respective operation of
each of their casino hotels. On October 23, 1996, TCS, Plaza Associates, Taj
Associates and Castle Associates entered into an Amended and Restated Services
Agreement pursuant to which TCS also provides those same functions and services
to Castle Associates in connection with the operation of Trump Marina. Trump
Communications, L.L.C. ("Trump Communications"), a New Jersey limited liability
company and a subsidiary of TCS, was formed on January 31, 1997 for the purpose
of realizing cost savings and operational synergies by consolidating advertising
functions of, and providing certain services to, each of Plaza Associates, Taj
Associates and Castle Associates.
THCR operates in only one industry segment. See "Financial Statements and
Supplementary Data."
TRUMP PLAZA
Management believes that Trump Plaza's "Four Star" Mobil Travel Guide rating
and "Four Diamond" American Automobile Association rating reflect the high
quality amenities and services that Trump Plaza provides to its casino patrons
and hotel guests. These amenities and services include a broad selection of
dining choices, headline entertainment, deluxe accommodations, tennis courts and
swimming and health spa facilities.
Management believes that as a result of the Trump Plaza Expansion and Trump
Plaza's strategic location, Trump Plaza is one of the premier host properties in
Atlantic City. The Trump Plaza Expansion was completed in May 1996 and increased
Trump Plaza's prime central frontage on The Boardwalk to nearly a quarter of a
mile. Management believes that the construction of the new convention center and
the tourist corridor linking the new convention center with The Boardwalk
enhances the desirability of Atlantic City generally and, as a result of Trump
Plaza's central location, benefits Trump Plaza in particular. In addition,
management has taken advantage of recent gaming regulatory changes that 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.
As part of the Trump Plaza Expansion, Trump Plaza opened the Ocean View
Casino and Bar and a total of 349 rooms, including nine super suites, located at
Trump Plaza East, which is fully integrated into Trump Plaza. Trump Plaza East
has approximately 15,000 square feet of casino space. Trump Plaza also completed
construction of a new entranceway to Trump Plaza to provide easier access by car
to Trump Plaza.
In May 1996, THCR completed the renovations and integration of Trump World's
Fair, located on The Boardwalk adjacent to the original Atlantic City Convention
Center, into Trump Plaza. Trump World's Fair contains 49,193 square feet of
gaming floor space, approximately 16,000 square feet of which is directly
accessible from The Boardwalk, and 500 hotel rooms, connected to Trump Plaza's
main tower by an enclosed walkway overlooking The Boardwalk.
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Management believes the increased hotel capacity as a result of the Trump
Plaza Expansion enables Trump Plaza to better meet demand and accommodate its
casino guests, as well as to host additional and larger conventions and
corporate meetings.
The following table details Trump Plaza's current casino and hotel capacity:
<TABLE>
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TRUMP TRUMP
PLAZA MAIN TRUMP WORLD'S
FACILITY PLAZA EAST FAIR TOTAL
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<S> <C> <C> <C> <C>
Gaming square footage............................................... 74,226 14,886 49,193 138,305
Slot machines....................................................... 2,201 371 1,518 4,090
Table games......................................................... 101 0 16 117
Hotel rooms......................................................... 555 349 500 1,404
</TABLE>
Trump Plaza's management team has launched a variety of initiatives designed
to increase the level of casino gaming activity generally at Trump Plaza and to
attract casino patrons who tend to wager more frequently than the typical
Atlantic City patron. These initiatives include targeted marketing and
advertising campaigns directed to select groups of customers in the Boston-New
York-Washington, D.C. corridor, the introduction of new slot machines and table
games and the addition of bill acceptors on slot machines.
ATLANTIC CITY MARKETING STRATEGY
TRUMP PLAZA. Trump Plaza East has been integrated into Trump Plaza and
together the two are operated as a single casino hotel facility. Trump Plaza
presently intends to continue the marketing strategies it has found successful
in the past, including targeting lucrative high-end drive-in slot customers.
Management believes the additional hotel rooms and gaming facilities at Trump
Plaza East better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the typical
walk-in or bus patron.
TRUMP WORLD'S FAIR. Trump World's Fair is seeking 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 World's Fair features a Boardwalk
level casino offering walk-in customers direct access from The Boardwalk to 569
slot machines. In addition, Trump World's Fair contains a new bus terminal that
has a dedicated escalator leading directly to a separate casino entertainment
area that contains a 500-seat buffet-style restaurant and a casino with
approximately 510 slot machines. The new bus terminal and dedicated casino
facilities allow Trump World's Fair to serve efficiently a high volume of bus
customers. The second floor of Trump World's Fair has approximately 439 slot
machines and 16 table games along with additional restaurants. Moreover, with
its prime location adjoining the original Atlantic City Convention Center and
near the new Atlantic City Convention Center, and its newly refurbished room
base of 500 rooms and approximately 50,000 square feet of total gaming space,
management believes that Trump World's Fair is ideally suited to attract
convention visitor traffic.
TRUMP PLAZA BUSINESS STRATEGY
GENERAL. A primary element of Trump Plaza's business strategy is to seek to
attract patrons who tend to wager more frequently and in larger denominations
than the typical Atlantic City gaming customer. Such high-end players typically
wager $5 or more per play in slots and $25 or more per play in table games. In
the fall of 1992, Plaza Associates, the owner and operator of Trump Plaza,
decided to de-emphasize marketing efforts directed at "high roller" patrons from
the Far East, who tend to wager $50,000 or more per play in table games. Plaza
Associates determined that the potential benefit derived from these patrons did
not outweigh the high costs associated with attracting such players and the
resultant volatility in the results of operations of Trump Plaza. Revenues
derived from high roller patrons have declined since 1992, although management
believes that such revenue loss has not had a significant impact on
profitability for
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the reasons discussed above. In addition, this shift in marketing strategy has
allowed Plaza Associates to focus its efforts on attracting high-end players.
Although considered one property, Trump Plaza and Trump World's Fair have
separate marketing identities. Trump Plaza caters to the mid to high level
segment while Trump World's Fair focuses on the "middle" market. Trump Plaza's
concentration of special events, entertainment, suites and variety of gourmet
restaurants define its presence and highly perceived image. The suite renovation
and high-end slot club expansion projects indicate Plaza Associates' commitment
to this segment of the market. While Trump Plaza strives to accommodate the more
lucrative drive-in patron, Trump World's Fair offers a fun, relaxing experience
which is extremely appealing to the bus rider. A combination of lower slot
denominations, including Atlantic City's largest nickel lounge, lower table
limits, sweepstakes, bus bingo programs, on-floor tournaments and a premier
buffet make this possible.
"COMPING" STRATEGY. In order to compete effectively with other Atlantic
City casino hotels, Plaza Associates offers complimentary drinks, meals, room
accommodations and/or travel arrangements to its patrons ("complimentaries" or
"comps"). Management monitors Trump Plaza's policy so as to provide
complimentaries primarily to patrons with a demonstrated propensity to wager at
Trump Plaza. A patron's propensity to wager is determined by a review of the
patron's prior gaming history at Trump Plaza as well as other gaming
establishments in Atlantic City. Each patron is analyzed to ensure that the
patron's gaming activity, net of any complimentaries, is profitable to Plaza
Associates.
ENTERTAINMENT. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end and other patrons. Trump Plaza offers headline
entertainment weekly during the summer and monthly during the off-season, and
also features other entertainment and revue shows.
PLAYER DEVELOPMENT/CASINO HOSTS. Plaza Associates currently employs gaming
representatives in New Jersey, New York and other states, as well as several
international representatives, to promote Trump Plaza to prospective gaming
patrons. Player development personnel host special events, offer incentives and
contact patrons directly in an effort to attract high-end table game patrons
from the United States, Canada and South America. Trump Plaza's casino hosts
assist patrons on the casino floor, make room and dinner reservations and
provide general assistance. They also solicit Trump Card (the frequent player
slot card) sign-ups in order to increase Plaza Associates' marketing base.
PROMOTIONAL ACTIVITIES. The Trump Card constitutes a key element in Trump
Plaza's direct marketing program. Slot machine players are encouraged to
register for and utilize their personalized Trump Card to earn various
complimentaries based upon their level of play. The Trump Card is inserted
during play into a card reader attached to the slot machine for use in
computerized rating systems. Plaza Associates' computer systems record data
about the cardholders, including playing preferences, frequency and denomination
of play and the amount of gaming revenues produced.
Trump Plaza designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Trump Card and on table game wagering by the casino game supervisors.
Promotional activities include the mailing of vouchers for complimentary slot
play. Trump Plaza also utilizes a special events calendar (E.G., birthday
parties, sweepstakes and special competitions) to promote its gaming operations.
BUS PROGRAM. Trump Plaza has a bus program, which transports approximately
1,700 gaming patrons per day during the week and 2,400 per day on the weekends.
Trump Plaza's bus program offers incentives and discounts to certain scheduled
and chartered bus customers. Trump Plaza's Transportation Facility (as defined)
contains 13 bus bays and is connected by an enclosed pedestrian walkway to Trump
Plaza. The Transportation Facility provides patrons with immediate access to the
casino, and contains a comfortable lounge area for patrons waiting for return
buses. Trump World's Fair has a newly constructed bus terminal with a dedicated
escalator leading directly to a casino entertainment area complete with an
international
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buffet. Trump World's Fair's bus terminal provides patrons with a spacious
lounge area with a view of the Atlantic Ocean and The Boardwalk. Trump World's
Fair's bus program transports approximately 1,200 gaming patrons per day during
the week and 2,100 per day on weekends.
CREDIT POLICY. Historically, Trump Plaza has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1995, 1996 and 1997 credit play as a percentage of total dollars wagered was
approximately 17.7%, 17.4% and 18.9%, respectively. As part of Trump Plaza's
business strategy, Trump Plaza has imposed stricter standards on applications
for new or additional credit. Trump Plaza bases credit limits on each individual
patron's creditworthiness, as determined by an examination of the following
criteria: (i) checking each patron's personal checking account for current and
average balances, (ii) performing a credit check on each domestic patron and
(iii) checking each patron's credit limits and indebtedness at all casinos in
the United States as well as many island casinos. The above determination of a
patron's continued creditworthiness is performed for continuing patrons on a
yearly basis or more frequently if Trump Plaza deems a re-determination of
credit worthiness is necessary. In addition, depositing of markers is regulated
by the State of New Jersey. Markers in increments of $1,000 or less are
deposited in a maximum of 7 days; markers of increments of $1,001 to $5,000 are
deposited in a maximum of 14 days; and markers in increments of over $5,001 are
deposited in a maximum of 45 days. Markers may be deposited sooner at the
request of patrons or at Trump Plaza's discretion.
FACILITIES AND AMENITIES
TRUMP PLAZA. The casino in Trump Plaza's main tower currently offers 101
table games and 2,201 slot machines. In addition to the casino, Trump Plaza's
main tower consists of a 31-story tower with 555 guest rooms, including 62
suites. Trump Plaza's main tower also offers 10 restaurants, a 750-seat cabaret
theater, four cocktail lounges, 28,000 square feet of convention, ballroom and
meeting room space, a swimming pool, tennis courts and a health spa.
The entry level of Trump Plaza's main tower includes a cocktail lounge,
three gift shops, a deli, a coffee shop, 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 an ocean view high-end slot area. An enclosed walkway
connects Trump Plaza at the casino level with the original Atlantic City
Convention Center and with Trump World's Fair.
On February 16, 1996, Trump Plaza opened the approximately 15,000
square-foot Ocean View Casino and Bar and 249 of its 349 hotel rooms at Trump
Plaza East. Management opened the remaining rooms and suites at Trump Plaza East
in March 1996. The Ocean View Casino and Bar is the first gaming room in
Atlantic City to combine a casino, bar and entertainment area, and features a
70-foot long bar with 27 bar-top slot machines, live entertainment and a 58
square-foot video wall, complemented by six additional television sets along the
bar. With its high ceilings and windows overlooking the Atlantic Ocean and The
Boardwalk, Trump Plaza has created a new and exciting entertainment environment
for its casino patrons.
Trump Plaza's guest rooms are located in two towers which afford most guest
rooms a view of the ocean. While rooms are of varying size, a typical guest room
consists of approximately 400 square feet. Trump Plaza's main tower also
features 16 one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites." The
Super Suites are located on the top two floors of Trump Plaza's main tower and
offer luxurious accommodations and 24-hour butler and maid service. The Super
Suites and certain other suites are located on the "Club Level" which requires
guests to use a special elevator key for access, and contains a lounge area that
offers food and bar facilities.
Trump Plaza's main tower is connected by an enclosed pedestrian walkway to a
10-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and a waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino, and is located directly off the Atlantic City
Expressway, the main highway into Atlantic City.
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In July 1994, Time Warner Entertainment Company, L.P. ("Time Warner") opened
its second largest Warner Brothers Studio Store occupying the entire first floor
of retail space on The Boardwalk at Trump Plaza East (approximately 17,000
square feet).
TRUMP WORLD'S FAIR. Trump World's Fair is connected to Trump Plaza's main
tower by an enclosed walkway overlooking The Boardwalk and adds an additional
500 hotel rooms to Trump Plaza. In addition, Trump World's Fair is outfitted
with approximately 50,000 square feet of casino floor space housing 1,518-slot
machines and 16 table games. In addition to the casino, Trump World's Fair
features three restaurants, including a state-of-the-art buffet, a cocktail
lounge, convention and ballroom and meeting room space. The enclosed walkway
runs through a portion of the original Atlantic City Convention Center, which is
located between Trump World's Fair and Trump Plaza's main tower. Plaza
Associates has acquired an easement with regard to this walkway through the
original Atlantic City Convention Center.
EMPLOYEES AND LABOR RELATIONS
Plaza Associates has approximately 3,770 full time equivalent employees of
whom approximately 1,500 are covered by collective bargaining agreements. The
collective bargaining agreement with Local No. 54 expires on September 15, 1999.
Management believes that its relationships with its employees are satisfactory.
Certain of Plaza Associates' employees must be licensed or registered under the
New Jersey Casino Control Act (the "Casino Control Act").
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 ("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 desired 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.
HISTORICAL BACKGROUND
THE 1992 EVENTS. Plaza Associates and Trump Plaza Funding, Inc. ("Plaza
Funding") restructured their indebtedness through a prepackaged plan of
reorganization under Chapter 11 of the Bankruptcy Code (the "1992 Plaza
Restructuring") in order to alleviate their liquidity problems. On May 29, 1992,
Plaza Associates and Plaza Funding completed the 1992 Plaza Restructuring, the
purpose of which 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 of Plaza Funding 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
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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 1993 EVENTS. The Successor Plaza Bonds and the Stock Units were
redeemed in 1993 out of the proceeds of a refinancing designed to enhance Plaza
Associates' liquidity and to position Plaza Associates for a subsequent
deleveraging transaction. The 1993 refinancing included (i) the sale by Plaza
Funding of $330 million in aggregate principal amount of 10 7/8% Mortgage Notes
due 2001 (the "Plaza Notes") and (ii) the sale by Trump AC (known prior to April
17, 1996 as Trump Plaza Holding Associates) of $60 million aggregate principal
amount of 12 1/2% Pay-In-Kind Notes due 2003 (the "Plaza PIK Notes") and
warrants to acquire an aggregate of $12 million in principal amount of
additional Plaza PIK Notes (the "Plaza PIK Note Warrants"). Upon consummation of
the refinancing, Plaza Funding held a 1% equity interest in Plaza Associates and
Trump Atlantic City Holding, Inc., known prior to April 17, 1996 as Trump Plaza
Holding, Inc. ("Trump AC Holding"), held a 99% equity interest.
THE 1995 AND 1996 EVENTS. In connection with the initial public offering
(the "June 1995 Stock Offering") of 10 million shares of THCR Common Stock, THCR
Holdings repurchased and redeemed the Plaza PIK Notes and the Plaza PIK Note
Warrants. In addition, in connection with the June 1995 Stock Offering and the
offering by THCR Holdings and its wholly owned finance subsidiary THCR Funding,
of $155 million 15 1/2% Senior Secured Notes due 2005 (the "Senior Notes") (the
"June 1995 Note Offering" and, together with the June 1995 Stock Offering, the
"June 1995 Offerings"), Trump transferred, pursuant to a contribution agreement,
to THCR Holdings his ownership interests in Plaza Funding and Trump AC. Upon the
consummation of the June 1995 Offerings, THCR Holdings owned Plaza Associates.
In connection with the Taj Acquisition, THCR Holdings became the owner of both
Plaza Associates and Taj Associates, the owner and operator of the Taj Mahal,
through its ownership interest in Trump AC. As part of the 1996 Offerings, Trump
AC and its wholly owned finance subsidiary, Trump Atlantic City Funding, Inc., a
Delaware corporation ("Trump AC Funding"), issued the TAC I Notes (as defined).
THE 1997 EVENTS. In December 1997, Trump AC and Trump Atlantic City Funding
II, Inc., a Delaware corporation ("Funding II"), issued the TAC II Notes (as
defined) and Trump AC and Trump Atlantic City Funding III, Inc., a Delaware
corporation ("Funding III"), issued the TAC III Notes (as defined).
THE TAJ MAHAL
The Taj Mahal ranked first among all Atlantic City casinos in terms of total
gaming revenues for the year ended December 31, 1997. 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 growth of the Atlantic City market.
In recent years, Taj Associates has completed construction of the Taj
Entertainment Complex (as defined), reconfigured and expanded the casino floor
to provide race simulcasting, poker wagering and keno, opened an Asian themed
table game area, opened the Bengal Club for mid-level slot players and increased
the number of poker tables and slot machines. The Taj Mahal's poker room is the
largest in Atlantic City, which management believes adds to its customers'
overall gaming experience. Taj Associates continually monitors operations to
adapt to and anticipate industry trends. From 1994 to mid-1997, the Taj Mahal
refurbished substantially all of its hotel guest rooms and corridors and
replaced all of its existing slot
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machines with new, more efficient machines with bill acceptors. Moreover, to
further attract high-end players, the Taj Mahal opened the Dragon Room, an Asian
themed table gaming area with 16 table games, and the Sultan's Palace, a
separate 5,900 square-foot high-end slot lounge. In connection with the Sultan's
Palace, the Taj Mahal opened the relocated and expanded President's Club for
high-end slot players.
The Taj Mahal Expansion consisted of the construction of a new 14-bay bus
terminal, which was completed in December 1996, a 2,400 space expansion of the
existing self parking facilities, which was completed in May 1997, and an
approximately 7,000 square foot casino expansion with approximately 260 slot
machines with frontage on The Boardwalk, which was completed in July 1997. In
addition, to increase entertainment opportunities for customers, the Hard Rock
Cafe opened in November 1996, the All Star Cafe opened in March 1997 and the
Stage Deli of New York opened in October 1997. A Warner Brothers Studio Store
opened at the Taj Mahal in May 1997.
THE TAJ MAHAL OPERATIONS
GENERAL. The Taj Mahal currently has approximately 147,700 square feet of
gaming space, 218 table games and 4,136 slot machines, which includes an
approximately 12,000 square-foot poker, keno and race simulcasting room with 63
poker tables, which was added in 1993 and expanded in 1994. The casino's
offerings include blackjack, progressive blackjack, craps, roulette, baccarat,
mini baccarat, sic-bo, pai gow, pai gow poker, Caribbean stud poker, big six,
mini big six, mini dice 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 May 1996, the Taj Mahal
opened the Sultan's Palace, a high-end slot lounge. In August 1996, the Taj
Mahal opened the relocated and expanded President's Club for high-end slot
players in conjunction with the Sultan's Palace.
In December 1996, the Taj Mahal opened a new bus terminal with 14 bays. In
November 1996, the Hard Rock Cafe opened at the Taj Mahal adjacent to the casino
and The Boardwalk. In March 1997, the All Star Cafe opened at the Taj Mahal. A
Warner Brothers Studio Store opened in May 1997. An additional simulcasting
facility featuring horse racing was completed in June 1997. Construction of an
approximately 7,000 square-foot casino expansion with 260 slot machines, with
Boardwalk frontage, was completed in July 1997. In October 1997, the Stage Deli
of New York opened at the Taj Mahal. In addition, as a special bonus to high-end
players, the Taj Mahal offers three clubs for the exclusive use of select
customers: the Maharajah Club for high-end table game players, the President's
Club for high-end slot players and the Bengal Club for other preferred slot
players.
The Taj Mahal currently consists of a 42-story hotel tower and contiguous
low-rise structure sited on approximately 30 acres of land. The Taj Mahal has
1,250 guest rooms (including 242 suites), 18 dining and 12 beverage locations,
parking for approximately 6,950 cars, a 14-bay bus terminal and approximately
65,000 square feet of ballroom, meeting room and pre-function area space. In
addition, the Taj Mahal features a 20,000 square-foot multi-purpose
entertainment complex known as the Xanadu Theater with seating capacity for
approximately 1,200 people which can be used as a theater, concert hall, boxing
arena or exhibition hall (the "Taj Entertainment Complex") and the Mark Etess
Arena, which comprises an approximately 63,000 square-foot exhibition hall and
entertainment facility. The Xanadu Theater and Mark Etess Arena have allowed the
Taj Mahal to offer longer running, more established productions that cater to
the tastes of the Taj Mahal's high-end international guests, and has afforded
the Taj Mahal more flexibility in the use of its facilities for sporting and
other headline programs. The Taj Mahal regularly engages well-known musicians
and entertainment personalities and will continue to emphasize weekend marquee
events such as 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.
GAMING ENVIRONMENT. The Taj Mahal's management continues to capitalize on
the Taj Mahal's status as one of the largest facilities in Atlantic City and a
"must see" attraction, while maintaining the
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attractiveness of the property and providing a comfortable gaming experience. In
1994, the Taj Mahal completed a major redecoration of the hotel lobby, a casino
floor expansion and a reconfiguration, as well as the addition of a new
mid-level player slot club. The casino floor expansion and reconfiguration
accommodated the addition of keno, poker tables and slot machines. In the period
1994 through 1996, the Taj Mahal substantially replaced all of its existing slot
machines with new, more efficient machines with bill acceptors. In addition, in
June 1993, the Taj Mahal completed a 10,000 square-foot poker and simulcast area
(which was subsequently enlarged to 12,000 square feet), which features 63 poker
tables in the largest poker room in Atlantic City. For the year ended December
31, 1997, the Taj Mahal captured approximately 45.3% of the total Atlantic City
poker revenues. In 1996 and 1997 the Taj Mahal expanded its casino floor by
approximately 6,200 and 8,600 square feet, respectively. The 1997 expansion
accommodated casino space with Boardwalk frontage and a second horserace
simulcasting location.
The Taj Mahal currently intends to reconfigure its casino floor, subject to
approval by the CCC on an ongoing basis, to accommodate changes in patron
demand. Management continuously monitors the configuration of the casino floor
and the games it offers to patrons with a view towards making changes and
improvements. For example, the Taj Mahal's casino floor has clear, large signs
for the convenience of patrons. Additionally, as new games have been approved by
the CCC, management has integrated such games to the extent it deems
appropriate. In 1994, the Taj Mahal introduced the newly approved games of keno
and Caribbean stud poker and, in 1995, introduced the games of pai gow, pai gow
poker and let it ride poker. Progressive blackjack and mini dice were also added
in 1996 and 1997, respectively.
"COMPING" STRATEGY. In order to compete effectively with other casino
hotels, the Taj Mahal offers complimentaries. Currently, the policy at the Taj
Mahal is to focus promotional activities, including complimentaries, on middle
and upper middle market "drive in" patrons who visit Atlantic City frequently
and have proven to be the most profitable market segment.
ENTERTAINMENT. The Taj Mahal believes headline entertainment, as well as
other entertainment and revue shows, is an effective means of attracting and
retaining gaming patrons. 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 Xanadu Theater, together with the
Mark Etess Arena (an approximately 63,000 square-foot exhibition hall facility),
afford the Taj Mahal more flexibility in the use of its larger entertainment
arena for sporting and other headline programs. The Taj Mahal regularly engages
well-known musicians and entertainment personalities and will continue to
emphasize weekend "marquee" events such as 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. The Taj Mahal employs sales representatives as a means
of attracting high-end slot and table gaming patrons to the property. The Taj
Mahal currently employs numerous gaming representatives in New Jersey, New York
and other states, as well as several international representatives, to host
special events, offer incentives and contact patrons directly in the United
States, Canada and South America. In addition, targeted marketing to
international clientele will be continued and expanded through new sales
representatives in Latin America, Mexico, Europe, the Far East and the Middle
East.
The casino hosts assist patrons on the casino floor, make room and dinner
reservations and provide general assistance. They also solicit Trump Card (a
player identification card) sign-ups in order to increase the Taj Mahal's
marketing base.
The Taj Mahal also plans to continue the development of its slot and coin
programs through direct mail and targeted marketing campaigns emphasizing the
high-end player. "Motorcoach Marketing," the Taj Mahal's customer bus-in
program, has been an important component of player development and will continue
to focus on tailoring its player base and maintaining a low-cost package.
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PROMOTIONAL ACTIVITIES. The Trump Card, a player identification card,
constitutes a key element in the Taj Mahal's direct marketing program. Both
table and slot machine players are encouraged to register for and utilize their
personalized Trump Card to earn various complimentaries and incentives based on
their level of play. The Trump Card is inserted during play into a card reader
attached to the table or slot machine for use in computerized rating systems.
These computer systems record data about the cardholder, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced. Sales and management personnel are able to monitor the
identity and location of the cardholder and the frequency and denomination of
such cardholder's play. They can also use this information to provide attentive
service to the cardholder while the patron is on the casino floor.
The Taj Mahal designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Trump Card and on table game wagering by the casino games supervisor.
Promotional activities at the Taj Mahal include the mailing of vouchers for
complimentary slot play and utilization of a special events calendar (e.g.,
birthday parties, sweepstakes and special competitions) to promote its gaming
operations.
The Taj Mahal conducts slot machine and table game tournaments in which cash
prizes are offered to a select group of players invited to participate in the
tournament based upon their tendency to play. Special events such as "Slot
Sweepstakes" and "bingo" are designed to increase mid-week business. Players at
these tournaments tend to play at their own expense during "off-hours" of the
tournament. At times, tournament players are also offered special dining and
entertainment privileges that encourage them to remain at the Taj Mahal.
CREDIT POLICY. Historically, the Taj Mahal has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1995, 1996 and 1997, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 24.5%, 29.7% and 31.2%, respectively. The Taj
Mahal bases credit limits on each individual patron's creditworthiness, as
determined by an examination of the following criteria: (i) checking each
patron's personal checking account for current and average balances, (ii)
performing a credit check on each domestic patron and (iii) checking each
patron's credit limits and indebtedness at all casinos in the United States as
well as many island casinos. The above determination of a patron's continued
creditworthiness is performed for continuing patrons on a yearly basis or more
frequently if the Taj Mahal deems a re-determination of credit worthiness is
necessary. In addition, depositing of markers is regulated by the State of New
Jersey. Markers in increments of $1,000 or less are deposited in a maximum of 7
days; markers of increments of $1,001 to $5,000 are deposited in a maximum of 14
days; and markers in increments of over $5,001 are deposited in a maximum of 45
days. Markers may be deposited sooner at the request of patrons or at the Taj
Mahal's discretion.
EMPLOYEES
Taj Associates has approximately 4,500 full time equivalent employees for
the operation of the Taj Mahal, of whom approximately 1,750 employees are
covered by collective bargaining agreements. The collective bargaining agreement
with Local No. 54 expires on September 15, 1999. Management believes that its
relationships with its employees are satisfactory and that its staffing levels
are sufficient to provide superior service. Certain of Taj Associates' employees
must be licensed or registered under the Casino Control Act.
TAJ ACQUISITION
On April 17, 1996, a subsidiary of THCR was merged (the "Taj Merger") with
and into Taj Mahal Holding Corp., known after the Taj Acquisition as THCR
Holding Corp. ("THCR Holding Corp."). As a result of the Taj Merger and the
related transactions discussed below, THCR Holdings acquired Taj Associates. The
Taj Acquisition included, among other things:
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(a) the payment of an aggregate of approximately $31,181,000 in cash and
the issuance of 323,423 shares of THCR Common Stock to the holders of THCR
Holding Corp.'s Class A Common Stock, par value $.01 per share ("THCR
Holding Corp. Class A Common Stock");
(b) the contribution (i) by Trump to Trump AC of all of his direct and
indirect ownership interests in Taj Associates, pursuant to the contribution
agreement, dated as of April 17, 1996, among, Trump, Trump Casinos, Inc.
("TCI"), TM/GP Corporation, known after the Taj Acquisition as THCR/ LP
Corporation ("THCR/LP"), and THCR Holdings in exchange for a modification of
Trump's limited partnership interest in THCR Holdings and (ii) by THCR to
Trump AC of all of its direct ownership interests in Taj Associates acquired
in the Taj Merger;
(c) the public offerings by (i) THCR of 12,500,000 shares of THCR Common
Stock (plus 750,000 shares of THCR issued in connection with the partial
exercise of the underwriters' over-allotment option (together, the "1996
Stock Offering")), and (ii) Trump AC and Trump AC Funding of the TAC I Notes
(collectively with the 1996 Stock Offering, the "1996 Offerings");
(d) the redemption, immediately prior to the Taj Merger, of the
outstanding shares of THCR Holding Corp.'s Class B Common Stock, par value
$.01 per share ("THCR Holding Corp. Class B Common Stock"), in accordance
with its terms, for $.50 per share;
(e) the redemption of the outstanding 11.35% Mortgage Bonds, Series A,
due 1999 issued by Trump Taj Mahal Funding, Inc. (the "Taj Bonds");
(f) the retirement of the outstanding Plaza Notes;
(g) the satisfaction of the indebtedness of Taj Associates under its
loan agreement with National Westminster Bank USA ("Nat West");
(h) the purchase of certain real property used in the operation of the
Taj Mahal (the "Specified Parcels") that was leased from Taj Mahal Realty
Corp. ("Realty Corp.");
(i) the purchase of Trump Plaza East;
(j) the payment to Bankers Trust Company ("Bankers Trust") to obtain
releases of liens and guarantees that Bankers Trust had in connection with
indebtedness owed by Trump to Bankers Trust; and
(k) the issuance to Trump of warrants to purchase 1,800,000 shares of
THCR Common Stock (the "Trump Warrants").
TRUMP MARINA
Castle Associates owns and operates Trump Marina, a luxury casino hotel
located on 14.7 acres in the Marina District approximately two miles from The
Boardwalk. Trump Marina is approximately one-quarter mile from the H-Tract.
Trump Marina consists of a 27-story hotel tower with 728 rooms, including 185
suites, 99 of which are oversized luxury suites, and contains approximately
75,900 square feet of gaming space. Trump Marina offers 2,198 slot machines, 91
table games, 8 restaurants, approximately 58,000 square feet of convention,
ballroom and meeting space, a 9-story parking garage, which can accommodate
approximately 3,000 cars, a 540-seat cabaret theater, two cocktail lounges, a
swimming pool, tennis courts, a health club and a roof-top helipad. In addition,
Trump Marina operates a 645-slip marina which is adjacent to the casino hotel.
An elevated enclosed walkway connects Trump Marina to a two-story building which
contains offices, a nautically themed retail store, a cocktail lounge and a
240-seat gourmet restaurant that overlooks the marina and the Atlantic City
skyline. As a result of its high quality amenities, its exceptional customer
service and its geographical location, Trump Marina distinguishes itself as a
desirable alternative to the Atlantic City casinos located on The Boardwalk.
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MARKETING STRATEGY
Management's recent retheming of Trump Marina is intended to build upon the
casino's established customer base by attracting a younger crowd to the
facility. In keeping with this initiative, management has aimed to differentiate
Trump Marina from other Atlantic City casinos by offering contemporary
entertainment attractions and introducing its current "Wild Side" marketing
campaign. The "Wild Side" marketing program consists of a coordinated
advertising, entertainment and marketing campaign that is geared toward a
younger generation of patrons but will not exclude Trump Marina's established
customer base. Management, which developed the "Wild Side" marketing program
after careful study of the Atlantic City market, seeks to accomplish its goals
via an advertising campaign with a fun and youthful appeal, as well as providing
varied and extensive contemporary entertainment in the Grand Cayman Ballroom,
"The Shell" (a cabaret style theater), "The Wave" (a night club), "The Deck"
(for outdoor summertime entertainment) and large outdoor performances billed as
"Rock the Dock" concerts.
SERVICE. By providing and maintaining a first-class facility and
exceptional service, Trump Marina has earned both the American Automobile
Association's "Four Diamond" and a "Four Star" Mobil Travel Guide rating. Trump
Marina provides a broadly diversified gaming and entertainment experience
consistent with the "Trump" name and reputation for quality amenities and
first-class service.
GAMING ENVIRONMENT. To stay abreast of current gaming trends in Atlantic
City, Trump Marina's management continuously monitors the configuration of the
casino floor and the games it offers to patrons with a view towards making
changes and improvements. A sophisticated computerized slot tracking and
marketing system is employed to perform this analysis. This monitoring has
confirmed a recent trend in the Atlantic City market towards fewer table games
and more slot machines. For example, slot machine revenue for the Atlantic City
market increased from 54.6% of the industry gaming revenue in 1988 to 70.4% of
industry gaming revenue in 1997. Trump Marina experienced a similar increase,
with slot revenue increasing from 52.5% of gaming revenue in 1988 to 70.1% of
gaming revenue in 1997. In response to this trend, management devoted more of
its casino floor space to slot machines and between 1994 and 1997 and has
replaced substantially all of its slot machines with newer machines. Trump
Marina has also responded to this trend by introducing its Monte Carlo club for
high-end slot players.
"COMPING" STRATEGY. In order to compete effectively with other Atlantic
City casino hotels, Trump Marina offers complimentaries primarily to patrons
with a demonstrated propensity for gaming at Trump Marina. The policy at Trump
Marina is to focus 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.
ENTERTAINMENT AND SPECIAL EVENTS. Trump Marina pursues a coordinated
program of headline entertainment and special events. Trump Marina offers
headline entertainment approximately twenty times a year in its main ballroom,
complimented by contemporary acts each weekend in the cabaret theater. As a part
of its marketing plan, Trump Marina offers special events aimed at its core,
middle and upper-middle market segments. Trump Marina also hosts special events
on an invitation-only basis in an effort to attract existing targeted gaming
patrons and build loyalty among these patrons. These special events include golf
tournaments, theme parties and gaming tournaments. Headline entertainment is
scheduled so as not to overlap with any of these special events. In addition, as
part of its "Wild Side" marketing campaign, Trump Marina features outdoor bands
nightly (in season) as well as outdoor concerts promoted under the "Rock the
Dock" theme. Recent performers have included The Wallflowers and comedian Chris
Rock.
PLAYER DEVELOPMENT AND CASINO HOSTS. Trump Marina has contracts with sales
representatives in New Jersey, New York and other states to promote the casino
hotel. Trump Marina has sought to attract more middle market slot patrons, as
well as premium players, through its "junket" marketing operations, which
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involve attracting groups of patrons by providing airfare, gifts and room
accommodations. Player development personnel host special events, offer
incentives and contact patrons directly in an effort to attract high-limit table
game patrons.
The casino hosts at Trump Marina assist table game patrons, and the slot
sales representatives at Trump Marina assist slot patrons on the casino floor,
make room and dinner reservations and provide general assistance. Slot sales
representatives also solicit Marina Card (the frequent player identification
slot card) sign-ups in order to increase Trump Marina's marketing base.
PROMOTIONAL ACTIVITIES. The Marina Card constitutes a key element in the
direct marketing program of Trump Marina. Slot machine players are encouraged to
register for and utilize their personalized Marina Card to earn various
complimentaries based upon their level of play. The Marina Card is inserted
during play into a card reader attached to the slot machine for use in
computerized rating systems. These computer systems record data about the
cardholder, including playing preferences, frequency and denomination of play
and the amount of gaming revenues produced. Slot sales and management personnel
are able to monitor the identity and location of the cardholder and the
frequency and denomination of the cardholder's slot play. They also use this
information to provide attentive service to the cardholder on the casino floor.
Trump Marina designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Marina Card and on table wagering by the casino games supervisor. Trump Marina
conducts slot machine and table game tournaments in which cash prizes are
offered to a select group of players invited to participate in the tournament
based upon their tendency to play. Such players tend to play at their own
expense during "off-hours" of the tournament. At times, tournament players are
also offered special dining and entertainment privileges that encourage them to
remain at Trump Marina.
CREDIT POLICY. Historically, Trump Marina has extended credit on a
discretionary basis to certain qualified patrons. Credit play, as a percentage
of total dollars wagered, was approximately 32.4%, 31.4% and 30.0% for 1997,
1996 and 1995, respectively. As part of Trump Marina's business strategy, Trump
Marina has imposed stricter standards on applications for new or additional
credit. Trump Marina bases credit limits on each individual patron's
creditworthiness, as determined by an examination of the following criteria: (i)
checking each patron's personal checking account for current and average
balances, (ii) performing a credit check on each domestic patron and (iii)
checking each patron's credit limits and indebtedness at all casinos in the
United States as well as many island casinos. The above determination of a
patron's continued creditworthiness is performed for continuing patrons on a
yearly basis or more frequently if Trump Marina deems a re-determination of
credit worthiness is necessary. In addition, depositing of markers is regulated
by the State of New Jersey. Markers in increments of $1,000 or less are
deposited in a maximum of 7 days; markers of increments of $1,001 to $5,000 are
deposited in a maximum of 14 days; and markers in increments of over $5,001 are
deposited in a maximum of 45 days. Markers may be deposited sooner at the
request of patrons or at Trump Marina's discretion.
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BUS PROGRAM. Trump Marina has a bus program which transports approximately
700 gaming patrons per day during the week and 650 per day on the weekends.
Castle Associates' bus program offers incentives and discounts to certain
scheduled and chartered bus customers. Based on historical surveys, management
has determined that gaming patrons who arrive by special charters as opposed to
scheduled bus lines or who travel distances greater than 60 miles are more
likely to create higher gaming revenue. Accordingly, Trump Marina's marketing
efforts are focused on such bus patrons.
TRUMP MARINA EXPANSION
In 1997, Trump Marina completed a project to retheme the casino hotel with a
nautical emphasis, targeting younger customers by offering contemporary
entertainment attractions and emphasizing Trump Marina's energetic, lively
atmosphere. In connection with this retheming, Trump Marina has developed an
expansion plan which would substantially increase the size of its facilities.
This plan includes the addition of a new hotel tower with 780 rooms and suites,
a 17,000 square foot expansion of the existing casino and a 430 foot luxury
yacht located in the marina, which would be physically connected to the main
casino and would feature 40,000 square feet of casino space. Management believes
that this proposed expansion could be completed at a minimum cost as Trump
Marina was designed to accommodate additional development with a minimal
disruption to existing operations.
The Trump Marina Expansion is dependent upon a number of factors, including
the availability and terms of financing and the consent of Castle Associates'
debtholders to the incurrence of additional indebtedness. The Trump Marina
Expansion will also require various licenses and approvals, including the
approval of the CCC. Furthermore, the Casino Control Act requires that
additional guest rooms be put into service within a specified time period after
any such casino expansion. If Castle Associates completed any casino expansion
and subsequently did not complete the requisite number of additional guest rooms
within the specified time period, Castle Associates may be required 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 Castle Associates.
In addition, in order to operate the additional casino space contemplated by the
Trump Marina Expansion, Castle Associates must obtain, among other regulatory
approvals, the determination of the CCC that the operation of this additional
casino space by Castle Associates will not constitute undue economic
concentration of Atlantic City casino operations. There can be no assurance that
Castle Associates will be able to obtain all the necessary financing, consents,
licenses and regulatory approvals to complete the Trump Marina Expansion.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1997, Castle Associates employed approximately 2,550
full-time equivalent employees, of whom approximately 1,100 were subject to
collective bargaining agreements. Castle Associates' collective bargaining
agreement with Local No. 54 expires on September 15, 1999. Such agreement
extends to approximately 900 employees. In addition, four other collective
bargaining agreements, which expire in the year 2000, cover approximately 200
maintenance employees. Castle Associates believes that its relationships with
its employees are satisfactory. Castle Funding (as defined) has no employees.
Certain employees of Castle 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 licensing requirements than non-casino employees, and
must meet applicable standards pertaining to such matters as financial
responsibility, good character, ability, casino training, experience and New
Jersey residency. Such regulations have resulted in significant competition for
employees who meet these requirements.
HISTORICAL BACKGROUND
GENERAL. Trump's Castle Funding, Inc. ("Castle Funding") was incorporated
under the laws of the State of New Jersey in May 1985 and is wholly owned by
Castle Associates. Castle Funding was formed to
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serve as a financing corporation to raise funds as an agent of Castle
Associates. Since Castle Funding has no business operations, its ability to
service its indebtedness is completely dependent upon funds it receives from
Castle Associates. Accordingly, the following discussion is related primarily to
Castle Associates and its operations.
1992 AND 1993 RECAPITALIZATIONS. On May 29, 1992, Trump's Castle Hotel &
Casino, Inc. ("TCHI"), Castle Funding and Castle Associates restructured their
indebtedness through a prepackaged plan of reorganization to alleviate certain
liquidity problems (attributable, in part, to the overall deterioration in the
Atlantic City Market experienced prior to such time, aggravated by an economic
recession in the Northeast and the Persian Gulf War), to improve the
amortization schedule and to extend the maturity of Castle Associates'
indebtedness. In December 1993, Castle Associates, Castle Funding and certain
affiliated entities completed a recapitalization of their debt and equity
capitalization (the "Castle Recapitalization"). The purpose of the Castle
Recapitalization was (i) to improve the debt capitalization of Castle Associates
and, initially, to decrease its cash charges, (ii) to provide the holders of the
Units (comprised of $1,000 principal amount of Castle Funding's 9 1/2% Mortgage
Bonds due 1998 and one share of Trump Casinos II, Inc.'s ("TCI-II") common stock
(the "Units")), who participated in the exchange offer in connection with the
Castle Recapitalization with a cash payment of $6.19 and securities having a
combined principal amount of $905 for each Unit and (iii) to provide Trump with
beneficial ownership of 100% of the common equity interests in Castle Associates
(subject to the rights of holders of the certain warrants (the "Castle
Warrants") of TCHI).
As a result of the Castle Recapitalization, TCI-II had a 37.5% equity
interest in Castle Associates, Trump had a 61.5% equity interest in Castle
Associates and TCHI had a 1% equity interest in Castle Associates; accordingly,
through his ownership of 100% of TCI-II and TCHI, Trump was the beneficial owner
of 100% of the equity interests in Castle Associates (subject to the rights of
the holders of the Castle Warrants). Also as a consequence of the Castle
Recapitalization, the principal amount of Castle Associates' debt was reduced,
and, initially, Castle Associates' cash charges were reduced. Upon consummation
of the Castle Recapitalization, Castle Associates' outstanding debt, on a
consolidated basis, consisted of the $38 million outstanding on a term loan with
a bank (the "Castle Term Loan"), $27 million principal amount outstanding of its
Castle Senior Notes (as defined), the approximately $242 million principal
amount outstanding of the Castle Mortgage Notes (as defined) (which are
subordinated to the Castle Senior Notes) and the approximately $50 million
principal amount outstanding of its Increasing Rate Subordinated Pay-in-Kind
Notes due 2005 of Castle Funding (the "Castle PIK Notes") (which are
subordinated to both the Castle Senior Notes and the Castle Mortgage Notes).
PIK NOTE ACQUISITION. On June 23, 1995, Castle Associates entered into an
agreement with Hamilton Partners, L.P. ("Hamilton") which granted Castle
Associates an option (the "Castle Option") to acquire the Castle PIK Notes owned
by Hamilton (the "Castle Option Agreement"). The Castle Option was granted to
Castle Associates in consideration of $1.9 million of aggregate payments to
Hamilton. The Castle Option was exercisable at a price equal to 60% of the
aggregate principal amount of the Castle PIK Notes delivered by Hamilton, with
accrued but unpaid interest, plus 100% of the Castle PIK Notes issued to
Hamilton as interest subsequent to June 23, 1995. Pursuant to the terms of the
Castle Option Agreement, upon the occurrence of certain events within 18 months
of the time the Castle Option is exercised, Castle Associates was required to
make an additional payment to Hamilton of up to 40% of the principal amount of
the Castle PIK Notes. On May 21, 1996, Castle Associates assigned the Castle
Option to THCR Holdings, which, on that same date, exercised the Castle Option
and acquired approximately 90% of the then outstanding Castle PIK Notes for
approximately $38.7 million, in exchange for which THCR Holdings received an
aggregate of approximately $59.3 million principal amount of Castle PIK Notes.
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CASTLE ACQUISITION. On October 7, 1996, THCR Holdings acquired from Trump
all of the outstanding equity of Castle Associates. The following transactions
were effected in connection with the Castle Acquisition:
(i) Trump contributed to THCR Holdings his 61.5% equity interest in
Castle Associates, in consideration of which he received a 9.52854% limited
partnership interest in THCR Holdings, exchangeable into 3,626,450 shares of
THCR Common Stock (valuing each such share at $30.00 (the "THCR Stock
Contribution Value"));
(ii) TCI-II contributed to THCR Holdings its 37.5% equity interest in
Castle Associates in consideration of which it received a 5.81009% limited
partnership interest in THCR Holdings, exchangeable into 2,211,250 shares of
THCR Common Stock (valuing each such share at the THCR Stock Contribution
Value); and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and a wholly owned
subsidiary of THCR Holdings ("Castle Merger Sub"), merged (the "TCHI
Merger") with and into TCHI (holder of a 1% equity interest in Castle
Associates) whereupon (x) each share of common stock of TCHI, par value $.01
per share (the "TCHI Common Stock"), outstanding immediately prior to the
TCHI Merger was converted into the right to receive $.8845 in cash (the
"TCHI Consideration") and each share of common stock of Castle Merger Sub
was converted into the right to receive one share of common stock of the
surviving corporation of the TCHI Merger and (y) each holder of the Castle
Warrants issued under a warrant agreement, dated as of December 30, 1993,
between TCHI and First Bank National Association, as warrant agent, became
entitled to receive, for each former share of TCHI Common Stock for which
each Castle Warrant was exercisable, an amount in cash equal to the TCHI
Consideration.
In the aggregate, Trump received (i) a limited partnership interest in THCR
Holdings convertible into 5,837,700 shares of THCR Common Stock and (ii)
$884,550 in cash. On October 7, 1996, the closing sale price of the THCR Common
Stock on the New York Stock Exchange was $22.625 per share.
As a result of the Castle Acquisition, on October 7, 1996, THCR's and
Trump's beneficial equity interest in THCR Holdings was approximately 63.4% and
36.6%, respectively, and Trump's beneficial equity interest in THCR Holdings was
exchangeable into 13,918,723 shares of THCR Common Stock. The Castle Acquisition
was approved by the stockholders of THCR on September 30, 1996.
INDIANA RIVERBOAT
The Indiana Riverboat features an approximately 280-foot luxury yacht
containing approximately 37,000 square feet of gaming space with 1,393 slot
machines, 59 table games and capacity for approximately 2,690 passengers and 300
employees. The site adjacent to the Indiana Riverboat includes surface parking
for approximately 3,000 automobiles and certain other infrastructure
improvements. The cost to THCR 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, was $96 million through the opening on June 8, 1996. During
Trump Indiana's initial five-year license term, an additional $57 million of
funds (consisting of approximately $40 million for the construction of a hotel
and other amenities and $17 million for infrastructure improvements and other
municipal uses) will be required to be spent in connection with the Indiana
Riverboat facility and related commitments, including commitments required in
connection with the licensure process. The sources of the initial $96 million
included: $62 million from the proceeds of the June 1995 Offerings and the 1996
Offerings (as defined), $17.5 million from vessel financing, $14.2 million from
equipment financing (including approximately $9 million for slot machines) and
$1.9 million from operating leases. The remaining $57 million required to be
spent over the initial five-year license term is expected to be funded with cash
from operations, a $13 million hotel construction loan, proceeds from the 1996
Offerings or other available financings.
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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. Management believes the
Indiana Riverboat benefits 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 presently limited
to 1,200 gaming positions under current regulations in Illinois, which
management believes puts Illinois properties at a competitive disadvantage to
larger facilities such as the Indiana Riverboat. THCR has drawn on these
competitive advantages and capitalized on its experience in gaming activities in
Atlantic City in order to create an outstanding gaming and entertainment
experience.
THCR focuses its marketing efforts for the Indiana Riverboat on the middle
market, which makes up the majority of the gaming population in the 200-mile
radius of Buffington Harbor, encompassing portions of the states of Indiana,
Illinois, Michigan, Ohio and Wisconsin (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, THCR has been attracting this middle market
customer.
The operation of a gaming riverboat in Indiana is subject to Indiana's
Riverboat Gambling Act (the "Riverboat Gambling Act") and the administrative
rules promulgated thereunder. Under the Riverboat Gambling Act, all games
typically available in Atlantic City casinos are permitted on the Indiana
Riverboat. The riverboat casinos in Indiana are permitted to stay open 21 hours
per day, 365 days per year and to extend credit and accept credit charge cards
with no loss or wagering limits.
In June 1996, the Indiana Gaming Commission (the "IGC") granted Trump
Indiana a riverboat owner's license for the ownership and operation of a gaming
vessel at Buffington Harbor, which must be renewed by June 2001.
On June 30, 1995, Trump Indiana acquired, pursuant to the Agreement of Sale
with Lehigh Portland Cement Company ("Lehigh"), dated May 10, 1995 (the "Site
Sale Agreement"), approximately 88 acres of land at Buffington Harbor (the
"Buffington Harbor Site") for $13.5 million. Pursuant to an agreement between
Lehigh and Trump Indiana, Lehigh granted Trump Indiana a lease for a term of up
to ten years for the use of the harbor and certain of Lehigh's property adjacent
to the Buffington Harbor site for the docking of the Indiana Riverboat vessel.
No lease payments were due to Lehigh during the first 30 months of the lease.
Pursuant to the Harbor Lease Agreement, Lehigh is entitled to receive lease
payments in the amount of $125,000 per month for the use of the property during
the remaining term of the lease, if the use continues beyond the initial 30
month period. The initial period has expired and the lease payments are
currently being paid to Lehigh. Trump Indiana contributed the Buffington Harbor
Site and its rights under the Harbor Lease Agreement to BHR in connection with
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 Trump
Indiana's and Barden's separate riverboat casinos at Buffington Harbor. Trump
Indiana and Barden are each equally responsible for the development and the
operating expenses of BHR.
Trump Indiana entered into a "Development Agreement" with the City, dated as
of May 1, 1996, which memorialized the commitments made by Trump Indiana to the
City during the licensing process. The Development Agreement sets forth the
scope and timing of the capital expenditures committed to be made by Trump
Indiana during the initial five-year term of its riverboat owner's license,
Trump Indiana's agreement to pay to the City four (4%) percent of Trump
Indiana's annual adjusted gross receipts and Trump Indiana's commitment
regarding the employment of women and racial minorities and the utilization of
union labor and local vendors. The Development Agreement also provides for
certain monetary penalties in the event Trump Indiana elects to abandon the
Buffington Harbor Site within the first four years of gaming operations. In
addition, the Development Agreement includes provisions regarding the
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"Trump Indiana Foundation," a private foundation established by Trump Indiana
for charitable purposes primarily within the City and Lake County, Indiana. As
of December 31, 1996, Trump Indiana funded an initial $1.0 million to the Trump
Indiana Foundation. In addition, Trump Indiana is required to make annual
contributions of $100,000 to the Trump Indiana Foundation for the remaining four
years of the Development Agreement. The 1997 contribution was made as of
December 31, 1997.
THCR 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 believes that the location of the Indiana
Riverboat allows THCR to compete effectively with other casinos in the
geographic area surrounding its casino, THCR 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."
TRADEMARK/LICENSING
Subject to certain restrictions, THCR has the exclusive right to use the
"Trump" name and likeness in connection with gaming and related activities
pursuant to a trademark license agreement between Trump and THCR (the "License
Agreement"). Pursuant to the License Agreement, Trump granted to THCR the
world-wide right and license to use the names "Trump," "Donald Trump" and
"Donald J. Trump" (including variations thereon, the "Trump Names") and related
intellectual property rights (collectively, the "Marks") in connection with
casino and gaming activities and related services and products. The License
Agreement does not restrict or restrain Trump from the right to use or further
license the Trump Names in connection with services and products other than
casino services and products.
The license is for a term of the later of: (i) June 2015; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant to
an employment, management, consulting or similar services agreement with THCR.
Upon expiration of the term of the license, Trump will grant THCR a
non-exclusive license for a reasonable period of transition on terms to be
mutually agreed upon between Trump and THCR. Trump's obligations under the
License Agreement are secured by a security agreement, pursuant to which Trump
granted THCR a first priority security interest in the Marks for use in
connection with casino services, as well as related hotel, bar and restaurant
services.
CERTAIN INDEBTEDNESS OF THCR
SENIOR NOTES. THCR Holdings and THCR Funding (the "THCR Obligors") are the
issuers of $145 million aggregate 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.
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 indenture pursuant to which the Senior Notes were
issued (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) 100% of the general partnership
interests in Plaza Associates, (b) 100% of the capital stock of Plaza Funding,
(c) 100% of the general partnership interests in Taj Associates, (d) 100% of the
membership interests in Trump Communications, (e) 100% of the capital stock of
TACC, which owns a 1% general partnership interest in Plaza Associates, a 1%
general partnership interest in Taj Associates and a 1% membership interest in
Trump Communications, (f) 100% of the membership interests in TCS, which owns a
99% membership interest in Trump Communications, (g) 100% of the capital stock
of Trump AC
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Funding, (h) 100% of the general partnership interests in Trump AC, which owns
1% of the capital stock of TACC, 99% of the membership interests of TCS, a 99%
general partnership interest in Taj Associates, a 99% general partnership
interest in Plaza Associates and 100% of the capital stock of Trump AC Funding,
(i) 100% of the capital stock of Trump AC Holding, a direct wholly owned
subsidiary of THCR Holdings which owns a 1% general partnership interest in
Trump AC, (j) 100% of the capital stock of Trump Indiana, (k) 100% of the
capital stock of THCR Funding, (l) 100% of the partnership interests in Castle
Associates, (m) 100% of the capital stock of TCHI, which owns a 1% general
partnership interest in Castle Associates, (n) other equity interests issued
from time to time by THCR Holdings or any of its Subsidiaries (as defined in the
Senior Note Indenture), (o) the Castle PIK Notes held by THCR Holdings and (p)
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; and (2) certain proceeds
from time to time received, receivable or otherwise distributed in respect of
the assets described in clause (1) above (collectively, the "Senior Note
Collateral"). The security interests in the Senior Note Collateral are first
priority security interests and are exclusive. 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.
TAC I NOTES. As a part of the Taj Acquisition, Trump AC and Trump AC
Funding issued in an underwritten offering $1,200,000,000 aggregate principal
amount of Mortgage Notes which mature on May 1, 2006 (the "TAC I Notes"). The
TAC I Notes include restrictive covenants prohibiting or limiting, among other
things, the sale of assets, the making of acquisitions and other investments,
capital expenditures, the incurrence of additional debt and liens and the
payment of dividends and distributions. Non-compliance could result in the
acceleration of such indebtedness.
TAC II NOTES. In December 1997, Trump AC and Funding II issued in a private
offering, exempt from registration under the Securities Act, $75,000,000
principal amount of Mortgage Notes which mature on May 1, 2006 (the "TAC II
Notes"). The TAC II Notes include restrictive covenants prohibiting or limiting,
among other things, the sale of assets, the making of acquisitions and other
investments, capital expenditures, the incurrence of additional debt and liens
and the payment of dividends and distributions. Non-compliance could result in
the acceleration of such indebtedness.
TAC III NOTES. In December 1997, Trump AC and Funding III issued in a
private offering, exempt from registration under the Securities Act, $25,000,000
principal amount of the Mortgage Notes which mature on May 1, 2006 (the "TAC III
Notes"). The TAC III Notes include restrictive covenants prohibiting or
limiting, among other things, the sale of assets, the making of acquisitions and
other investments, capital expenditures, the incurrence of additional debt and
liens and the payment of dividends and distributions. Non-compliance could
result in the acceleration of such indebtedness.
PLAZA NOTES. The Plaza Notes were retired in connection with the Taj
Acquisition. The Plaza Notes were issued by Plaza Funding, with Plaza Associates
providing a full and unconditional guaranty thereof. The Plaza Notes were
retired through repurchase and defeasance and Plaza Funding and Plaza Associates
were released from their obligations under all financial and negative covenants
and certain other provisions contained in the indenture under which the Plaza
Notes were issued (the "Plaza Note Indenture"), and the Plaza Note Security (as
defined in the Plaza Note Indenture) was released against the deposit of cash or
U.S. government obligations in an amount sufficient to effect the redemption on
June 15, 1998 of all of the Plaza Notes so defeased, at a redemption price of
105% of the principal amount thereof, together with accrued and unpaid interest
to such date.
CASTLE NOTES. Castle Funding's Mortgage Notes bear interest, payable
semi-annually in cash, at 11 3/4% and mature on November 15, 2003 (the "Castle
Mortgage Notes"). In the event the Castle PIK Notes (discussed below) are
redeemed prior to November 15, 1998, the interest rate on the Castle
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Mortgage Notes will be reduced to 11 1/2%. The Castle Mortgage Notes may be
redeemed at Castle Funding's option at a specified percentage of the principal
amount commencing in 1998.
The Castle Mortgage Notes are secured by a promissory note of Castle
Associates to Castle Funding (the "Castle Partnership Note") in an amount and
with payment terms necessary to service the Castle Mortgage Notes. The Castle
Partnership Note is secured by a mortgage on Trump Marina and substantially all
of the other assets of Castle Associates. The Castle Partnership Note has been
assigned by Castle Funding to the trustee of the indenture under which the
Castle Mortgage Notes were issued to secure the repayment of the Castle Mortgage
Notes. In addition, Castle Associates has guaranteed the payment of the Castle
Mortgage Notes (the "Castle Guaranty"), which is secured by a mortgage on Trump
Marina and substantially all of the assets of Castle Associates. The Castle
Partnership Note and the Castle Guaranty are expressly subordinated to the
indebtedness of the Castle Senior Notes (as defined) and the Castle Term Loan
described below (collectively, the "Senior Indebtedness") and the liens of the
mortgages securing the Castle Partnership Note and the Castle Guaranty are
subordinate to the liens securing the Senior Indebtedness.
The Castle PIK Notes bear interest payable, at Castle Funding's option in
whole or in part in cash and through the issuance of additional Castle PIK
Notes, semi-annually at the rate of 7% through September 30, 1994 and 13 7/8%
through November 15, 2003. After November 15, 2003, interest on the Castle PIK
Notes is payable in cash at the rate of 13 7/8%. The Castle PIK Notes mature on
November 15, 2005. The Castle PIK Notes may be redeemed at Castle Funding's
option at 100% of the principal amount under certain conditions, as described in
the indenture governing the Castle PIK Notes, and are required to be redeemed
from a specified percentage of any equity offering which includes Castle
Associates. Interest has been accrued using the effective interest method. On
May 15, 1997 and November 15, 1997, the semi-annual interest payments of
$4,908,000 and $5,248,000, respectively, were paid by the issuance of additional
Castle PIK Notes.
The Castle PIK Notes are secured by a subordinated promissory note of Castle
Associates to Castle Funding (the "Castle Subordinated Partnership Note"), which
has been assigned to the Trustee for the Castle PIK Notes, and Castle Associates
has issued a subordinated guaranty (the "Castle Subordinated Guaranty") of the
Castle PIK Notes. The Castle Subordinated Partnership Note and the Castle
Subordinated Guaranty are expressly subordinated to the Senior Indebtedness, the
Castle Partnership Note and the Castle Guaranty. On May 21, 1996, THCR Holdings
exercised an option and acquired approximately 90% of the then outstanding
Castle PIK Notes outstanding for approximately $38.7 million, in exchange for
which THCR Holdings received an aggregate of approximately $59.3 million
principal amount of Castle PIK Notes.
Castle Funding's Senior Notes bear interest, payable semi-annually in cash,
at 11 1/2% and mature on November 15, 2000 (the "Castle Senior Notes" and
together with the Castle Mortgage Notes and Castle PIK Notes, the "Castle
Notes"). Similar to the Castle Mortgage Notes, the Castle Senior Notes are
secured by an assignment of a promissory note of the Partnership (the "Senior
Castle Partnership Note") which is in turn secured by a mortgage on Trump Marina
and substantially all of the other assets of Castle Associates. In addition,
Castle Associates has guaranteed (the "Castle Senior Guaranty") the payment of
the Castle Senior Notes, which Castle Senior Guaranty is secured by a mortgage
on Trump Marina and substantially all of the assets of Castle Associates. The
Castle Senior Partnership Note and the Castle Senior Guaranty are subordinated
to the Castle Term Loan described below.
The Castle Senior Notes are subject to an approximately $4.0 million sinking
fund payment due on each of May 31, 1998 and May 31, 1999. Castle Associates is
currently in negotiations regarding the refinancing of the Castle Senior Notes.
Castle Associates also has the Castle Term Loan with an outstanding
principal balance of $32,933,000 at December 31, 1997. The Castle Term Loan has
a maturity date of May 28, 2000. Interest is at a rate of 3% above the bank's
prime rate, which was 11 1/2% at December 31, 1997, but in no event can be less
than
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9% per annum. The outstanding principal amount of the Castle Term Loan is being
repaid at $158,000 per month through May 28, 2000, at which time the entire
outstanding principal balance will be due. The Castle Term Loan is secured by a
mortgage lien on Trump Marina and substantially all of the other assets of
Castle Associates. The lien is senior to the liens securing the Castle Mortgage
Notes and the Castle Senior Notes. In addition, Castle Funding has guaranteed
the payment of the Castle Term Loan.
The terms of Castle Term Loan, the Castle Mortgage Notes, the Castle PIK
Notes and the Castle Senior Notes include limitations on the amount of
additional indebtedness Castle Associates may incur, distributions of Castle
Associates capital, investments and other business activities.
OTHER INDEBTEDNESS. In addition to the foregoing, THCR's consolidated
long-term indebtedness includes approximately $53.2 million of indebtedness as
of December 31, 1997.
ATLANTIC CITY MARKET
The Atlantic City market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.91 billion in gaming revenues
in 1997, an approximately 2.1% increase over 1996 gaming revenues of
approximately $3.83 billion. From 1992 to 1997, total gaming revenues in
Atlantic City have increased approximately 21.4%, while hotel rooms increased by
25.5% during that period. Although total visitor volume to Atlantic City
remained relatively constant in 1997, the volume of bus customers dropped to 9.4
million in 1997, continuing a decline from 11.7 million in 1991. The volume of
customers traveling by other means to Atlantic City has grown from 20.4 million
in 1992 to 34.3 million in 1997.
Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
Management believes that this relatively slower growth is primarily attributable
to two key factors. First, there were no significant additions to hotel capacity
in Atlantic City until 1996. Las Vegas visitor volumes have increased, in part,
due to the continued addition of new hotel capacity. Both markets have exhibited
a strong correlation between hotel room inventory and total casino revenues.
Secondly, the regulatory environment and infrastructure problems in Atlantic
City have made it more difficult and costly to operate. Total regulatory costs
and tax levies in New Jersey have exceeded those in Nevada since inception, and
there is generally a higher level of regulatory oversight in New Jersey than in
Nevada. The infrastructure problems, manifested by impaired accessibility of the
casinos, downtown Atlantic City congestion and the condition of the areas
surrounding the casinos have made Atlantic City less attractive to the gaming
customer.
Total Atlantic City slot revenues increased 3.6% in 1997, continuing a trend
of increases over the past five years. From 1992 through 1997, slot revenue
growth in Atlantic City has averaged 5.2% per year. Total table game revenue did
not increase in 1997, while table game revenue from 1992 to 1997 has increased
on average 0.8% 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. 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 1992, the number of slot machines in Atlantic City has increased 54%,
while the number of table games has increased by 12.6%. Slot revenues increased
from 66% of total casino revenues in 1992 to 70% in 1997. 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.
The regulatory environment in Atlantic City has improved over the past
several years. Most significantly, 24-hour gaming has been approved, poker and
keno have been added and regulatory burdens have
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been reduced. In particular, comprehensive amendments to New Jersey gaming laws
were made in January 1995, which have eliminated duplicative regulatory
oversight and channeled operator's funds from regulatory support into uses of
the New Jersey Casino Reinvestment Development Authority (the "CRDA").
Administrative costs of regulation will be reduced while increasing funds will
be available for new development. In addition, in 1994, legislation was enacted
which eliminated the requirement that a casino consist of a "single room" in a
casino hotel. A casino may now consist of "one or more locations or rooms"
approved by the CCC for casino gaming.
Atlantic City's new convention center, with approximately 500,000 square
feet of exhibit and pre-function space, 45 meeting rooms, food-service
facilities and a 1,600-car underground parking garage, is the largest exhibition
space between New York City and Washington, D.C. It is located at the base of
the Atlantic City Expressway and opened in May 1997. The old convention center,
built in the late 1920s and located on The Boardwalk, will receive an
approximately $50 million facelift following the opening of the new convention
center and will continue to be used for special events. The State of New Jersey
has commenced a long-term capital plan to upgrade and expand the Atlantic City
International Airport. To date, approximately $18 million has been spent on
renovation of the airport terminal and upgrades of the airport's access roads
and parking facilities.
In addition to the planned casino expansions, major infrastructure
improvements have begun. The CRDA is currently overseeing the development of the
$88 million "Grand Boulevard" corridor that will link the new convention center
with The Boardwalk. The project has been substantially completed as of December
31, 1997.
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 and high occupancy rates, significant
investment in the Atlantic City Market has been initiated and/or announced.
Management believes that these increases in hotel capacity, together with
infrastructure improvements, will be instrumental in stimulating future revenue
growth in the Atlantic City Market. See "--Competition."
COMPETITION
ATLANTIC CITY. Competition in the Atlantic City Market is intense. Trump
Plaza, the Taj Mahal and Trump Marina (the "Atlantic City Properties") compete
with other casino hotels located in Atlantic City and with each other. At
present, there are 12 casino hotels located in Atlantic City, including the
Atlantic City Properties, all of which compete for patrons. In addition, there
are several sites on The Boardwalk and in the Marina District on which casino
hotels could be built in the future and various applications for casino licenses
have been filed and announcements with respect thereto made from time to time
(including a casino resort by Mirage to be built in the Marina District and a
casino resort by MGM Grand, Inc. to be built on The Boardwalk), although
management is not aware of any current construction on such sites by third
parties. Substantial new expansion and development activity has recently been
completed or has been announced in Atlantic City, including the expansion at
Harrah's, Hilton, Caesar's, Resorts, Tropicana and Bally's Wild West Casino,
which intensifies competitive pressures in the Atlantic City Market. While
management believes that the addition of hotel capacity would be beneficial to
the Atlantic City Market generally, there can be no assurance that such
expansion would not be materially disadvantageous to the Atlantic City
Properties. There also can be no assurance that the Atlantic City development
projects which are planned or are underway will be completed.
Total Atlantic City gaming revenues have increased over the past five years,
although at varying rates. 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
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(including Trump Plaza) experienced decreased revenues. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994. During 1996, six
casinos (including Trump Plaza and the Taj Mahal) experienced increased gaming
revenues compared to 1995, while six casinos experienced decreased revenues. In
1997, eight casinos (including Trump Plaza and the Taj Mahal) experienced
increased gaming revenues compared to 1996, while four casinos experienced
decreased revenues.
In 1992, 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. During 1996, a total of
approximately 65,870 square feet of casino floor space was added, an increase of
47.2%, including Trump World's Fair's 49,193 square feet. Slot machines
increased by approximately 1,911 units during 1996 and table games increased by
approximately 44 units during 1996, of which Trump World's Fair accounted for
1,518 units and 16 units, respectively. During 1997, a total of approximately
51,870 square feet of casino floor space was added. Slot machines increased by
approximately 2,153 units and table games increased by approximately 82 units
during 1997.
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 and Niagara
Falls), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in its
surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. In December 1996, Bay Cruises began
operation of a gambling cruise ship where patrons are taken from a pier in
Sheepshead Bay in Brooklyn, New York to international waters to gamble. Bay
Cruises temporarily ceased operations pending the outcome of its appeal of a
federal prosecutor's ruling that the ships must travel 12, rather than 3, miles
offshore to reach international waters. On December 2, 1997, a federal judge
overruled the prosecutor's ruling, and Bay Cruises announced plans to resume
operations. In September 1997, another gambling cruise ship was launched off the
coast of Montauk, New York. On January 28, 1998, Manhattan Cruises began
offering nightly gambling cruises departing from Manhattan, New York City and
five other companies are currently seeking permission to operate similar
cruises. On December 5, 1997, the mayor of New York City proposed the
construction of a casino on Governors Island, located in the middle of New York
Harbor; however the proposal would require an amendment to the New York State
Constitution and the sale of the island to New York by the federal government.
In Delaware, a total of approximately 2,000 slot machines were installed at 3
horse tracks in 1996, and track owners in several other states are seeking to do
the same. In December 1996, the temporary Casino Niagara opened in Niagara
Falls, Ontario. Ontario officials expect that two-thirds of Casino Niagara's
patrons will come from the United States, predominantly from western New York.
In February 1998, the Ontario Casino Commission designated a consortium whose
principal
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investor is Hyatt Hotels Corporation ("Hyatt") as the preferred developer of the
permanent Casino Niagara.
In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects of
certain of their respective marketing efforts, including the common use of the
"Trump" name, the Atlantic City Properties compete directly with each other for
gaming patrons.
INDIANA. The Indiana Riverboat competes 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 competes with a riverboat in Hammond,
Indiana, owned and operated by Empress Riverboat Casino in Joliet, Illinois, a
riverboat in East Chicago, Indiana, which is owned and operated by Harrah's
Entertainment under the Showboat name, and with a riverboat in Michigan City,
Indiana, which is owned and operated by Bluechip Casino. To a lesser degree, the
Indiana Riverboat competes with four operating riverboats located in southern
Indiana and one additional riverboat scheduled to be licensed and operating in
1998. At present there are four other riverboats in the Chicago area, with each
operator limited to 1200 gaming positions.
Management 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 THCR believes that the location of
the Indiana Riverboat will allow THCR to compete effectively with other casinos
in the geographic area surrounding its casino. Management expects competition in
the casino gaming industry to continue to be intense in the Northwest Indiana
marketplace.
The Indiana Riverboat is seeking 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. In 1997, Detroit approved land-based casino gaming with
a limit of four licenses for the metropolitan area, and selected the operators
for the licenses. Although management 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.
THCR 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.
OTHER COMPETITION. In addition, the Atlantic City Properties and the
Indiana Riverboat face competition from casino facilities in a number of states
operated by federally recognized Native American tribes. Pursuant to the Indian
Gaming Regulatory Act ("IGRA"), which was passed by Congress in 1988, any state
which permits casino-style gaming (even if only for limited charity purposes) is
required to negotiate gaming compacts with federally recognized Native American
tribes. Under IGRA, Native American tribes enjoy comparative freedom from
regulation and taxation of gaming operations, which provides them with an
advantage over their competitors, including the Atlantic City Properties and the
Indiana Riverboat. In March 1996, the United States Supreme Court struck down a
provision of IGRA which allowed Native American tribes to sue states in federal
court for failing to negotiate gaming compacts in good faith.
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Management cannot predict the impact of this decision on the ability of Native
American tribes to negotiate compacts with states.
In 1991, the Mashantucket Pequot Nation opened Foxwoods, a casino facility
in Ledyard, Connecticut, located in the far eastern portion of such state, an
approximately three-hour drive from New York City and an approximately two and
one-half hour drive from Boston, which currently offers 24-hour gaming and
contains over 5,500 slot machines. An ongoing expansion at Foxwoods, due to be
completed in April 1998, will include additional hotel rooms, restaurants and
retail stores. A high-speed ferry between New York City and Foxwoods is due to
begin service in March 1998. The Mashantucket Pequot Nation has also announced
plans for a high-speed train linking Foxwoods to the interstate highway and an
airport outside Providence, Rhode Island. In addition, in October 1996, the
Mohegan Nation opened the Mohegan Sun Resort in Uncasville, Connecticut, located
10 miles from Foxwoods. Developed by Sun International Hotels, Ltd., the Mohegan
Sun Resort has 75% of the gaming capacity of Foxwoods. The Mohegan Nation has
announced plans for an expansion of the casino facilities and the construction
of a hotel, convention center and entertainment center to be completed by the
year 2000. In addition, the Eastern Pequots are seeking formal recognition as a
Native American tribe for the purpose of opening a casino in the North
Stonington area. There can be no assurance that any continued expansion of
gaming operations of the Mashantucket Pequot Nation, the gaming operations of
the Mohegan Nation or the commencement of gaming operations by the Eastern
Pequots would not have a materially adverse impact on the operations of the
Atlantic City Properties.
A group in Cumberland County, New Jersey calling itself the "Nanticoke Lenni
Lenape" tribe has filed a notice of intent with the Bureau of Indian Affairs
seeking formal federal recognition as a Native American tribe. 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. The Oneida
Nation opened a hotel in October 1997 that included expanded gaming facilities,
and has announced plans to construct a golf course and convention center.
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 Native American
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 seeking to open a casino in Rhode Island. The Aquinnah Wampanoag
Tribe is seeking to open a casino in Fall River, 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.
STATE LEGISLATION. Legislation permitting other forms of casino gaming has
been proposed, from time to time, in various states, including those bordering
New Jersey. Six states have presently legalized riverboat gambling while others
are considering its approval, including New York and Pennsylvania. Several
states are considering or have approved large scale land-based casinos.
Additionally, since 1993, the gaming space in Las Vegas has expanded
significantly, with additional capacity planned and currently under
construction. The operations of the Atlantic City Properties could be adversely
affected by such
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competition, particularly if casino gaming were permitted in jurisdictions near
or elsewhere in New Jersey or in other states in the Northeast. In December
1993, the Rhode Island Lottery Commission approved the addition of slot machine
games on video terminals at Lincoln Greyhound Park and Newport Jai Alai, where
poker and blackjack have been offered for over two years. Currently, casino
gaming, other than Native American gaming, is not allowed in other areas of New
Jersey or in Connecticut, New York or Pennsylvania. On November 17, 1995, a
proposal to allow casino gaming in Bridgeport, Connecticut was voted down by
that state's Senate. On January 28, 1997, the New York State Senate rejected a
constitutional amendment to legalize casino gambling in certain areas of New
York State, effectively postponing any new gambling constitutional amendment
until 1999. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, proposals have been introduced to legalize gaming in other
locations, including Philadelphia, Pennsylvania. In addition, legislation has
from time to time been introduced in the New Jersey State Legislature relating
to types of statewide legalized gaming, such as video games with small wagers.
To date, no such legislation, which may require a state constitutional
amendment, has been enacted. Management is unable to predict whether any such
legislation, in New Jersey, Indiana, Illinois or elsewhere, will be enacted or
whether, if passed, it would have a material adverse impact on THCR.
GAMING AND OTHER LAWS AND REGULATIONS
THE FOLLOWING IS ONLY A SUMMARY OF THE APPLICABLE PROVISIONS OF THE CASINO
CONTROL ACT, THE RIVERBOAT GAMBLING ACT AND CERTAIN OTHER LAWS AND REGULATIONS.
IT DOES NOT PURPORT TO BE A FULL DESCRIPTION THEREOF AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE CASINO CONTROL ACT, THE RIVERBOAT GAMBLING ACT AND
SUCH OTHER LAWS AND REGULATIONS. UNLESS OTHERWISE INDICATED, ALL REFERENCES TO
"TRUMP PLAZA" INCLUDE (A) TRUMP PLAZA'S MAIN TOWER, INCLUDING TRUMP PLAZA EAST
(WHICH OPERATES PURSUANT TO A CASINO LICENSE HELD BY PLAZA ASSOCIATES) AND (B)
TRUMP WORLD'S FAIR (WHICH OPERATES PURSUANT TO A SEPARATE CASINO LICENSE ALSO
ISSUED TO PLAZA ASSOCIATES).
NEW JERSEY GAMING REGULATIONS
In general, the Casino Control Act and its implementing regulations contain
detailed provisions concerning, among other things: the granting and renewal of
casino licenses; the suitability of the approved hotel facility, and the amount
of authorized casino space and gaming units permitted therein; the qualification
of natural persons and entities related to the casino licensee; the licensing of
certain employees and vendors of casino licensees; the rules of the games; the
selling and redeeming of gaming chips; the granting and duration of credit and
the enforceability of gaming debts; management control procedures, accounting
and cash control methods and reports to gaming agencies; the security standards;
the manufacture and distribution of gaming equipment; the simulcasting of horse
races by casino licensees; equal employment opportunities for employees of
casino operators, contractors of casino facilities and others; and advertising,
entertainment and alcoholic beverages.
CASINO CONTROL COMMISSION. The ownership and operation of casino/hotel
facilities in Atlantic City are the subject of strict state regulation under the
Casino Control Act. The CCC is empowered to regulate a wide spectrum of gaming
and non-gaming related activities and to approve the form of ownership and
financial structure of not only a casino licensee, but also its entity
qualifiers and intermediary and holding companies and any other related entity
required to be qualified ("CCC Regulations").
OPERATING LICENSES. In June 1995, the CCC renewed Plaza Associates' license
to operate Trump Plaza through June 1999. In May 1996, the CCC granted Plaza
Associates a license to operate Trump World's Fair through May 1997. In June
1995, the CCC renewed Taj Associates' license to operate the Taj Mahal through
March 1999. In June 1996, the CCC also granted TCS a license through July 1997,
which license has been renewed through July 1998. Timely applications for
renewal of the TCS casino license will be made to the CCC. In June 1995, the CCC
renewed Castle Associates' casino license and approved Trump as a natural person
qualifier through May 1999. In December 1996, the CCC allowed Plaza Associates
to operate Trump Plaza and Trump World's Fair under one casino license through
May 1999.
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None of these licenses are transferable and their renewal will include a
financial review of the relevant operating entities. Upon revocation, suspension
for more than 120 days or failure to renew a casino license, the Casino Control
Act provides for the appointment of a conservator to take possession of the
hotel and casino's business and property, subject to all valid liens, claims and
encumbrances.
CASINO LICENSE. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion with
regard to the issuance, renewal, revocation and suspension of such licenses and
approvals, which are non-transferable. The qualification criteria with respect
to the holder of a casino license include its financial stability, integrity and
responsibility; the integrity and adequacy of its financial resources which bear
any relation to the casino project; its good character, honesty and integrity;
and the sufficiency of its business ability and casino experience to establish
the likelihood of a successful, efficient casino operation. The casino licenses
currently held by Plaza Associates, Taj Associates and Castle 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. Further, no
person may be the holder of a casino license if the holding of such license will
result in undue economic concentration in Atlantic City casino operations by
that person. On May 17, 1995, the CCC adopted a regulation defining the criteria
for determining undue economic concentration which codifies the content of
existing CCC precedent with respect to the subject. In April 1995, Plaza
Associates petitioned the CCC for certain approvals. In its May 18, 1995
declaratory rulings with respect to such petition, the CCC, among other things,
(i) determined that Trump World's Fair is an approved hotel permitted to contain
a maximum of 60,000 square-feet of casino space, that the 40,000 square-feet of
casino space therein is a "single room" and that its operation by Plaza
Associates would not result in undue economic concentration in Atlantic City
casino operations; (ii) approved the operation of Trump World's Fair by Plaza
Associates under a separate casino license subject to an application for and the
issuance of such license and approved the proposed easement agreements with
respect to the proposed enclosed Atlantic City Convention Center walkway; (iii)
approved in concept the proposed physical connection and integrated operation by
Plaza Associates of Trump Plaza's main tower, Trump Plaza East and Trump World's
Fair; and (iv) determined that the approved hotel comprised of the main tower
and Trump Plaza East is permitted to contain a maximum of 100,000 square feet of
casino space. In addition, on December 13, 1995, Plaza Associates received CCC
authorization for 49,340 square-feet of casino space at Trump World's Fair.
Plaza Associates' casino license with respect to Trump World's Fair has a
renewable term of one year for each of its first three years and thereafter is
renewable for periods of up to four years. Subsequently, in December 1996, the
CCC approved Plaza Associates' license to operate Trump Plaza and Trump World's
Fair under one casino license through May 1999. 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.
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.
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."
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Management believes that it has adequate financial resources to meet the
financial stability requirements of the CCC for the foreseeable future.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership in
the licensee, each person who in the opinion of the CCC has the ability to
control or elect a majority of the board of directors of the licensee (other
than a banking or other licensed lending institution which makes a loan or holds
a mortgage or other lien acquired in the ordinary course of business) and any
lender, underwriter, agent or employee of the licensee or other person whom the
CCC may consider appropriate, obtains and maintains qualification approval from
the CCC. Qualification approval means that such person must, but for residence,
individually meet the qualification requirements as a casino key employee.
Pursuant to a condition of its casino license, payments by Plaza Associates to
or for the benefit of any related entity or partner, with certain exceptions,
are subject to prior CCC approval; and, if Plaza Associates', Taj Associates' or
Castle Associates' cash position falls below $5.0 million for three consecutive
business days, such entity must present to the CCC and the Division evidence as
to why it should not obtain a working capital facility in an appropriate amount.
CONTROL PERSONS. An entity qualifier or intermediary or holding company,
such as Trump AC, Trump AC Holding, Plaza Funding, TACC, TCHI, THCR Holdings,
THCR Funding or THCR is required to register with the CCC and meet the same
basic standards for approval as a casino licensee; PROVIDED, HOWEVER, that the
CCC, with the concurrence of the Director of the Division, may waive compliance
by a publicly-traded corporate holding company with the requirement that an
officer, director, lender, underwriter, agent or employee thereof, or person
directly or indirectly holding a beneficial interest or ownership of the
securities thereof, individually qualify for approval under casino key employee
standards so long as the CCC and the Director of the Division are, and remain,
satisfied that such officer, director, lender, underwriter, agent or employee is
not significantly involved in the activities of the casino licensee, or that
such security holder does not have the ability to control the publicly-traded
corporate holding company or elect one or more of its directors. Persons holding
five percent or more of the equity securities of such holding company are
presumed to have the ability to control the company or elect one or more of its
directors and will, unless this presumption is rebutted, be required to
individually qualify. Equity securities are defined as any voting stock or any
security similar to or convertible into or carrying a right to acquire any
security having a direct or indirect participation in the profits of the issuer.
FINANCIAL SOURCES. The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of indebtedness,
either in effect or proposed, which bear any relation to any casino project,
including holders of publicly-traded securities of an entity which holds a
casino license or is an entity qualifier, subsidiary or holding company of a
casino licensee (a "Regulated Company"), to qualify as financial sources. In the
past, the CCC has waived the qualification requirement for holders of less than
15% of a series of publicly-traded mortgage bonds so long as the bonds remained
widely distributed and freely traded in the public market and the holder had no
ability to control the casino licensee. The CCC may require holders of less than
15% of a series of debt to qualify as financial sources even if not active in
the management of the issuer or casino licensee.
INSTITUTIONAL INVESTORS. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended; any collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; any
closed end investment trust; any chartered or licensed life insurance company or
property and casualty insurance company; any banking and other chartered or
licensed lending institution; any investment advisor registered under the
Investment Advisers Act of 1940, as amended; and such other persons as the CCC
may determine for reasons consistent with the policies of the Casino Control
Act.
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An Institutional Investor may be granted a waiver by the CCC from financial
source or other qualification requirements applicable to a holder of
publicly-traded securities, in the absence of a prima facie showing by the
Division that there is any cause to believe that the holder may be found
unqualified, on the basis of CCC findings that: (i) its holdings were purchased
for investment purposes only and, upon request by the CCC, it files a certified
statement to the effect that it has no intention of influencing or affecting the
affairs of the issuer, the casino licensee or its holding or intermediary
companies; PROVIDED, HOWEVER, that the Institutional Investor will be permitted
to vote on matters put to the vote of the outstanding security holders; and (ii)
if (x) the securities are debt securities of a casino licensee's holding or
intermediary companies or another subsidiary company of the casino licensee's
holding or intermediary companies which is related in any way to the financing
of the casino licensee and represent either (A) 20% or less of the total
outstanding debt of the company or (B) 50% or less of any issue of outstanding
debt of the company, (y) the securities are equity securities and represent less
than 10% of the equity securities of a casino licensee's holding or intermediary
companies or (z) the securities so held exceed such percentages, upon a showing
of good cause. There can be no assurance, however, that the CCC will make such
findings or grant such waiver and, in any event, an Institutional Investor may
be required to produce for the CCC or the Antitrust Division of the Department
of Justice upon request, any document or information which bears any relation to
such debt or equity securities.
Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
holder purchased the securities for investment purposes only and holds them in
the ordinary course of business; (iii) the holder has no involvement in the
business activities of and no intention of influencing or affecting, the affairs
of the issuer, the casino licensee or any affiliate; and (iv) if the holder
subsequently determines to influence or affect the affairs of the issuer, the
casino licensee or any affiliate, it shall provide not less than 30 days' prior
notice of such intent and shall file with the CCC an application for
qualification before taking any such action. If an Institutional Investor
changes its investment intent, or if the CCC finds reasonable cause to believe
that it may be found unqualified, the Institutional Investor may take no action
with respect to the security holdings, other than to divest itself of such
holdings, until it has applied for interim casino authorization and has executed
a trust agreement pursuant to such an application. See "--Interim Casino
Authorization."
OWNERSHIP AND TRANSFER OF SECURITIES. The Casino Control Act imposes
certain restrictions upon the issuance, ownership and transfer of securities of
a Regulated Company and defines the term "security" to include instruments which
evidence a direct or indirect beneficial ownership or creditor interest in a
Regulated Company including, but not limited to, mortgages, debentures, security
agreements, notes and warrants. Currently, each of Plaza Funding, Trump AC,
Trump AC Holding, Plaza Associates, Taj Associates, TCS, Castle Associates,
TCHI, THCR Holdings, THCR Funding and THCR is 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
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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.
Under the terms of the indentures pursuant to which the Senior Notes, the
TAC I Notes (the "TAC I Note Indenture"), the TAC II Notes (the "TAC II Note
Indenture"), the TAC III Notes (the "TAC III Note Indenture"), Castle Senior
Notes, the Castle Mortgage Notes, and the Castle PIK Notes were issued, if a
holder of such securities does not qualify under the Casino Control Act when
required to do so, such holder must dispose of its interest in such securities,
and the respective issuer or issuers of such securities may redeem the
securities at the lesser of the outstanding amount or fair market value. Similar
provisions are set forth in THCR's Certificate of Incorporation with respect to
the THCR 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 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.
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Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities to
a trust in application for interim casino authorization and the CCC thereafter
orders that the trust become operative: (i) during the time the trust is
operative, the holder may not participate in the earnings of the casino hotel or
receive any return on its investment or debt security holdings; and (ii) after
disposition, if any, of the securities by the trustee, proceeds distributed to
the unqualified holder may not exceed the lower of their actual cost to the
unqualified holder or their value calculated as if the investment had been made
on the date the trust became operative.
APPROVED HOTEL FACILITIES. The CCC may permit an existing licensee, such as
one of the Atlantic City Properties, to increase its casino space if the
licensee agrees to add a prescribed number of qualifying sleeping units within
two years after the commencement of gaming operations in the additional casino
space. However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed.
Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
Unless otherwise determined by the CCC, agreements to lease an approved
hotel building or the land under the building must be for a durational term
exceeding 30 years, must concern 100% of the entire approved hotel building or
the land upon which it is located and must include a buy-out provision
conferring upon the lessee the absolute right to purchase the lessor's entire
interest for a fixed sum in the event that the lessor is found by the CCC to be
unsuitable.
AGREEMENT FOR MANAGEMENT OF CASINO. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10% of all the outstanding equity
securities of the casino licensee. Such an agreement shall: (i) provide for the
complete management of the casino; (ii) provide for the unrestricted power to
direct the casino operations; and (iii) provide for a term long enough to ensure
the reasonable continuity, stability and independence and management of the
casino.
LICENSE FEES. The CCC is authorized to establish annual fees for the
renewal of casino licenses. The renewal fee is based upon the cost of
maintaining control and regulatory activities prescribed by the Casino Control
Act, and may not be less than $200,000 for a four-year casino license.
Additionally, casino licensees are subject to potential assessments to fund any
annual operating deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for use or in use in
any casino.
GROSS REVENUE TAX. Each casino licensee is also required to pay an annual
tax of 8% on its gross casino revenues. For the years ended December 31, 1995,
1996 and 1997, Plaza Associates' gross revenue tax was approximately $24.0
million, $29.8 million and $30.1 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $4.4 million,
$6.0 million and $4.9 million, respectively. For the years ended December 31,
1995, 1996 and 1997, Taj Associates' gross revenue tax was approximately $40.2
million, $40.7 million and $41.7 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $5.2 million,
$5.0 million and $3.9 million, respectively. For the years ended December 31,
1995, 1996 and 1997, Castle Associates' gross revenue tax was approximately
$21.9 million, $19.9 million and $21.1 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $3.8 million,
$4.0 million and $3.5 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
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end of the calendar year. A licensee is obligated to pay the investment
alternative tax for a period of 30 years. Estimated payments of the investment
alternative tax obligation must be made quarterly in an amount equal to 1.25% of
estimated gross revenues for the preceding three-month period. Investment tax
credits may be obtained by making qualified investments or by the purchase of
bonds issued by the CRDA ("CRDA Bonds"). CRDA Bonds may have terms as long as 50
years and bear interest at below market rates, resulting in a value lower than
the face value of such CRDA Bonds.
For the first ten years of its tax obligation, the licensee is entitled to
an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of the CRDA Bonds issued to the licensee.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such CRDA Bonds or twice the amount
of its investments authorized in lieu of such bond investments or made in
projects designated as eligible by the CRDA and (ii) has the option of entering
into a contract with the CRDA to have its tax credit comprised of direct
investments in approved eligible projects which may not comprise more than 50%
of its eligible tax credit in any one year.
From the monies made available to the CRDA, the CRDA is required to set
aside $100 million for investment in hotel development projects in Atlantic City
undertaken by a licensee which result in the construction or rehabilitation of
at least 200 hotel rooms. These monies will be held to fund up to 35% of the
cost to casino licensees of expanding their hotel facilities to provide
additional hotel rooms, a portion of which will be required to be available upon
the opening of the new Atlantic City Convention Center and dedicated to
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 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, Taj Associates and Castle Associates currently charge their parking
patrons $2.00 in order to make their required payments to the New Jersey State
Treasurer and cover related expenses. Amounts in the special fund will be
expended by the CRDA for eligible projects in the corridor region of Atlantic
City related to improving the highways, roads, infrastructure, traffic
regulation and public safety of Atlantic City or otherwise necessary or useful
to the economic development and redevelopment of Atlantic City in this regard.
ATLANTIC CITY FUND. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and known
as the Atlantic City Fund, its proportional share of an amount related to the
amount by which annual operating expenses of the CCC and the Division are less
than a certain fixed sum. Additionally, a portion of the investment alternative
tax obligation of each casino licensee for the years 1994 through 1998 allocated
for projects in northern New Jersey shall be paid into and credited to the
Atlantic City Fund. Amounts in the Atlantic City Fund will be expended by the
CRDA for economic development projects of a revenue-producing nature that foster
the redevelopment of Atlantic City other than the construction and renovation of
casino hotels.
CONSERVATORSHIP. If, at any time, it is determined that Plaza Associates,
Plaza Funding, Trump AC Holding, Trump AC, Trump AC Funding, Funding II, Funding
III, Taj Associates, TCS, Castle Associates, TCHI, THCR, THCR Holdings, THCR
Funding or any other entity qualifier has violated the Casino Control Act or
that any of such entities cannot meet the qualification requirements of the
Casino Control Act, such entity could be subject to fines or the suspension or
revocation of its license or qualification. If a casino license is suspended for
a period in excess of 120 days or is revoked, or if the CCC fails or refuses to
renew such casino license, the CCC could appoint a conservator to operate and
dispose of such licensee's casino hotel facilities. A conservator would be
vested with title to all property of such licensee relating to the casino and
the approved hotel subject to valid liens and/or encumbrances. The conservator
would be
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required to act under the direct supervision of the CCC and would be charged
with the duty of conserving, preserving and, if permitted, continuing the
operation of the casino hotel. During the period of the conservatorship, a
former or suspended casino licensee is entitled to a fair rate of return out of
net earnings, if any, on the property retained by the conservator. The CCC may
also discontinue any conservatorship action and direct the conservator to take
such steps as are necessary to effect an orderly transfer of the property of a
former or suspended casino licensee.
QUALIFICATION OF EMPLOYEES. Certain employees of Plaza Associates, Taj
Associates and Castle Associates must be licensed by or registered with the CCC,
depending on the nature of the position held. Casino employees are subject to
more stringent requirements than non-casino employees and must meet applicable
standards pertaining to financial stability, integrity and responsibility, good
character, honesty and integrity, business ability and casino experience and New
Jersey residency. These requirements have resulted in significant competition
among Atlantic City casino operators for the services of qualified employees.
GAMING CREDIT. The casino games at the Atlantic City Properties 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 Atlantic City Properties is conducted by
trained and supervised personnel. Plaza Associates, Taj Associates and Castle
Associates employ extensive security and internal controls. Security checks are
made to determine, among other matters, that job applicants for key positions
have had no criminal history or associations. Security controls utilized by the
surveillance department include closed circuit video cameras to monitor the
casino floor and money counting areas. The count of moneys from gaming also is
observed daily by representatives of the CCC.
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 THCR. 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.
RIVERBOAT OWNER'S LICENSE. The operation of a gaming riverboat in Indiana
is subject to the Riverboat Gambling Act and the administrative rules
promulgated thereunder. In June 1996, the IGC granted Trump Indiana a riverboat
owner's license, which must be renewed by June 2001.
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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. Trump Indiana satisfied all interim compliance requirements
prior to receiving its riverboat owner's license from the IGC. 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 riverboat 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 riverboat 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 that it 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 owner's licensee, 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 riverboat owner's licensee
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's licensees. In addition, all use, excise and retail taxes
apply to sales aboard riverboats.
In addition to the Indiana tax requirements, a similar tax on adjusted gross
receipts is imposed by the City at a rate of 4%.
RESTRICTED CONTRACTS. Under proposed IGC rules, no riverboat owner's
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 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 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 a 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
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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 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. Section18(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 of THCR provides that THCR may redeem any
shares of THCR'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
THCR. As defined in THCR's 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.
Under IGC rules, 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
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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 compliance with state and
federal clean water requirements, including the Federal Water Pollution Control
Act 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. THCR
and Trump Indiana have obtained insurance coverage and a Certificate of
Financial Responsibility as required by 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 United States Department of the Treasury (the "Treasury") has adopted
regulations pursuant to which a casino is required to file a report of each
deposit, withdrawal, exchange of currency, gambling tokens or chips, or other
payments or transfers by, through or to such casino which involves a transaction
in currency of more than $10,000 per patron, per gaming day (a "Currency
Transaction Report"). Such reports are required to be made on forms prescribed
by the Secretary of the Treasury and are filed with the Commissioner of the
Internal Revenue Service (the "Service"). In addition, THCR is required to
maintain detailed records (including the names, addresses, social security
numbers and other information with respect to its gaming customers) dealing
with, among other items, the deposit and withdrawal of funds and the maintenance
of a line of credit.
In the past, the Service had taken the position that gaming winnings from
table games by nonresident aliens were subject to a 30% withholding tax. The
Service, however, subsequently adopted a practice of not collecting such tax.
Recently enacted legislation exempts from withholding tax table game winnings by
nonresident aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively feasible.
As the result of an audit conducted by the Treasury's Office of Financial
Enforcement in 1995, Plaza Associates was alleged to have failed to file timely
the Currency Transaction Report 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 filed by Taj
Associates for the period from April 2, 1990 through December 31, 1991. The
Treasury has received a
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report detailing the audit as well as the response of Taj Associates. As a
result of Taj Associates' audit, the Treasury has notified Taj Associates that
it failed to timely file Currency Transaction Reports in connection with certain
currency transactions. In December 1997, Taj Associates paid a fine of $477,000
in connection with 106 of these violations.
Plaza Associates and Taj Associates, together with Castle Associates and
Trump Indiana, have adopted the following internal control procedures to
increase compliance with these Treasury regulations: (i) computer exception
reporting; (ii) establishment of a committee to review Currency Transaction
Report transactions and reporting which consists of executives from the Casino
Operations, Marketing and Administration Departments; (iii) internal audit
testing of compliance with the Treasury regulations; (iv) training for all new
and existing employees in compliance with the Treasury regulations; and (v) a
self-disciplinary program for employee violations of the policy.
The Indiana Riverboat site is located near or adjacent to and may include
protected wetlands which may subject THCR to obligations or liabilities in
connection with wetlands mitigation or protection.
THCR is subject to other federal, state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages in the State of New Jersey as well as in
other jurisdictions. Management believes all required licenses and permits
necessary to conduct the business of THCR has been obtained for operations in
New Jersey and Indiana.
THCR 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 THCR in those
jurisdictions.
In addition, the Federal Merchant Marine Act of 1936 and the Federal
Shipping Act of 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.
ITEM 2. PROPERTIES.
THCR
THCR has entered into a ten year lease with The Trump-Equitable Fifth Avenue
Company, a corporation wholly owned by Trump (the "Trump-Equitable Company"),
dated as of July 1, 1995, for the lease of office space in The Trump Tower in
New York City, which THCR may use for its general, executive and administrative
offices. The fixed rent is $115,500 per year, paid in equal monthly
installments, for the period from July 1, 1995 to June 30, 2000 and will be
$129,250 per year, paid in equal monthly installments, for the period from July
1, 2000 to June 30, 2005. In addition, THCR will pay as additional rent, among
other things, a portion of the property taxes due each year. THCR has the option
to terminate this lease upon ninety days' written notice and payment of
$32,312.50.
TRUMP PLAZA
Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is subject to the liens of the
mortgages associated with the TAC I Notes, the TAC II Notes and the TAC III
Notes (collectively, the "Plaza Mortgages") and certain other liens.
PLAZA CASINO PARCEL. Trump Plaza's main tower is located on The Boardwalk
in Atlantic City, New Jersey, next to the Atlantic City Convention Center. It
occupies the entire city block (approximately 2.38 acres) bounded by The
Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the "Plaza
Casino Parcel").
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The Plaza Casino Parcel consists of four tracts of land, three of which are
currently owned by Plaza Associates and one of which is leased by Plaza Hotel
Management Company ("PHMC") to Plaza Associates pursuant to a non-renewable
ground lease, which expires on December 31, 2078 (the "PHMC Lease"). The land
which is subject to the PHMC Lease is referred to as the "Plaza Leasehold
Tract." Seashore Four Associates ("Seashore Four") and Trump Seashore Associates
("Trump Seashore") had leased to Plaza Associates two of the tracts which are
now owned by Plaza Associates. Trump Seashore and Seashore Four are 100%
beneficially owned by Trump and are, therefore, affiliates of THCR. Plaza
Associates purchased the tract from Seashore Four in January 1997 and the tract
from Trump Seashore in September 1996 for $10 million and $14.5 million,
respectively.
The PHMC Lease is a "net lease" pursuant to which Plaza Associates, in
addition to the payment of fixed rent, is responsible for all costs and expenses
with respect to the use, operation and ownership of the Plaza Leasehold Tract
and the improvements now, or which may in the future be, located thereon,
including, but not limited to, all maintenance and repair costs, insurance
premiums, real estate taxes, assessments and utility charges. The improvements
located on the Plaza Leasehold Tract are owned by Plaza Associates during the
term of the PHMC Lease, and upon the expiration of the term of the PHMC Lease
(for whatever reason), ownership of such improvements will vest in PHMC. The
PHMC Lease also contains an option pursuant to which Plaza Associates may
purchase the Plaza Leasehold Tract at certain times during the term of such PHMC
Lease under certain circumstances.
TRUMP PLAZA EAST. In connection with the Taj Acquisition, Plaza Associates
exercised its option to purchase certain of the fee and leasehold interests
comprising Trump Plaza East for a purchase price of $28.0 million. During the
years ended December 31, 1995 and 1996, Plaza Associates incurred approximately
$3.8 million and $1.1 million, respectively, in expenses associated with its
lease of Trump Plaza East. Plaza Associates currently leases a portion of the
land which comprises Trump Plaza East from an unrelated third party.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into a sublease with Time Warner
(the "Time Warner Sublease") pursuant to which Time Warner subleased the entire
first floor of retail space for a new Warner Brothers Studio Store which opened
in July 1994. Time Warner renovated the premises in connection with the opening
of the Warner Brothers Studio Store. The lease term is for ten years and gives
Time Warner the option to renew for two additional 5-year terms. Time Warner is
required to pay percentage rent monthly in an amount equal to (i) 7.5% of gross
annual sales up to $15.0 million and (ii) 10% of gross annual sales in excess of
$15 million. The terms of the Time Warner Sublease give Time Warner the right to
terminate the sublease if (i) gross annual sales are less than $5.0 million for
year two or less than $5.0 million as adjusted by CPI for years three through
nine; and (ii) Trump Plaza ceases to operate as a first class hotel.
TRUMP WORLD'S FAIR. Pursuant to the option to purchase Trump World's Fair,
on June 12, 1995, using proceeds from the June 1995 Offerings, Plaza Associates
acquired title to Trump World's Fair. Further, pursuant to an easement agreement
with the NJSEA, Plaza Associates has an exclusive easement over, in and through
the portions of the original Atlantic City Convention Center used as the
pedestrian walkway connecting Trump Plaza's main tower and Trump World's Fair.
The easement is for a 25-year term and may be renewed at the option of Plaza
Associates for one additional 25-year period. In consideration of the granting
of the easement, Plaza Associates must pay to NJSEA the sum of $2.0 million
annually, such annual payment to be adjusted every five years to reflect changes
in the consumer price index. Plaza Associates has 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 "Business--Gaming and Other Laws and
Regulations--New Jersey Gaming Regulations--Approved Hotel Facilities."
PARKING PARCELS. Plaza Associates owns a parcel of land (the "Plaza Garage
Parcel") located across the street from the Plaza Casino Parcel and along
Pacific Avenue in a portion of the block bound by Pacific Avenue, Mississippi
Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has constructed
the
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Transportation Facility on the Plaza Garage Parcel. An enclosed pedestrian
walkway from the parking garage accesses Trump Plaza at the casino level.
Parking at the parking garage is available to Trump Plaza's guests, as well as
to the general public.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet ("Additional Parcel 1")
and owns another parcel on Mississippi Avenue adjacent to Additional Parcel 1
consisting of approximately 5,750 square feet.
Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square feet, and subleases one parcel consisting of approximately 3,125
square feet. All of such parcels are contiguous and are located along Atlantic
Avenue, in the same block as the Plaza Garage Parcel. They are used for signage
and surface parking and are not encumbered by any mortgage liens other than that
of the Plaza Mortgages.
WAREHOUSE PARCEL. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey, containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1997, of approximately $1.4 million and is encumbered by the Plaza
Mortgages. This facility is currently being utilized by TCS.
SUPERIOR MORTGAGES. The liens securing the indebtedness on the Plaza Garage
Parcel, the Egg Harbor Parcel and liens securing indebtedness on certain parking
facilities are each senior to the liens of the Plaza Mortgages. The principal
amount currently secured by such mortgages is, in the aggregate, approximately
$3.2 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.
TAJ MAHAL
Taj Associates currently owns the parcels of land which are used in
connection with the operation of the Taj Mahal. Each of these parcels is
encumbered by the mortgages securing the TAC I Notes, the TAC II Notes and the
TAC III Notes.
THE CASINO PARCEL. The land comprising the Taj Mahal site consists of
approximately 30 acres, bounded by The Boardwalk to the south, vacated former
States Avenue to the east, Pennsylvania Avenue to the west and Pacific Avenue to
the north. The Taj Mahal was opened to the public on April 2, 1990.
TAJ ENTERTAINMENT COMPLEX. In connection with the Taj Acquisition, Taj
Associates purchased the Taj Entertainment Complex from Realty Corp. The Taj
Entertainment Complex is a 20,000-square-foot multipurpose entertainment complex
known as the Xanadu Theater with seating capacity for approximately 1,200
people, which can be used as a theater, concert hall, boxing arena or exhibition
hall.
STEEL PIER. In connection with the Taj Acquisition, Taj Associates
purchased the approximately 3.6 acre pier and related property located across
The Boardwalk from the Taj Mahal (the "Steel Pier") from Realty Corp. Taj
Associates initially proposed a concept to improve the Steel Pier, the estimated
cost of which improvements was $30 million. Such concept was approved by the New
Jersey Department of Environment Protection ("NJDEP"), the agency which
administers the Coastal Area Facilities Review Act ("CAFRA"). A condition
imposed on Taj Associates' CAFRA permit initially required that Taj Associates
begin construction of certain improvements on the Steel Pier by October 1992,
which improvements were to be completed within 18 months of commencement. In
March 1993, Taj Associates obtained a modification of its CAFRA permit providing
for the extensions of the required commencement and completion dates of the
improvements to the Steel Pier for one year based upon an interim use of the
Steel Pier for an amusement park. Taj Associates received additional one-year
extensions of the required commencement
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and completion dates of the improvements of the Steel Pier based upon the same
interim use of the Steel Pier as an amusement park pursuant to a sublease ("Pier
Sublease") with an amusement park operator. The Pier Sublease terminates on
December 31, 1998 unless extended.
OFFICE AND WAREHOUSE SPACE. Taj Associates owns an office building located
on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Castle Associates which are presently leased to commercial tenants
and used for office space and vehicle maintenance facilities. In connection with
the Taj Acquisition, Taj Associates purchased from Realty Corp. a warehouse
complex of approximately 34,500 square feet.
Taj Associates has entered into a lease with Trump-Equitable Company for the
lease of office space in 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 6,950 cars of
which 6,725 spaces are located in indoor parking garages and 225 surface spaces
are located on land purchased from Realty Corp. in connection with the Taj
Acquisition. In addition, Taj Associates entered into a lease agreement with
Castle Associates to share its employee parking facilities.
THEMED RESTAURANTS AND SPECIALTY STORE. Hard Rock Cafe International
(N.J.), Inc. ("Hard Rock") has entered into a fifteen-year lease (the "Hard Rock
Cafe Lease") with Taj Associates for the lease of space at the Taj Mahal for a
Hard Rock Cafe. The basic rent under the Hard Rock Cafe Lease is $750,000 per
year, paid in equal monthly installments, for the first 10 years of the lease
term, and will be $825,000 per year, paid in equal monthly installments, for the
remaining 5 years of the lease term. In addition, Hard Rock will pay percentage
rent in an amount equal to 10% of Hard Rock's annual gross sales in excess of
$10,000,000. Hard Rock has the right to terminate the Hard Rock Cafe Lease on
the tenth anniversary thereof and also has the option to extend the term of the
lease for an additional five-year period at an annual basic rent of $907,500
during such renewal term. The Hard Rock Cafe opened in November 1996.
All Star Cafe, Inc. ("All Star") has entered into a twenty-year lease (the
"All Star Cafe Lease") with Taj Associates for the lease of space at the Taj
Mahal for an All Star Cafe. The basic rent under the All Star Cafe Lease is $1.0
million per year, paid in equal monthly installments. In addition, All Star will
pay percentage rent in an amount equal to the difference, if any, between (i) 8%
of All Star's gross sales made during each calendar month during the first lease
year, 9% of All Star's gross sales made during each calendar month during the
second lease year and 10% of All Star's gross sales made during each calendar
month during the third through the twentieth lease years, and (ii) one-twelfth
of the annual basic rent. The All Star Cafe opened in March 1997.
Stage Deli of Atlantic City, Inc. ("Stage Deli") has entered into a ten-year
and five-month lease commencing July 7, 1997 (the "Stage Deli Lease") with Taj
Associates for the lease of space at the Taj Mahal for a Stage Deli of New York
restaurant. Stage Deli has an option to renew the Stage Deli Lease for an
additional five-year term. The basic rent under the Stage Deli Lease is (i)
$400,000 per year for the first three years of the lease, (ii) $436,000 per year
for the fourth through sixth years of the lease, (iii) $475,240 per year for the
seventh through ninth years of the lease and (iv) $518,011.56 per year for the
last year of the lease, paid in equal monthly installments. In addition, Stage
Deli will pay percentage rent in an amount equal to the difference, if any,
between (i) 6% of Stage Deli's gross monthly sales made during each lease year
and (ii) the applicable monthly basic rent. The Stage Deli of New York opened in
October 1997.
Time Warner has entered into a ten-year lease (the "Time Warner Taj Lease")
with Taj Associates for the lease of space at the Taj Mahal for a Warner
Brothers Studio Store. Time Warner has an option to
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renew the Time Warner Taj Lease for two additional five-year terms. Time Warner
pays percentage rent monthly in an amount equal to (i) 7.5% of gross annual
sales up to $5.0 million and (ii) 10% sales of gross annual sales in excess of
$5.0 million. No minimum or "base" rent is payable under the Time Warner Taj
Lease. The terms of the lease give Time Warner the right to terminate the lease
if (i) gross annual sales are less than $2.5 million for the second year of the
lease or less than $2.5 million as adjusted by CPI for the third through ninth
years of the lease; and (ii) the Taj Mahal ceases to operate as a first class
hotel. The Warner Brothers Studio Store opened in May 1997.
TRUMP MARINA
THE CASINO PARCEL. Trump Marina is located in the Marina District on an
approximately 14.7 acre triangular-shaped parcel of land, which is owned by
Castle Associates in fee, located at the intersection of Huron Avenue and
Brigantine Boulevard directly across from the marina, approximately two miles
from The Boardwalk.
Trump Marina has approximately 75,900 square-feet of gaming space which
accommodates 91 table games, 2,198 slot machines and race simulcasting
facilities. In addition to the casino, Trump Marina consists of a 27-story hotel
with 728 guest rooms, including 185 suites, of which 99 are "Crystal Tower"
luxury suites. Renovation of 300, 210 and 90 of the guest rooms was completed in
1995, 1996 and 1997, respectively. The facility also offers eight restaurants, a
540-seat cabaret theater, two cocktail lounges, 58,000 square-feet of
convention, ballroom and meeting space, a swimming pool, tennis courts and a
sports and health club facility. Trump Marina has been designed so that it can
be enlarged in phases into a facility containing 2,000 rooms and a 1,600-seat
cabaret theater. Trump Marina also has a nine-story garage providing on-site
parking for approximately 3,000 vehicles and a helipad which is located atop the
parking garage, making Trump Marina the only Atlantic City casino with access by
land, sea and air.
Between 1994 and 1997, management replaced substantially all of its slot
machines with newer, more popular models and upgraded its computerized slot
tracking and slot marketing system. During 1997, the property was rethemed with
a nautical emphasis and renamed the Trump Marina Hotel Casino. In 1994,
management completed a 3,000 square-foot expansion to its casino which enabled
Trump Marina to accommodate the addition of simulcast race track wagering and
expended in excess of $2 million on renovations to its hotel facility. The
casino expansion also increased casino access and casino visibility for hotel
patrons. In 1993, Trump Marina completed the construction of a Las Vegas-style
marquee and reader board, the largest of its kind on the East Coast.
THE MARINA. Pursuant to an agreement with the New Jersey Division of Parks
and Forestry (the "Marina Agreement"), Castle Associates in 1987 began operating
and renovating the marina at Trump Marina, including docks containing
approximately 645 slips. An elevated pedestrian walkway connecting Trump Marina
to a two-story building at the marina was completed in 1989. Castle Associates
constructed the two-story building, which contains a 240-seat restaurant and
offices as well as a snack bar and a large nautical theme retail store. Pursuant
to the Marina Agreement and a certain lease between the State of New Jersey, as
landlord, and Castle Associates, as tenant, dated as of September 1, 1990 (the
"Marina Lease"), Castle Associates commenced leasing the marina and the
improvements thereon for an initial term of twenty-five years. The lease is a
net lease pursuant to which Castle Associates, in addition to the payment of
annual rent equal to the greater of (i) a certain percentage of gross revenues
of Castle Associates from operation of the marina during the lease year and (ii)
minimum base rent of $300,000 annually (increasing every five years to $500,000
in 2011), is responsible for all costs and expenses related to the premises,
including but not limited to, all maintenance and repair costs, insurance
premiums, real estate taxes, assessments and utility charges. Any improvements
made to the marina (which is owned by the State of New Jersey), excluding the
elevated pedestrian walkway, automatically become the property of the State of
New Jersey upon their completion. It is anticipated that the Marina Lease will
be renegotiated in connection with the Trump Marina Expansion.
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THE PARKING PARCEL. Castle Associates also owns an employee parking lot
located on Route 30, approximately two miles from Trump Marina, which can
accommodate approximately 1,000 cars.
INDIANA RIVERBOAT
See "Business--Indiana Riverboat."
ITEM 3. LEGAL PROCEEDINGS.
GENERAL. THCR and certain of its employees have been involved in various
legal proceedings. Such persons are vigorously defending the allegations against
them and intend to contest vigorously any future 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, judgments, fines and penalties) incurred by them in said legal
proceedings.
PLAZA ASSOCIATES. The CRDA is required to set aside funds 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. These
investments are to fund up to 27% of the cost to casino licensees of such
projects. See "Business--Gaming and Other Laws and Regulations--New Jersey
Gaming Regulations-- Investment Alternative Tax Obligations." In June 1993,
Plaza Associates made application for such funding to the CRDA with respect to
its proposed construction of the Trump Plaza East facilities, demolition of a
certain structure adjacent thereto, development of an appurtenant public park,
roadway and parking area and acquisition of the entire project site. The CRDA,
in rulings through January 10, 1995, approved the hotel development project and,
with respect to same and pursuant to a credit agreement between them, reserved
to Plaza Associates the right to take investment tax credits up to approximately
$14.2 million. Plaza Associates has, except for three small parcels discussed
below, acquired the site and had constructed and presently maintains the
proposed hotel tower, public park, roadway and parking area.
As part of its approval and on the basis of its powers of eminent domain,
the CRDA, during 1994, initiated certain condemnation proceedings in the
Superior Court of New Jersey, Atlantic County, to acquire certain small parcels
of land within the project site. Plaza Associates has since acquired two of the
parcels and proceedings with respect to those parcels have been concluded. The
proceedings with respect to the remaining three parcels, which, if acquired,
will be included in the public park and parking area of the project, are
currently pending and include a claim by the defendants that the CRDA did not
properly determine that the parcels were to be used for public purposes. The
CRDA motion seeking dismissal of this claim has been briefed and, in February
1998, argued by the parties. Additionally, with respect to the two parcels to be
included in the public park portion of the project, the CRDA, by a separate
motion, seeks an order that the Plaza Associates' application and credit
agreement be deemed amended so as to terminate the CRDA obligation to acquire
the two parcels and enabling the CRDA to abandon the condemnation proceedings
with respect to these two parcels. This motion is opposed by Plaza Associates.
On March 18, 1998, the Court denied the motion but granted the CRDA leave to
amend its pleadings to formally assert a claim for specific performance of the
alleged agreement.
The defendants in two of the condemnation proceedings filed a separate joint
complaint in the New Jersey Superior Court alleging, among other claims, that
the CRDA and Plaza Associates are wrongfully attempting to deprive them of
property rights in violation of their constitutional and civil rights. COKING,
ET AL. V. CASINO REINVESTMENT DEVELOPMENT AUTHORITY, ET AL., Docket No.
ATL-L-2555-97. The CRDA's motion for summary judgment on the complaint and Plaza
Associates' motion to dismiss it for failure to state a claim were granted by
the New Jersey Superior Court on October 24, 1997 and November 11, 1997.
TRUMP INDIANA. 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
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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 then asserted a right to purchase stock in Trump
Indiana. Trump Indiana and THCR did not agree with the residents' assertions of
any such rights with respect to the stock of Trump Indiana or otherwise, and so
advised the residents. Although discussions had been ongoing with respect to the
resolution of this matter, on March 29, 1996, in the matter entitled KESHAV D.
AGGARWAL, ET AL. V. DONALD J. TRUMP, TRUMP HOTELS & CASINO RESORTS, INC., TRUMP
HOTELS & CASINO RESORTS HOLDINGS, L.P. AND TRUMP INDIANA, INC.,such residents
filed a complaint with respect to this matter in the United States District
Court, Southern District of Indiana, seeking, among other things, compensatory
and punitive damages in an unspecified amount, and that the court order the
defendants to transfer ownership of 7.5% of Trump Indiana to the plaintiffs.
Trump, THCR, THCR Holdings and Trump Indiana filed an answer to the complaint on
May 31, 1996. Trump Indiana and the other defendants reached a settlement with
four of the eight plaintiffs and the action has been dismissed with prejudice as
to these four plaintiffs. In addition, the four remaining plaintiffs withdrew
their claims for specific performance seeking the transfer of 7.5% of Trump
Indiana to the plaintiffs and are proceeding with the action seeking only
monetary damages. THCR and the other defendants intend to vigorously contest the
allegations against them. Further, management believes that the resolution of
these claims will not have a material adverse effect on THCR.
CASTLE ACQUISITION. On August 14, 1996, certain stockholders of THCR filed
two derivative actions in the Court of Chancery in Delaware (Civil Action Nos.
15148 and 15160) (the "Delaware cases") against each of the members of the Board
of Directors of THCR, THCR, THCR Holdings, Castle Associates and TCI-II. The
plaintiffs claim that the directors of THCR breached their fiduciary duties in
connection with its acquisition of Castle Associates (the "Castle Acquisition")
by purchasing these interests at an excessive price in a self-dealing
transaction. The complaint sought to enjoin the transaction, and also sought
damages and an accounting. The injunction was never pursued. These plaintiffs
served a notice of dismissal in the Delaware cases on December 29, 1997. The
Court of Chancery has not yet ordered the Delaware cases dismissed.
On October 16, 1996, a stockholder of THCR filed a derivative action in the
United States District Court, Southern District of New York (96 Civ. 7820)
against each member of the Board of Directors of THCR, THCR, THCR Holdings,
Castle Associates, TCI, TCI-II, TCHI and Salomon Brothers, Inc ("Salomon"). The
plaintiff claims that certain of the defendants breached their fiduciary duties
and engaged in ultra vires acts in connection with the Castle Acquisition and
that Salomon was negligent in the issuance of its fairness opinion with respect
to the Castle Acquisition. The plaintiff also alleges violations of the federal
securities laws for alleged omissions and misrepresentations in THCR's proxies,
and that Trump, TCI-II and TCHI breached the acquisition agreement by supplying
THCR with untrue information for inclusion in the proxy statement delivered to
THCR's stockholders in connection with the Castle Acquisition. The plaintiff
seeks removal of the directors of THCR, and an injunction, rescission and
damages.
The Delaware cases were amended and refiled in the Southern District of New
York and consolidated with the federal action for all purposes, including
pretrial proceedings and trial. On or about January 17, 1997, the plaintiffs
filed their Consolidated Amended Derivative Complaint (the "First Amended
Complaint"), reflecting the consolidation. On or about March 24, 1997, the
plaintiffs filed their Second Consolidated Amended Derivative Complaint (the
"Second Amended Complaint"). In addition to the allegations made in the First
Amended Complaint, the Second Amended Complaint claims that certain of the
defendants breached their fiduciary duties and wasted corporate assets in
connection with a previously contemplated transaction with Colony Capital, Inc.
("Colony Capital"). The Second Amended Complaint also includes claims against
Colony Capital for aiding and abetting certain of those violations. In addition
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to the relief sought in the First Amended Complaint, the Second Amended
Complaint sought to enjoin the previously contemplated transaction with Colony
Capital or, if it was effectuated, to rescind it. On March 27, 1997, THCR and
Colony Capital mutually agreed to end negotiations with respect to such
transaction. On June 26, 1997, plaintiffs served their Third Consolidated
Amended Derivative Complaint (the "Third Amended Complaint"), which omitted the
claims against Colony Capital. THCR and the other defendants in the action moved
to dismiss the Third Amended Complaint on August 5, 1997. The plaintiffs opposed
the defendants' motions to dismiss the Third Amended Complaint by response dated
October 24, 1997. The defendants' reply was served December 9, 1997.
OTHER LITIGATION. On March 13, 1997, THCR filed a lawsuit in the United
States District Court, District of New Jersey, against Mirage, the State of New
Jersey ("State"), the New Jersey Department of Transportation ("NJDOT"), the
South Jersey Transportation Authority ("SJTA"), the CRDA, the New Jersey
Transportation Trust Fund Authority and others. THCR was seeking declaratory and
injunctive relief to recognize and prevent violations by the defendants of the
casino clause of the New Jersey State Constitution and various federal
securities and environmental laws relating to proposed infrastructure
improvements in the Atlantic City marina area. While this action was pending,
defendants State and CRDA then filed an action in the New Jersey State Court
seeking a declaratory judgment as to the claim relating to the casino clause of
the New Jersey State Constitution. On May 1, 1997, the United States District
Court dismissed the federal claims and ruled that the State constitutional
claims should be pursued in State Court. This decision is currently being
appealed. On May 14, 1997 the State Court granted judgment in favor of the State
and CRDA. On March 20, 1998, the Appellate Division affirmed. THCR intends to
seek review in the State Supreme Court.
On June 26, 1997, THCR filed an action against NJDOT, SJTA, Mirage and
others, in the Superior Court of New Jersey, Chancery Division, Atlantic County
(the "Chancery Division Action"). THCR is seeking to declare unlawful and enjoin
certain actions and omissions of the defendants arising out of and relating to a
certain Road Development Agreement dated as of January 10, 1997, by and among
NJDOT, SJTA and Mirage (the "Road Development Agreement") and the public funding
of a certain road and tunnel project to be constructed in Atlantic City, as
further described in the Road Development Agreement. THCR moved to consolidate
this action with other previously filed related actions. Defendants opposed
THCR's motion to consolidate the Chancery Division Action, initially moved to
dismiss this action on procedural grounds and subsequently moved to dismiss this
action on substantive grounds. On October 20, 1997, the Chancery Court denied
the defendants' motion to dismiss this action on procedural grounds, but entered
summary judgment dismissing this action on substantive grounds. This decision is
currently being appealed.
On June 26, 1997, THCR also filed an action, in lieu of prerogative writs,
against the CRDA, in the Superior Court of New Jersey, Law Division, Atlantic
County, seeking review of the CRDA's April 15, 1997 approval of funding ($120
million principal amount plus interest) for the road and tunnel project
discussed above, a declaratory judgment that the said project is not eligible
for such CRDA funding, and an injunction prohibiting the CRDA from contributing
such funding to the said project. Defendants moved to dismiss this action on
procedural grounds and also sought to transfer this action to New Jersey's
Appellate Division. On October 3, 1997, the New Jersey Superior Court
transferred this action to the Appellate Division where it is currently pending.
On September 9, 1997, Mirage filed a complaint against Trump, THCR and
Hilton Hotels Corporation, in the United States District Court for the Southern
District of New York. The complaint seeks damages for alleged violations of
antitrust laws, tortious interference with prospective economic advantage and
tortious inducement of a breach of fiduciary duties arising out of activities
purportedly engaged in by defendants in furtherance of an alleged conspiracy to
impede Mirage's efforts to build a casino resort in the Marina district of
Atlantic City, New Jersey. Among other things, Mirage contends that the
defendants filed several frivolous lawsuits and funded others that challenge the
proposed state funding mechanisms for the construction of a proposed roadway and
tunnel that would be paid for chiefly through government
46
<PAGE>
funds and which would link the Atlantic City Expressway with the site of
Mirage's proposed new casino resort. On November 10, 1997, THCR and Trump moved
to dismiss the complaint.
Various other legal proceedings are now pending against THCR. Management
considers all such proceedings to be ordinary litigation incident to the
character of its business. Management 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.
From time to time, Plaza Associates, Taj Associates, Castle Associates and
Trump Indiana may be involved in routine administrative proceedings involving
alleged violations of certain provisions of the Casino Control Act and the
Riverboat Gambling Act, as the case may be. However, management believes that
the final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on THCR or on the ability of Plaza
Associates, Taj Associates, Castle Associates or Trump Indiana to otherwise
retain or renew any casino or other licenses required under the Casino Control
Act or the Indiana Riverboat Act, as the case may be, for the operation of Trump
Plaza, the Taj Mahal, Trump Marina and the Indiana Riverboat, respectively.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted by THCR to its security holders for a vote during
the fourth quarter of 1997.
47
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
THCR. The THCR Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "DJT." The initial public offering price of the THCR
Common Stock was $14.00 per share on June 7, 1995. The following table reflects
the high and low sales prices of the THCR Common Stock as reported by the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1996
First quarter......................................................... $29 1/4 $18 7/8
Second quarter........................................................ $35 1/2 $25 1/2
Third quarter......................................................... $28 3/4 $21 7/8
Fourth quarter........................................................ $24 7/8 $11 3/8
1997
First quarter......................................................... $13 1/8 $ 8 3/4
Second quarter........................................................ $12 1/4 $ 8 1/4
Third quarter......................................................... $12 15/16 $ 9 7/16
Fourth quarter........................................................ $10 11/16 $ 6 1/4
1998
First quarter (through March 30, 1998)................................ $12 $ 6 3/4
</TABLE>
As of March 30, 1998 there were approximately 736 holders of record of THCR
Common Stock.
Trump is the sole beneficial owner of all 1,000 outstanding shares of THCR's
Class B Common Stock, par value $.01 per share (the "THCR Class B Common
Stock"). No established trading market exists for the THCR Class B Common Stock
and Trump has been the beneficial owner of all THCR Class B Common Stock since
its issuance. The THCR Class B Common Stock has no right to receive any dividend
or other distribution (other than certain distributions upon liquidation) with
respect to the equity of THCR.
THCR has never paid a dividend on the THCR 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 THCR Board of Directors and will
depend upon, among other things, THCR's financial condition and capital needs,
legal restrictions on the payment of dividends, contractual restrictions in
financing agreements and on other factors deemed pertinent by the THCR Board of
Directors. It is the current policy of the THCR Board of Directors to retain
earnings, if any, for use in THCR's subsidiaries' operations (except as set
forth in the partnership agreement governing THCR Holdings) and THCR otherwise
has no current intention of paying dividends to the holders of THCR Common
Stock. In addition, the TAC I Note Indenture, the TAC II Note Indenture, the TAC
III Note Indenture and the Senior Note Indenture contain certain covenants,
including, without limitation, covenants with respect to limitations on the
payment of dividends, which limitations would limit THCR's ability to obtain
funds from THCR Holdings 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 indenture, (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.
THCR HOLDINGS. THCR Holdings is a limited partnership of which THCR is
currently a 59.87743% general partner. Trump is currently a 27.06458% limited
partner. THCR/LP is currently a 3.55096% limited partner. TCI is currently a
3.69695% limited partner and TCI-II is currently a 5.81009% limited partner.
48
<PAGE>
THCR FUNDING. THCR Holdings owns 100% of the outstanding shares of THCR
Funding's common stock. There is no established trading market for THCR
Funding's common stock. The Senior Note Indenture restricts the ability of THCR
Funding to declare or pay dividends.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical consolidated financial
information of Trump AC and Plaza Associates (predecessors of THCR) for each of
the years ended December 31, 1993 through 1994 and for the period January 1,
1995 through June 12, 1995 and certain historical consolidated financial
information of THCR for the period from inception (June 12, 1995) through
December 31, 1995 (see Note 1 below) and for the years ended December 31, 1996
and 1997 (see Note 2 below). All financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of THCR," and the consolidated and condensed financial
statements and the related notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
TRUMP AC AND PLAZA ASSOCIATES THCR
------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM INCEPTION
JUNE 12, 1995
YEARS ENDED DECEMBER FROM THROUGH YEAR YEAR
31, JANUARY 1, 1995 DECEMBER 31, ENDED ENDED
-------------------- THROUGH 1995 DECEMBER 31, DECEMBER 31,
1993 1994 JUNE 12, 1995 (NOTE 1) 1996 1997
--------- --------- --------------- --------------- ------------ ------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gaming............................... $ 264,081 $ 261,451 $ 122,865 $ 175,208 $ 883,441 $1,280,245
Other................................ 69,203 66,869 29,523 44,659 206,535 301,984
--------- --------- --------------- --------------- ------------ ------------
Gross revenues..................... 333,284 328,320 152,388 219,867 1,089,976 1,582,229
Promotional allowances............... 32,793 33,257 14,540 24,394 123,032 182,856
--------- --------- --------------- --------------- ------------ ------------
Net revenues....................... 300,491 295,063 137,848 195,473 966,944 1,399,373
--------- --------- --------------- --------------- ------------ ------------
Costs and expenses:
Gaming............................... 136,895 139,540 69,467 95,533 537,770 810,329
Other................................ 24,778 23,380 9,483 12,483 58,971 81,033
General and administrative........... 71,624 73,075 30,081 44,792 192,082 271,110
Depreciation and amortization........ 17,554 15,653 6,999 9,219 69,663 89,094
Pre-opening.......................... -- -- -- -- 13,839 --
Development costs.................... -- -- -- -- 4,607
--------- --------- --------------- --------------- ------------ ------------
Total costs and expenses........... 250,851 251,648 116,030 162,027 872,325 1,256,173
--------- --------- --------------- --------------- ------------ ------------
Income from operations................. 49,640 43,415 21,818 33,446 94,619 143,200
Interest expense, net.................. (39,889) (48,219) (22,113) (31,273) (139,530) (205,008)
Other non-operating (expense)
income(a)............................ (3,873) (4,931) (1,649) (4,094) 14,869 (1,028)
Loss in joint venture.................. -- -- -- -- (925) (3,478)
Extraordinary (loss) gain(b)........... 4,120 -- (9,250) -- (60,732) --
Minority interest...................... -- -- -- -- 26,022 24,186
(Provision) benefit for income taxes... (660) 865 161 -- --
--------- --------- --------------- --------------- ------------ ------------
Net income (loss)...................... $ 9,338 $ (8,870) $ (11,033) $ (1,921) $ (65,677) $ (42,128)
--------- --------- --------------- --------------- ------------ ------------
--------- --------- --------------- --------------- ------------ ------------
Basic loss per share(c) $(.19) $(3.27 ) $(1.85 )
--------------- ------------ ------------
--------------- ------------ ------------
Average Shares Outstanding............. 10,133,333 20,081,122 22,794,921
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.............. $ 14,393 $ 11,144 $ 28,125 $ 19,208 $ 175,749 $ 140,328
Property and equipment, net............ 293,141 298,354 301,316 408,231 2,009,261 2,004,751
Total assets........................... 374,498 375,643 394,085 584,545 2,455,643 2,473,309
Total long-term debt, net of current
maturities........................... 395,948 403,214 331,142 494,471 1,713,425 1,817,569
Minority interest...................... -- -- -- -- 172,604 148,418
Total capital (deficit)................ (54,710) (63,580) (74,613 ) 50,591 388,095 328,885
</TABLE>
49
<PAGE>
- ------------------------
Note 1: THCR 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 AC and Plaza Associates 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 THCR from inception (June 12, 1995) to
December 31, 1995.
Note 2: On April 17, 1996, a subsidiary of THCR was merged with and into THCR
Holding Corp. which represented 50% of the economic interest in Taj
Associates. Trump held the remaining 50% interest in Taj Associates and
contributed such interest in Taj Associates to Trump AC in exchange for
limited partnership interests in THCR Holdings. All of the outstanding
shares of THCR Holding Corp. Class C Common Stock held by Trump were
canceled and all of the outstanding shares of THCR Holding Corp. Class B
Common Stock were redeemed in connection with the Taj Acquisition. In
connection with the Taj Acquisition, Taj Associates became a wholly
owned subsidiary of Trump AC. On October 7, 1996, THCR Holdings acquired
from Trump all of the outstanding equity of Castle Associates.
Therefore, the financial data as of December 31, 1996 and for the year
ended December 31, 1996 reflect the operations of THCR and Plaza
Associates for the full year, Taj Associates for the period from April
17, 1996 to December 31, 1996, Castle Associates from October 7, 1996 to
December 31, 1996, and Trump Indiana for the period June 8, 1996 (the
opening date of the Indiana Riverboat) to December 31, 1996.
(a) 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 million, $4.9
million, $1.6 million and $2.1 million, respectively, of real estate
taxes and leasing costs associated with Trump Plaza East. Other
non-operating income (expense) for the year ended December 31, 1995,
also includes $2.0 million in costs associated with Trump World's Fair.
Other non-operating income for the year ended December 31, 1996 includes
$15.0 million license fee revenue. Other non-operating expense for the
year ended December 31, 1997 includes $1.0 million of costs associated
with certain litigation.
(b) 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 Plaza PIK Notes and Plaza PIK Note Warrants and the write off of
related unamortized deferred financing costs. The extraordinary loss for
the year ended December 31, 1996 of $59.1 million relates to the
redemption of the Plaza Notes and Plaza PIK Note Warrants and the
write-off of unamortized deferred financing costs of $1.6 million for
redemption of $10.0 million of Senior Notes.
(c) Basic loss per share has been calculated for all periods presented in
accordance with Statement of Financial Accounting Standards Board No.
128 "Earnings per Share." Earnings per share is based upon average
shares outstanding, shares and phantom stock units awarded to the Chief
Executive Officer of THCR under the 1995 Stock Plan (as defined) and
common stock equivalents, if dilutive, represents net income (loss)
divided by such amounts. The shares of THCR Class B Common Stock owned
by Trump have no economic interest and, therefore, are not considered.
50
<PAGE>
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following tables include selected data of Plaza Associates for the year
ended December 31, 1995 and Plaza Asssociates, Taj Associates (since date of
acquisition), Trump Indiana (since the opening of the Indiana Riverboat) and
Castle Associates (since its date of acquisition), for the years ended December
31, 1996 and 1997, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1996 1996 1996 1996
PLAZA PLAZA TAJ TRUMP AC TRUMP TRUMP
ASSOCIATES ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA
----------- ----------- ----------- ------------- ----------- -----------
<CAPTION>
(A) (B) (C)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................................ $ 298.1 $ 368.9 $ 383.3 $ 752.2 $ 80.7 $ 50.5
Other................................. 74.2 105.7 85.3 191.0 2.3 13.2
----------- ----------- ----------- ------ ----- -----------
Gross Revenue....................... 372.3 474.6 468.6 943.2 83.0 63.7
Less: Promotional Allowance............. 45.1 65.6 48.1 113.7 0.3 8.9
----------- ----------- ----------- ------ ----- -----------
Net Revenue............................. 327.2 409.0 420.5 829.5 82.7 54.8
----------- ----------- ----------- ------ ----- -----------
Costs and Expenses:
Gaming................................ 164.4 223.9 230.0 453.9 50.2 33.7
Pre Opening........................... -- 4.1 -- 4.1 9.7 --
General & Administrative.............. 65.5 83.3 64.2 147.5 15.8 15.6
Depreciation & Amortization........... 16.2 23.0 37.8 60.9 3.4 4.8
Other................................. 21.3 28.4 26.2 54.6 1.3 3.1
----------- ----------- ----------- ------ ----- -----------
Total Costs and Expenses................ 267.4 362.7 358.2 721.0 80.4 57.2
----------- ----------- ----------- ------ ----- -----------
Income from Operations.................. 59.8 46.3 62.3 108.5 2.3 (2.4)
----------- ----------- ----------- ------ ----- -----------
Non-Operating Income (Expense).......... (4.7) 4.9 10.7 16.6 0.8 0.2
Interest Expense........................ (44.3) (47.1) (67.4) (114.5) (8.9) (11.6)
----------- ----------- ----------- ------ ----- -----------
Total Non-Operating Expense............. (49.0) (42.2) (56.7) (97.9) (8.1) (11.4)
----------- ----------- ----------- ------ ----- -----------
Loss in Joint Venture................... -- -- -- -- (0.9) --
Extraordinary Loss...................... (9.3) (59.1) -- (59.1) -- --
----------- ----------- ----------- ------ ----- -----------
Income (Loss) Before Minority
Interest.............................. $ 1.5 $ (55.0) $ 5.6 $ (48.5) $ (6.7) $ (13.8)
----------- ----------- ----------- ------ ----- -----------
----------- ----------- ----------- ------ ----- -----------
Minority Interest.......................
Net Loss................................
<CAPTION>
<S> <C>
1996
THCR INC.
CONSOLIDATED*
-------------
<S> <C>
Revenues:
Gaming................................ $ 883.4
Other................................. 206.6
-------------
Gross Revenue....................... 1,090.0
Less: Promotional Allowance............. 123.0
-------------
Net Revenue............................. 967.0
-------------
Costs and Expenses:
Gaming................................ 537.7
Pre Opening........................... 13.8
General & Administrative.............. 192.2
Depreciation & Amortization........... 69.6
Other................................. 59.1
-------------
Total Costs and Expenses................ 872.4
-------------
Income from Operations.................. 94.6
-------------
Non-Operating Income (Expense).......... 26.0
Interest Expense........................ (150.7)
-------------
Total Non-Operating Expense............. (124.7)
-------------
Loss in Joint Venture................... (0.9)
Extraordinary Loss...................... (60.7)
-------------
Income (Loss) Before Minority
Interest.............................. $ (91.7)
Minority Interest....................... 26.0
-------------
Net Loss................................ $ (65.7)
-------------
-------------
</TABLE>
- ------------------------
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
(a) Results from date of acquisition, April 17, 1996.
(b) Results from date of commencement of operations, June 8, 1996.
(c) Results from date of acquisition, October 7, 1996.
51
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1997 1997 1997 1997
PLAZA TAJ TRUMP AC TRUMP TRUMP
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA
----------- ----------- ------------- ----------- -----------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues:
Gaming........................................... $ 370.7 $ 518.4 $ 889.1 $ 129.7 $ 261.4
Other............................................ 108.0 123.2 231.2 3.4 67.4
----------- ----------- ------------- ----------- -----------
Gross Revenue.................................. 478.7 641.6 1,120.3 133.1 328.8
Less: Promotional Allowance........................ 64.4 73.7 138.1 0.7 44.1
----------- ----------- ------------- ----------- -----------
Net Revenue...................................... 414.3 567.9 982.2 132.4 284.7
----------- ----------- ------------- ----------- -----------
Costs and Expenses:
Gaming........................................... 233.8 321.6 555.5 84.2 170.6
General & Administrative......................... 80.2 88.0 168.1 31.5 62.7
Depreciation & Amortization...................... 24.4 41.4 66.0 5.9 17.1
Other............................................ 32.0 33.5 65.5 2.9 12.8
Development Costs................................ -- -- -- -- --
----------- ----------- ------------- ----------- -----------
Total Costs and Expenses....................... 370.4 484.5 855.1 124.5 263.2
----------- ----------- ------------- ----------- -----------
Income from Operations............................. 43.9 83.4 127.1 7.9 21.5
----------- ----------- ------------- ----------- -----------
Non-Operating Income............................... 0.6 1.1 2.9 -- 0.5
Interest Expense................................... (48.6) (94.7) (144.1) (10.5) (49.9)
----------- ----------- ------------- ----------- -----------
Total Non-Operating Expense.................... (48.0) (93.6) (141.2) (10.5) (49.4)
----------- ----------- ------------- ----------- -----------
Loss in Joint Venture.............................. -- -- -- (3.5) --
----------- ----------- ------------- ----------- -----------
Loss Before Minority Interest...................... $ (4.1) $ (10.2) $ (14.1) $ (6.1) $ (27.9)
----------- ----------- ------------- ----------- -----------
----------- ----------- ------------- ----------- -----------
Minority Interest..................................
Net Loss...........................................
<CAPTION>
<S> <C>
1997
THCR
CONSOLIDATED*
-------------
<S> <C>
Revenues:
Gaming........................................... $ 1,280.2
Other............................................ 302.1
-------------
Gross Revenue.................................. 1,582.3
Less: Promotional Allowance........................ 182.9
-------------
Net Revenue...................................... 1,399.4
-------------
Costs and Expenses:
Gaming........................................... 810.3
General & Administrative......................... 271.1
Depreciation & Amortization...................... 89.1
Other............................................ 81.1
Development Costs................................ 4.6
-------------
Total Costs and Expenses....................... 1,256.2
-------------
Income from Operations............................. 143.2
-------------
Non-Operating Income............................... 5.5
Interest Expense................................... (211.5)
-------------
Total Non-Operating Expense.................... (206.0)
-------------
Loss in Joint Venture.............................. (3.5)
-------------
Loss Before Minority Interest...................... $ (66.3)
Minority Interest.................................. 24.2
-------------
Net Loss........................................... $ (42.1)
-------------
-------------
</TABLE>
- ------------------------
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
52
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN MILLIONS, EXCEPT STATISTICAL DATA)
<TABLE>
<CAPTION>
1995 1996 1996 1996 1996 1996 1996
PLAZA PLAZA TRUMP TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED
----------- ----------- ----------- ------------ --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(A) (B) (C)
Table Game Revenues..................... $ 96.4 $ 104.1 $ 161.9 $ 266.0 $ 22.3 $ 14.9 $ 303.2
Incr (Decr) over prior period......... $ 7.7 $ 169.6 $ 206.8
Table Game Drop......................... $ 626.8 $ 686.9 $ 942.5 $ 1,629.4 $ 128.0 $ 103.2 $ 1,860.6
Incr (Decr) over prior period......... $ 60.1 $ 1,002.6 $ 1,233.8
Table Win Percentage.................... 15.4% 15.2% 17.2% 16.3% 17.5% 14.4% 16.3%
Incr (Decr) over prior period......... (0.2) pts. .9 pts. .9 pts.
Number of Table Games................... 97 127 167 294 71 87 452
Incr (Decr) over prior period......... 30 197 355
Slot Revenues........................... $ 201.7 $ 264.8 $ 206.2 $ 471.0 $ 58.4 $ 35.6 $ 565.0
Incr (Dec) over prior period.......... $ 63.1 $ 269.3 $ 363.3
Slot Handle............................. $ 2,368.7 $ 3,179.8 $ 2,510.3 $ 5,690.1 $ 925.6 $ 482.0 $ 7,097.7
Incr (Decr) over prior period......... $ 811.1 $ 3,321.4 $ 4,729.0
Slot Win Percentage..................... 8.5% 8.3% 8.2% 8.3% 6.3% 7.4% 8.0%
Incr (Decr) over prior period......... (0.2) pts. (.2) pts. (.5) pts.
Number of Slot Machines................. 2,339 3,629 3,799 7,428 1,492 2,339 11,259
Incr (Decr) over prior period......... 1,290 5,089 8,920
Other Gaming Revenues................... N/A N/A $ 15.2 $ 15.2 N/A N/A $ 15.2
Total Gaming Revenues................... $ 298.1 $ 368.9 $ 383.3 $ 752.2 $ 80.7 $ 50.5 $ 883.4
Incr (Decr) over prior period......... $ 70.8 $ 454.1 $ 585.3
</TABLE>
- ------------------------------
(a) Results from date of acquisition, April 17, 1996.
(b) Results from date of commencement of operations, June 8, 1996.
(c) Results from date of acquisition, October 7, 1996.
53
<PAGE>
<TABLE>
<CAPTION>
1997 1997 1997 1997 1997 1997
PLAZA TRUMP TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED
----------- ----------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Table Game Revenues.............................. $ 96.4 $ 202.7 $ 299.1 $ 38.6 $ 76.1 $ 413.8
Incr (Decr) over prior period(a)............... $ (7.7) $ 40.8 $ 33.1 $ 16.3 $ 61.2 $ 110.6
Table Game Drop.................................. $ 654.4 $ 1,279.1 $ 1,933.5 $ 213.2 $ 498.5 $ 2,645.2
Incr (Decr) over prior period(a)............... $ (32.5) $ 336.6 $ 304.1 $ 85.2 $ 395.3 $ 784.6
Table Win Percentage............................. 14.7% 15.9% 15.5% 18.1% 15.3% 15.6%
Incr (Decr) over prior period.................. (0.5) pts. (1.3) pts. (0.8) pts. 0.6 pts. 0.9 pts. (0.7) pts.
Number of Table Games............................ 117 155 272 67 91 430
Incr (Decr) over prior period(a)............... (10) (12) (22) (4) 4 (22)
Slot Revenues.................................... $ 274.3 $ 297.4 $ 571.7 $ 91.1 $ 183.2 $ 846.0
Incr (Decr) over prior period(a)............... $ 9.5 $ 91.2 $ 100.7 $ 32.7 $ 147.6 $ 281.0
Slot Handle...................................... $ 3,381.1 $ 3,583.7 $ 6,964.8 $ 1,361.1 $ 2,267.0 $ 10,592.9
Incr (Decr) over prior period(a)............... $ 201.3 $ 1,073.4 $ 1,274.7 $ 435.5 $ 1,785.0 $ 3,495.2
Slot Win Percentage.............................. 8.1% 8.3% 8.2% 6.7% 8.1% 8.0%
Incr (Decr) over prior period.................. (0.2) pts. 0.1 pts. (0.1) pts. 0.4 pts. 0.7 pts. 0.0 pts.
Number of Slot Machines.......................... 4,083 4,136 8,219 1,430 2,198 11,847
Incr (Decr) over prior period.................. 454 337 791 (62) (141) 588
Other Gaming Revenues............................ N/A $ 18.3 $ 18.3 N/A $ 2.1 $ 20.4
Incr (Decr) over prior period(a)............... N/A $ 3.1 $ 3.1 N/A $ 2.1 $ 5.2
Total Gaming Revenues............................ $ 370.7 $ 518.4 $ 889.1 $ 129.7 $ 261.4 $ 1,280.2
Incr (Decr) over prior period(a)............... $ 1.8 $ 135.1 $ 136.9 $ 49.0 $ 210.9 $ 396.8
</TABLE>
- ------------------------
(a) With the exception of Plaza Associates, 1996 results are for a partial year
(see notes, a, b, and c on previous page).
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
The Third Amended and Restated Agreement of Limited Partnership of THCR
Holdings, as amended, provides that all business activities of THCR must be
conducted by THCR Holdings or subsidiary partnership or corporations. As a
result of the June 1995 Offerings, the Taj Acquisition and the Castle
Acquisition, THCR's results of operations are primarily those of Plaza
Associates, Taj Associates, Trump Indiana and Trump Marina, and the results of
operations included in the Statement of Operations reflect Plaza Associates'
results of operations for the twelve month period ended December 31, 1996, Taj
Associates' results of operations for the period April 17, 1996 to December 31,
1996, Trump Indiana's results of operations from June 8, 1996 to December 31,
1996 and Castle Associates' results of operations from October 7, 1996 to
December 31, 1996.
Gaming revenues are the primary source of THCR's revenues. Table games
revenues represent the amount retained by THCR from amounts wagered at table
games. The table win percentage tends to be fairly constant over the long term,
but may vary significantly in the short term, due to large wagers by "high
rollers".
Non-operating income for the year ended December 31, 1996 included a
one-time $15.0 million non-refundable licensing fee resulting from an agreement
with Atlantic Jersey Thermal Systems, Inc.
The extraordinary loss of $60.7 million for the year ended December 31, 1996
includes $59.1 million for the redemption of the Plaza Notes and the write-off
of unamortized deferred financing costs on April 17, 1996, and $1.6 million
relating to the loss on retirement of $10 million of Senior Notes on November 7,
1996 by THCR Funding and THCR Holdings. The extraordinary loss of $9.3 million
for the year ended December 31, 1995 relates to the redemption and write-off of
unamortized deferred financing costs relating to the redemption of Plaza PIK
Notes and Plaza PIK Note Warrants on June 12, 1995.
54
<PAGE>
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
In general, virtually all categories of revenue and expense are higher in
1997 compared to 1996 as a result of having a full year of operating activity
versus a partial year for the entities acquired in 1996.
Gaming revenues are the primary source of THCR's revenues. The increase in
gaming revenues is primarily attributable to the acquisitions of Taj Associates
on April 17, 1996, Trump Marina on October 7, 1996, and the opening of the
Indiana Riverboat on June 8, 1996.
Gaming costs and expenses were $810.3 million for the year ended December
31, 1997, an increase of $272.6 million or 50.7% from $537.7 million for the
comparable period in 1996. This increase is substantially proportionate to the
increase in gaming revenues from the comparable period in 1996.
General and administrative expenses were $271.1 million for the year ended
December 31, 1997, an increase of $79.0 million or 41.1% from general and
administrative expenses of $192.2 million. The acquisition of Trump Marina on
October 7, 1996 accounted for $47.1 million of the increase and Trump Indiana,
which commenced operations on June 8, 1996, accounted for $15.8 million of the
increase.
During the second quarter of 1997, THCR revised its estimates of the useful
lives of buildings, building improvements, furniture and fixtures which were
acquired in 1996. Building and building improvements were re-evaluated to have a
forty year life and furniture and fixtures were determined to have a seven year
life. During the third quarter of 1997, Trump Indiana revised its estimates of
the useful life of the riverboat and its improvements from fifteen to thirty
years. THCR believes these changes more appropriately reflect the timing of the
economic benefits to be received from these assets during their estimated useful
lives. For the year ended December 31, 1997, the net effect of applying these
new lives was to decrease THCR Holding's and THCR's net loss by $10.5 million
and $6.6 million, respectively, and decrease basic loss per share by $.29.
Development costs of $4.6 million, relating to Detroit, Niagara Falls and
other jurisdictions, were expensed in 1997.
Non-operating income decreased in 1997 primarily due to non-recurring income
in 1996. Non-operating income in 1996 included Taj Associates' one-time $10
million and Plaza Associates' one-time $5 million non-refundable licensing fees
resulting from agreements with Atlantic Jersey Thermal Systems, Inc. to operate
their heating and cooling facilities for a period of 20 years.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities are THCR's principal source of
liquidity and were $1.1 million in 1997 compared to $4.5 million for the
comparable period in 1996. Proceeds from the 1997 Offerings are intended by THCR
to provide expansion funds and working capital for operations. Accordingly, the
Company expects to have sufficient liquidity to meet its obligations over the
next operating period. Any excess cash flow achieved from operations during peak
periods is utilized to subsidize non-peak periods where necessary. With the
proceeds from the 1996 Offerings, THCR, among other things, redeemed the
outstanding Taj Bonds, retired the outstanding Plaza Notes, satisfied the
indebtedness of Taj Associates under its loan agreement with NatWest, purchased
certain real property used in the operation of Trump Plaza and the Taj Mahal and
paid Bankers Trust to release certain liens and guarantees.
The Senior Note Indenture restricts the ability of THCR Holdings and its
subsidiaries 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, THCR's future operating results are highly
conditional and could fluctuate significantly.
The TAC I Note Indenture, the TAC II Note Indenture and the TAC III Note
Indenture restrict the ability of Trump AC and its subsidiaries to make
distributions or pay dividends, as the case may be, unless certain financial
ratios are achieved.
55
<PAGE>
In addition, the ability of (i) Plaza Associates and Taj Associates (through
Trump AC) and (ii) Castle Associates to make payments of dividends or
distributions to THCR Holdings may be restricted by the CCC. Similarly, the
ability of Trump Indiana to make payments of dividends or distributions to THCR
Holdings may be restricted by the Indiana Gaming Commission.
Capital expenditures for Trump AC for the years ended December 31, 1996 and
1997 were $193.0 million and $56.4 million, respectively. Capital expenditures
for the year ended December 31, 1996 include Trump Plaza East's and Trump
World's Fair's expansions of $35.5 million and $57.9 million, respectively.
Capital expenditures for improvements to Trump Plaza' s existing facilities were
approximately $8.3 million and $14.8 million for the years ended December 31,
1996 and 1997, respectively. In addition, in 1996 and 1997, Plaza Associates
exercised its option to purchase from Trump Seashore Associates and Seashore
Four Associates, both entities beneficially owned by Trump, two of the parcels
of land underlying Trump Plaza's main tower, pursuant to the terms of the
leases, the payments under which were terminated upon the exercise of such
option. The exercise price and associated closing costs were $14.5 million for
Trump Seashore Associates and $10.2 million for Seashore Four Associates.
Capital expenditures attributable to the Taj Mahal were approximately $90.9
million for the period from acquisition, April 17, 1996 to December 31, 1996 and
$40.8 million for the year ended December 31, 1997. Capital expenditures for
improvements to existing facilities were approximately $18.8 million for the
period from acquisition, April 17, 1996 to December 31, 1996 and $7.6 million
for the year ended December 31, 1997. Capital expenditures attributable to the
expansion of the facility were approximately $10.3 million for the period from
acquisition, April 17, 1996 to December 31, 1996 and $33.2 million for the year
ended December 31, 1997. Capital expenditures for the period from acquisition
April 17, 1996 to December 31, 1996 included the purchase of property previously
leased upon which a portion of the casino hotel complex is situated for $61.8
million.
The Taj Mahal expansion consisted of the construction of a new 14-bay bus
terminal which was completed in December 1996, a 2,400 space expansion of the
existing self parking facilities, which was completed in May 1997, and an
approximate 7,000 square food casino expansion with 260 slot machines which was
completed in July 1997. The total costs of the Taj Mahal Expansion including
amounts expended in 1996 were approximately $43.5 million and have been funded
principally out of cash from operations.
The cost to THCR for the development of the Indiana Riverboat, which
includes the land, the vessel, gaming equipment, a pavilion for staging and
ticketing, restaurant facilities, berthing and support facilities, parking
facilities, and licensing and preopening expenses was approximately $96 million
through the opening on June 8, 1996. During Trump Indiana's initial five year
license term, an additional $57 million of funds will be required to be spent in
connection with the Indiana Riverboat facility and related commitments,
including community economic development commitments required in connection with
the licensing process. At December 31, 1997, $118 million of the total
requirement had been invested. The approximate $15 million costs of hotel
construction and other infrastructure improvements will be applied towards
satisfying this economic development obligation. THCR is currently negotiating
with Barden and the City of Gary for the development of a 1,500 space parking
garage by BHR which would cost approximately $20 million.
Castle Associates' capital expenditures for 1997 were $1.8 million and
principally consisted of hotel room renovations, as well as ongoing casino floor
improvements, parking garage upgrades and marina leasehold improvements. In
addition, during 1997, Castle Associates completed a $4.2 million project to
retheme the property with a nautical emphasis and rename it Trump Marina.
THCR has assessed the Year 2000 issue and has begun implementing a plan to
resolve the issue, which is expected to be completed in early 1999. Based upon
management's assessment, it is anticipated that associated costs incurred to
satisfactorily complete the plan will not be material.
56
<PAGE>
SEASONALITY
The gaming industry in Atlantic City and Indiana is seasonal, with the
heaviest activity occurring during the period from May through September.
Consequently, THCR's operating results during the two quarters ending in March
and December would not likely be as profitable as the two quarters ending in
June and September.
INFLATION
There was no significant impact on operations as a result of inflation
during 1995, 1996 or 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share" was issued in February 1997 and replaces Accounting Principles Board
("APB") Opinion No. 15. The new statement simplifies the computations of
earnings per share ("EPS") by replacing the presentation of primary EPS with
basic EPS, which is computed by dividing income available to common shareholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS under the new statement is computed similarly to fully diluted EPS
pursuant to APB Opinion No. 15. THCR has adopted SFAS No. 128 which did not have
a material impact on the computation of the earnings per share presented in the
consolidated financial statements.
SFAS No. 130, "Reporting Comprehensive Income", was issued in June 1997.
This statement is effective for THCR's fiscal year ending December 31, 1998.
This statement addresses the reporting and displaying of comprehensive income
and its components. Adoption of SFAS No. 130 relates to disclosure within the
financial statements and is not expected to have a material effect on the THCR's
financial statements.
SFAS No. 131, "Disclosures about Segments of and Enterprise and Related
Information", was issued in June 1997. This statement is effective for THCR's
fiscal year ending December 31, 1998. This statement changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports. Adoption of SFAS No. 131 relates to disclosure within
the financial statements and is not expected to have a material effect on THCR's
financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Pursuant to the General Instructions to Rule 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by this Item 7A and by Rule
305 of Regulation S-K are inapplicable to the Registrants at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
An index to financial statements and required financial statement schedules
is set forth in Item 14.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
57
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
MANAGEMENT OF THCR
The following table sets forth certain information concerning each of THCR's
directors and executive officers:
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Donald J. Trump......................................... Chairman of the Board of Directors
Nicholas L. Ribis....................................... President, Chief Executive Officer and Director
Robert M. Pickus........................................ Executive Vice President, General Counsel and Secretary
John P. Burke........................................... Senior Vice President and Corporate Treasurer
R. Bruce McKee.......................................... Senior Vice President of Corporate Finance and Chief
Financial Officer
Joseph A. Fusco......................................... Executive Vice President of Government and Regulatory
Affairs
Wallace B. Askins....................................... Director
Don M. Thomas........................................... Director
Peter M. Ryan........................................... Director
</TABLE>
DONALD J. TRUMP--Trump, 51 years old, has been Chairman of the Board of THCR
and THCR Funding since their formation in 1995. Trump was a 50% shareholder,
Chairman of the Board of Directors, President and Treasurer of Trump Plaza GP
and the managing general partner of Plaza Associates prior to June 1993. Trump
was Chairman of the Executive Committee and President of Plaza Associates from
May 1986 to May 1992 and was a general partner of Plaza Associates until June
1993. Trump has been a director of Trump AC Holding since February 1993 and was
President of Trump AC Holding from February 1993 until December 1997. Trump was
a partner in Trump AC from February 1993 until June 1995. Trump has been
Chairman of the Board of Directors of Trump AC Funding since its formation in
January 1996 and the Chairman of the Board of Directors of Funding II and
Funding III since their formation in November 1997. Trump has been Chairman of
the Board of Directors of THCR Holding Corp. and THCR/LP since October 1991;
President and Treasurer of THCR Holding Corp. since March 4, 1991; Chairman of
the Board of Directors, President and Treasurer of Trump Casinos, Inc. ("TCI")
since June 1988; Chairman of the Executive Committee of Taj Associates from June
1988 to October 1991; and President and sole Director of Realty Corp. since May
1986. Trump has been the sole director of TACC since March 1991. Trump was
President and Treasurer of TACC from March 1991 until December 1997. Trump has
been the sole director of Trump Indiana since its formation. Trump has been
Chairman of the Board of Partner Representatives of Castle Associates, the
partnership that owns Trump Marina, since May 1992; and was Chairman of the
Executive Committee of Castle Associates from June 1985 to May 1992. Trump is
the Chairman of the Board of Directors, President and Treasurer of Castle
Funding. Trump is the Chairman of the Board and Treasurer of TCHI. Trump is the
President, Treasurer, sole director and sole shareholder of TCI-II. Trump has
been a Director of THCR Enterprises, Inc., a Delaware corporation ("THCR
Enterprises"), since its formation in January 1997. Trump is also the President
of The Trump Organization, which has been in the business, through its
affiliates and subsidiaries, of acquiring, developing and managing real estate
properties for more than the past five years. Trump was a member of the Board of
Directors of Alexander's Inc. from 1987 to March 1992.
NICHOLAS L. RIBIS--Mr. Ribis, 53 years old, has been President, Chief
Executive Officer and a director of THCR and THCR Funding and Chief Executive
Officer of THCR Holdings since their formation in
58
<PAGE>
1995. Mr. Ribis has been the Chief Executive Officer of Plaza Associates since
February 1991, was President from April 1994 to February 1995, was a member of
the Executive Committee of Plaza Associates from April 1991 to May 29, 1992 and
was a director and Vice President of Trump Plaza GP from May 1992 until June
1993. Mr. Ribis served as Vice President of Trump AC Holding from February 1995
until December 1997. Mr. Ribis has served as President of Trump AC Holding since
December 1997. Mr. Ribis has served as a director of Trump AC Holding since June
1993. Mr. Ribis has been Chief Executive Officer, President and a director of
Trump AC Funding since its formation in January 1996 and Chief Executive
Officer, President and a director of Funding II and Funding III since their
formation in November 1997. Mr. Ribis served as Vice President of TACC until
December 1997. Mr. Ribis has served as the President of TACC since December
1997. Mr. Ribis has been the President and Chief Executive Officer of Trump
Indiana since its formation. Mr. Ribis has been a Director of THCR/LP and THCR
Holding Corp. since October 1991 and was Vice President of THCR/LP and THCR
Holding Corp. until June 1995; Chief Executive Officer of Taj Associates since
February 1991; Vice President of TCI since February 1991 and Secretary of TCI
since September 1991; Director of Realty Corp. since October 1991; and a member
of the Executive Committee of Taj Associates from April 1991 to October 1991.
Mr. Ribis has served as Vice President of THCR/LP and THCR Holding Corp. since
February 1998. He has also been Chief Executive Officer of Castle Associates
since March 1991; member of the Executive Committee of Castle Associates from
April 1991 to May 1992; member of the Board of Partner Representatives of Castle
Associates since May 1992; and has served as the Vice President and Assistant
Secretary of TCHI since December 1993 and January 1991, respectively. Mr. Ribis
is now a director of TCHI. Mr. Ribis has served as Vice President of TCI-II
since December 1993 and had served as Secretary of TCI-II from November 1991 to
May 1992. Mr. Ribis has been Vice President of Trump Corp. since September 1991.
Mr. Ribis has been the President and a director of THCR Enterprises since
January 1997. From January 1993 to January 1995 Mr. Ribis served as the Chairman
of the Casino Association of New Jersey and has been a member of the Board of
Trustees of the CRDA since October 1993. From January 1980 to January 1991, Mr.
Ribis was Senior Partner in, and from February 1991 to December 1995, was
Counsel to the law firm of Ribis, Graham & Curtin (now practicing as Graham,
Curtin & Sheridan, A Professional Association), which serves as New Jersey legal
counsel to all of the above-named companies and certain of their affiliated
entities.
ROBERT M. PICKUS--Mr. Pickus, 43 years old, has been Executive Vice
President, General Counsel and Secretary of THCR since its formation in 1995. He
has also been the Executive Vice President of Corporate and Legal Affairs of
Plaza Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates.
Mr. Pickus served as the Assistant Secretary of Trump AC Holding from April 1994
until February 1998. Since February 1998, Mr. Pickus has served as the Secretary
of Trump AC Holding. Mr. Pickus has been Secretary and a director of Trump AC
Funding since its formation in January 1996 and Secretary and a director of
Funding II and Funding III since their formation in November 1997. Mr. Pickus
has been the Executive Vice President and Secretary of Trump Indiana since its
inception. Mr. Pickus has been the Executive Vice President of Corporate and
Legal Affairs of Taj Associates since February 1995, and a Director of THCR
Holding Corp. and THCR/LP since November 1995. He was the Senior Vice President
and Secretary of Castle Funding from June 1988 to December 1993 and General
Counsel of Castle Associates from June 1985 to December 1993. Mr. Pickus served
as the Assistant Secretary of TACC until February 1998. Since February 1998, Mr.
Pickus has served as the Secretary of TACC. Mr. Pickus was also Secretary of
TCHI from October 1991 until December 1993. Mr. Pickus is a director of TCHI,
and has served as the Assistant Secretary of TCHI since February 1998. Mr.
Pickus has been the Executive Vice President of Corporate and Legal Affairs of
Castle Associates since February 1995, Secretary of Castle Associates since
February 1996 and a member of the Board of Partner Representatives of Castle
Associates since October 1995. Mr. Pickus is currently the Secretary of THCR
Holding Corp., has been the Vice President, Secretary and Director of THCR
Enterprises since January 1997 and has been Executive Vice President of TCS
since its inception.
59
<PAGE>
R. BRUCE MCKEE--Mr. McKee, 52 years old, has served as the Senior Vice
President of Corporate Finance of THCR, Trump AC Funding and TACC since June
1997. Mr. McKee has served as Chief Financial Officer of THCR since June 1987.
Mr. McKee has served as the Senior Vice President of Corporate Finance of
Funding II and Funding III since December 1997. Mr. McKee served as President
and Chief Operating Officer of Castle Associates from October 1996 until June
1997. Mr. McKee was acting Chief Operating Officer of Taj Associates from
October 1995 through October 1996, Senior Vice President, Finance of Taj
Associates from July 1993 through October 1996 and Vice President, Finance of
Taj Associates from September 1990 through June 1993. Mr. McKee has been the
Assistant Treasurer of THCR/LP, Realty Corp. and TCI since September 1991. Mr.
McKee served as the Assistant Treasurer of THCR Holding Corp. from September
1991 until February 1998. Previously, Mr. McKee was 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.
JOHN P. BURKE--Mr. Burke, 50 years old, served as the Senior Vice President
of Corporate Finance of THCR from January 1996 until June 1997. Mr. Burke has
served as the Senior Vice President of THCR since June 1997. Mr. Burke has been
Senior Vice President of Corporate Finance of THCR Holdings and THCR Funding
since January 1996, and has been the Corporate Treasurer of THCR, THCR Holdings
and THCR Funding since their formation in 1995. He has also been Corporate
Treasurer of Plaza Associates and Taj Associates since October 1991. Mr. Burke
has been the Treasurer of Trump Indiana since its formation. Mr. Burke has been
Treasurer of Trump AC Funding since its formation in January 1996 and Treasurer
of Funding II and Funding III since their formation in November 1997. Mr. Burke
has been Treasurer of TACC since February 1998. Mr. Burke was a Director of
THCR/LP and THCR Holding Corp. from October 1991 to April 1996 and was Vice
President of THCR/LP until June 1995. Mr. Burke has served as the Assistant
Treasurer of THCR Holding Corp. and THCR/LP since February 1998. Mr. Burke has
been the Corporate Treasurer of Castle Associates since October 1991, the Vice
President of Castle Associates, Castle Funding, TCI-II and TCHI since December
1993, a member of the Board of Partner Representatives of Castle Associates
since March 1997 and the Vice President-Finance of The Trump Organization since
September 1990. Mr. Burke was an Executive Vice President and Chief
Administrative Officer of Imperial Corporation of America from April 1989
through September 1990. Mr. Burke has been the Vice President and Treasurer of
THCR Enterprises since January 1997.
JOSEPH A. FUSCO--Mr. Fusco, 53 years old, has been Executive Vice President
for Government Relations & Regulatory Affairs of THCR since June 1996 and of TCS
since July 1996. From August 1985 to June 1996, he practiced law as a partner in
various Atlantic City law firms specializing in New Jersey casino regulatory,
commercial and administrative law matters, most recently from January 1994 to
June 1996 as a partner in the law firm of Sterns & Weinroth. Mr Fusco previously
served as Atlantic County Prosecutor, a Gubernatorial appointment, from April
1981 to July 1985 and as Special Counsel for Licensing for the CCC from the
inception of that agency in September 1977 to March 1981. He has been admitted
to practice law in the State of New Jersey since 1969.
WALLACE B. ASKINS--Mr. Askins, 67 years old, has been a director of THCR and
THCR Funding since June 1995. He has also been a director of Trump AC Holding
since April 11, 1994, and was a partner representative of the Board of Partner
Representatives of Castle Associates from May 1992 to June 1995. Mr. Askins has
been a director of Trump AC Funding since April 1996 and a director of Funding
II and Funding III since December 1997. Mr. Askins served as a director of
TCI-II from May 1992 to December 1993. From June 1984 to November 1992, Mr.
Askins served as Executive Vice President, Chief Financial Officer and as a
director of Armco Inc. Mr. Askins also serves as a director of EnviroSource,
Inc.
DON M. THOMAS--Mr. Thomas, 67 years old, has been a director of THCR and
THCR Funding since June 1995. Mr. Thomas has been a director of Trump AC Funding
since April 1996 and a director of Funding II and Funding III since December
1997. He has also been the Senior Vice President of Corporate
60
<PAGE>
Affairs of the Pepsi-Cola Bottling Co. of New York since January 1985. Mr.
Thomas was the acting Chairman, and a Commissioner, of the CRDA from 1985
through 1987, and a Commissioner of the CCC from 1980 through 1984 during a
portion of which time Mr. Thomas served as acting Chairman of the CCC. Mr.
Thomas was a director of Trump Plaza GP until June 1993 and has been a director
of Trump AC Holding since June 1993. Mr. Thomas is an attorney licensed to
practice law in the State of New York.
PETER M. RYAN--Mr. Ryan, 59 years old, has been a director of THCR and THCR
Funding since June 1995. He has also been the President of each of The Marlin
Group, LLC and The Brookwood Carrington Fund, LLC, real estate financial
advisory groups, since January 1995. Prior to that, Mr. Ryan was the Senior Vice
President of The Chase Manhattan Bank for more than five years. Mr. Ryan has
been a director of the Childrens' Hospital FTD since October 1995.
The officers of THCR serve at the pleasure of the Board of Directors of
THCR.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
THCR is the general partner of THCR Holdings. As the sole general partner of
THCR Holdings, THCR generally has the exclusive rights, responsibilities and
discretion in the management and control of THCR Holdings.
MANAGEMENT OF PLAZA ASSOCIATES
Trump AC is the managing general partner of Plaza Associates. Trump AC
Holding is the managing general partner of Trump AC. The Board of Directors of
Trump AC Holding consists of Messrs. Trump, Ribis, Wallace B. Askins and Don M.
Thomas.
Set forth below are the names, ages, positions and offices held with Plaza
Associates and a brief account of the business experience during the past five
years of each of the executive officers of Plaza Associates other than those who
are also directors or executive officers of THCR.
BARRY J. CREGAN--Mr. Cregan, 43 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 Trump AC Holding.
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
addition, Mr. Cregan has worked for Hilton and Hyatt in executive capacities as
well as working in Las Vegas and Atlantic City in executive capacities.
FRED A. BURO--Mr. Buro, 41 years old, has been the Executive 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, 46 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 Tropicana 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.
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
MANAGEMENT OF TAJ ASSOCIATES
Set forth below are the names, ages, positions and offices held with Taj
Associates and a brief account of the business experience during the past five
years of each of the executive officers and certain key employees of Taj
Associates other than those who are also directors or executive officers of
THCR.
61
<PAGE>
RODOLFO E. PRIETO--Mr. Prieto, 54 years old, has been Chief Operating
Officer of Taj Associates since October 1996. Mr. Prieto has been Vice President
of Trump AC Holding since February 1998. From December 1995 to October 1996, Mr.
Prieto was the Executive Vice President, Operations of Taj Associates. Prior to
joining the Taj Mahal, Mr. Prieto was Executive Vice President and Chief
Operating Officer for Elsinore Corporation from May 1995 to November 1995;
Executive Vice President in charge of the development of the Mojave Valley
Resort for Elsinore Corporation from December 1994 to April 1995 and Executive
Vice President and Assistant General Manager for the Tropicana Resort and Casino
from September 1986 to November 1994.
LARRY W. CLARK--Mr. Clark, 53 years old, has been Executive Vice President,
Casino Operations of Taj Associates since November 1991, Senior Vice President,
Casino Operations of Taj Associates from May 1991 to November 1991, and Vice
President, Casino Administration of Taj Associates from April 1991 to May 1991
and from January 1990 to November 1990. Prior to joining the Taj Mahal, Mr.
Clark was Vice President, Casino Operations of the Dunes Hotel & Country Club
from November 1990 to April 1991 and Director of Casino Marketing and Vice
President, Casino Operations of the Showboat Hotel & Casino from November 1988
to January 1990.
WALTER KOHLROSS--Mr. Kohlross, 56 years old, has been Senior Vice President,
Food & Beverages of Taj Associates since June 1992, 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, 51 years old, has been Executive Vice
President, International Marketing of Taj Associates since May 1996. From
November 1995 to May 1996, Mr. Niglio was Senior Vice President, Casino
Marketing of Taj Associates. From February 1995 to October 1995, Mr. Niglio was
Vice President, International Marketing of Taj Associates. Prior to joining Taj
Associates, Mr. Niglio was Executive Vice President of International
Marketing/Player Development for Castle Associates from 1993 until 1995. Prior
to that, Mr. Niglio served as Senior Vice President, Marketing of Caesar's World
Marketing Corporation from 1991 until 1993.
PATRICK J. O'MALLEY--Mr. O'Malley, 43 years old, has been the Executive Vice
President of Finance of Taj Associates since October 1996. Prior to joining the
Taj Mahal, Mr. O'Malley was the Executive Vice President of Hotel Operations of
Plaza Associates from September 1995 to October 1996. Prior to joining Trump
Plaza, from September 1994 until September 1995, Mr. O'Malley was President of
The Plaza Hotel in New York City. From December 1989 until September 1994, Mr.
O'Malley was the Vice President of Finance of The Plaza Hotel in New York City.
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 Marriott International Hotels.
LORETTA I. VISCOUNT--Ms. Viscount, 38 years old, has been Assistant
Secretary of Trump AC Holding since February 1998, Vice President of Legal
Affairs of Taj Associates since January 1997, Executive Director of Legal
Affairs for Taj Associates from May 1996 to January 1997; and Executive Director
of Legal Affairs for Castle Associates from September 1987 to May 1996. Prior to
that, Ms. Viscount served as in-house counsel to the Claridge Hotel and Casino
and had been engaged in the private practice of law since 1982.
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
Rodolfo 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 filed a plan of reorganization on February 28, 1996, which became
effective on February 28, 1997.
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MANAGEMENT OF TRUMP MARINA
All decisions affecting the business and affairs of Castle Associates,
including the operation of Trump Marina, are decided by the general partners
acting by and through a Board of Partner Representatives (the "Board of Partner
Representatives"), which includes a minority of Representatives elected
indirectly by the holders of the Castle Mortgage Notes and the Castle PIK Notes.
As currently constituted, the Board of Partner Representatives consists of
Donald J. Trump, Chairman, Nicholas L. Ribis, John P. Burke, Robert M. Pickus,
Asher O. Pacholder, Thomas F. Leahy, and Arthur S. Bahr.
Set forth below are the names, ages, positions, and offices held with Castle
Associates, and a brief account of the business experience during the past five
years of each member of the Board of Partner Representatives and the executive
officers of Castle Associates other than those who are also directors or
executive officers of THCR.
JOHN P. BELISLE--Mr. Belisle, 44 years old, served as President and Chief
Operating Officer of Castle Associates from June 1997 through November 1997 and
is currently serving as President of Trump Communications. Mr. Belisle also
served as the Executive Vice President of Operations of Castle Associates from
February 1997 through June 1997. Previously, Mr. Belisle served as Executive
Vice President and Chief Operating Officer of Resorts International Hotel
("RIH") since November 1993, Senior Vice President of Casino Operations of RIH
from May 1993 to November 1993, and Vice President of Marketing of RIH from June
1990 to May 1993. Mr. Belisle served as Vice President of Marketing for Trump
Marina from January 1990 to June 1990.
ASHER O. PACHOLDER--Dr. Pacholder, 60 years old, has been a partner
representative of the Board of Partner Representatives since May 1992. Dr.
Pacholder served as a director and the President of TCI-II from May 1992 to
December 1993. He has served as Chairman of the Board Directors and Chief
Financial Officer of ICO, Inc., an oil field services and petrochemicals
processing company, since February 1995 and Chief Operating Officer and a
director of Wedco Technology, Inc. since May of 1996. Dr. Pacholder has served
as Chairman of the Board and Managing Director of Pacholder Associates, Inc., an
investment advisory firm, since 1983. In addition, Dr. Pacholder is Chairman of
the Board of Directors of USF&G Pacholder Fund, Inc., a closed-end investment
company, and he serves on the Board of Directors of Southland Corporation, which
owns and operates convenience stores.
THOMAS F. LEAHY--Mr. Leahy, 60 years old, has been a partner representative
on the Board of Partner Representatives since June 1993. Mr. Leahy served as a
director and Treasurer of TCI-II from May 1992 to December 1993. From 1991 to
July 1992, Mr. Leahy served as Executive Vice President of CBS Broadcast Group,
a unit of CBS, Inc. Mr. Leahy retired from CBS, Inc. in 1992, having served in
various executive capacities over a 30-year period. Since November 1992, Mr.
Leahy has served as President of The Theater Development Fund, a service
organization for the performing arts. Since July 1992 Mr. Leahy has served as
Chairman of VT Properties, Inc., a privately-held corporation which invests in
literary, stage, and film properties.
ARTHUR S. BAHR--Mr. Bahr, 66 years old, has been a partner representative on
the Board of Partner Representatives since June 1995 and previously served as a
director of TCI-II from August 1993 to January 1994. Mr. Bahr retired in
February 1994 after serving in various senior investment positions for General
Electric Investment Corporation since 1970. Mr. Bahr serves on the Board of
Directors of Renaissance Reinsurance and the Korean International Investment
Fund.
MARK A. BROWN--Mr. Brown, 37 years old, joined Castle Associates as
Executive Vice President of Operations in July of 1995, and, effective November
1997, was named President and Chief Operating Officer. Previously, Mr. Brown
served as Senior Vice President of Eastern Operations for Caesar's World
Marketing Corporation, National and International Divisions from 1993 until
1995. Prior to that, Mr. Brown served as Vice President of Casino Operations at
the Taj Mahal from 1989 until 1993.
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Each member of the Board of Partner Representatives and all of the other
persons listed above have been licensed or found qualified by the CCC.
The employees of Castle Associates serve at the pleasure of the Board of
Partner Representatives subject to any contractual rights contained in any
employment agreement.
MANAGEMENT OF TRUMP INDIANA
The sole director of Trump Indiana is Trump. Set forth below are the names,
ages, positions and offices held with Trump Indiana and a brief account of the
business experience during the past five years of each of the directors and
executive officers of Trump Indiana other than those who are also directors or
executive officers of THCR.
JOSEPH D'AMATO--Mr. D'Amato, 50 years old, has been Chief Operating Officer
of Trump Indiana since August 1997. Previously, Mr. D'Amato was Senior Vice
President of Finance and Administration of Trump Indiana from April 1997 to
August 1997. For the twelve years prior to working with THCR, Mr. D'Amato held
various financial and administrative positions with Bally's (now Hilton) casino
in Atlantic City.
ROGER P. WAGNER--Mr. Wagner, 50 years old, was Acting General Manager of
Trump Indiana from October 1996 through February 1998, at which time Mr. Wagner
resigned. Mr. Wagner was a member of the Board of Partner Representatives from
May 1992 to October 1996 and President and Chief Operating Officer of Castle
Associates from January 1991 to October 1996. Mr. Wagner served as a member of
the Executive Committee of Castle Associates from January 1991 to May 1992. Mr.
Wagner was a director and President of TCHI from January 1991 to October 1996.
Prior to joining Castle Associates, Mr. Wagner served as President of the
Claridge Hotel Casino from June 1985 to January 1991 and was the Chairman of the
Casino Association of New Jersey.
Each person listed above is a citizen of the United States.
MANAGEMENT OF TCS
Set forth below are the names, ages, positions and offices held with TCS and
a brief account of the business experience during the past five years of each of
the executive officers of TCS, other than those who are directors or executive
officers of THCR.
FRANCIS X. MCCARTHY, JR.--Mr. McCarthy, 45 years old, has been the Executive
Vice President of Finance of TCS since October 1996. Mr. McCarthy was Vice
President of Finance and Accounting of Trump Plaza GP from October 1992 until
June 1993, Senior Vice President of Finance and Administration of Plaza
Associates from August 1990 to June 1994 and Executive Vice President of Finance
and Administration of Plaza Associates from June 1994 to October 1996. Mr.
McCarthy previously served in a variety of financial positions for Greate Bay
Hotel and Casino, Inc. from June 1980 through August 1990.
KEVIN S. SMITH--Mr. Smith, 41 years old, has been the Vice President of
Corporate Litigation of TCS since October 1996. Mr. Smith was the Vice
President, General Counsel of Plaza Associates from February 1995 to October
1996. Mr. Smith was previously associated with Cooper Perskie April Niedelman
Wagenheim & Levenson, an Atlantic City law firm specializing in trial
litigation. From 1989 until February 1992, Mr. Smith handled criminal trial
litigation for the State of New Jersey, Department of Public Defender, assigned
to the Cape May and Atlantic County Conflict Unit.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires THCR's
directors and executive officers, and persons who own more than 10% of the THCR
Common Stock, to file with the United States Securities and Exchange Commission
(the "Commission") initial reports of ownership and reports of
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changes in ownership of THCR Common Stock. Officers, directors and greater than
10% stockholders are required by the Commission to furnish THCR with copies of
all Section 16(a) forms they file.
To THCR's knowledge, based solely on review of the copies of such reports
furnished to THCR, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with
during the fiscal year ended December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
GENERAL. Because THCR was formed in 1995, there was no salary or bonus paid
to, deferred or accrued for the benefit of, THCR's Chief Executive Officer or
any of the four remaining most highly compensated executive officers (whose
annual salary and bonus exceeded $100,000 for the year ended December 31, 1995
(collectively, the "Executive Group")) by THCR or THCR Holdings prior to or
during the fiscal year ended December 31, 1994. Similarly, no member of the
Executive Group received any other annual compensation, restricted stock awards,
stock options, stock appreciation rights ("SARs"), long-term incentive
performance ("LTIP") payouts or other compensation from THCR or THCR Holdings
prior to or for the fiscal year ended December 31, 1994. All cash compensation
paid to the Executive Group in respect of services provided to THCR since its
inception was paid and will continue to be paid by THCR Holdings in accordance
with the THCR Holdings Partnership Agreement.
1995 STOCK INCENTIVE PLAN. The THCR Board of Directors adopted the 1995
Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which, directors,
employees and consultants of THCR and certain of its subsidiaries and affiliates
who have been selected as participants are eligible to receive awards of various
forms of equity-based incentive compensation, including stock options, SARs,
stock bonuses, restricted stock awards, performance units and phantom stock, and
awards consisting of combinations of such incentives. The 1995 Stock Plan is
administered by the Stock Incentive Plan Committee of the Board of Directors of
THCR (the "Stock Incentive Plan Committee"). Subject to the provisions of the
1995 Stock Plan, the Stock Incentive Plan Committee has sole discretionary
authority to interpret the 1995 Stock Plan and to determine the type of awards
to grant, when, if and to whom awards are granted, the number of shares covered
by each award and the terms and conditions of the award.
In 1996, THCR obtained approval from its shareholders to increase the number
of shares of THCR Common Stock authorized for issuance under the 1995 Stock Plan
from 1,000,000 to 4,000,000.
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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 THCR,
for each of the last three completed fiscal years. Compensation accrued during
one year and paid in another is recorded under the year of accrual. Compensation
for the year ended December 31, 1995 includes compensation paid to or accrued by
these individuals as executive officers of THCR and Plaza Associates, Taj
Associates and Castle Associates, as applicable.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------- RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS($) OPTIONS(#) COMPENSATION
- ----------------------------- --------- --------- --------- ----------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Trump.............. 1997 $1,000,000 --5,000,000 -- -- -- $ 212,960
Chairman of the Board 1996 1,000,000 $ -- -- -- 1,031,000(2)
1995 583,333 -- -- -- -- 4,830,000(2)
Nicholas L. Ribis............ 1997 $1,996,500 --2,500,000 -- $ 758,326(3) -- $ 4,000(4)
Chief Executive Officer 1996 1,996,500 $ -- -- 50,000 2,375(4)
1995 1,876,000 933,338 -- 933,324 133,333 2,588(4)
Robert M. Pickus............. 1997 $ 299,160 $ 25,000 -- 3,975 -- -- $ 4,000(4)
Executive Vice President, 1996 290,673 175,000 $ -- 30,000 4,973(4)
General Counsel and 1995 267,308 105,000 3,471 -- -- 4,004(4)
Secretary
R. Bruce McKee(5)............ 1997 $ 422,356 $ 50,000 -- -- 30,000 $ 2,969(4)
Senior Vice President of 1996 327,566 -- -- -- -- 3,529(4)
Corporate Finance 1995 183,799 292,758 -- -- -- 3,597(4)
Joseph A. Fusco(6)........... 1997 $ 295,660 $ 25,000 --2,665 -- -- $ 4,000(4)
Executive Vice President of 1996 $ 139,211 80,000 $ -- -- 20,000 --
Government and Regulatory 1995 -- -- -- -- --
Affairs
</TABLE>
- ------------------------
(1) Represents the dollar value of annual compensation not properly categorized
as salary or bonus, including amounts reimbursed for income taxes and
directors' fees. Pursuant to Commission 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 by (i) Plaza Associates to Trump
Plaza Management Corp. ("TPM"), a corporation beneficially owned by Trump,
for services provided under a services agreement (the "TPM Services
Agreement"), (ii) Taj Associates under the Taj Services Agreement (as
defined) and (iii) Castle Associates under the Castle Services Agreement (as
defined). See "--Compensation Committee Interlocks and Insider
Participation." In addition, Trump was reimbursed $756,000 and $733,000 in
1996 and 1995, respectively, for expenses incurred pursuant to the TPM
Services Agreement, the Taj Services Agreement and the Castle Services
Agreement.
(3) On June 12, 1997, 66,666 shares of stock were issued in accordance with Mr.
Ribis' employment agreement.
(4) Represents vested and unvested contributions made by Plaza Associates, Taj
Associates, Castle Associates and/or TCS to Trump Plaza Hotel and Casino
Retirement Savings Plan, Trump Taj Mahal Retirement Savings Plan, Trump's
Castle Hotel and Casino Retirement Savings Plan and Trump Casino Services
Retirement Savings Plan, respectively. Funds accumulated for an employee
under these plans consisting of a certain percentage of the employee's
compensation plus the employer matching contributions equaling 50% of the
participant's contributions, are retained until termination of employment,
attainment of age 59 1/2 or financial hardship, at which time the employee
may withdraw his or her vested funds.
(5) Former Acting Chief Operating Officer, Chief Financial Officer and Senior
V.P. of Finance of Taj Associates. Served as President and Chief Operating
Officer of Trump Marina from October 1996 through June 1997. Effective June
1997, Mr. McKee has served as Senior Vice President of Corporate Finance of
THCR.
(6) Mr. Fusco commenced his employment with THCR on June 27, 1996.
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There were no options granted in the year ended December 31, 1997.
The following table sets forth the number of shares covered by options held
by Messrs. Ribis, Pickus, Burke, McKee and Fusco, the only members of the
Executive Group who held options in 1997, and the value of the options as of
December 31, 1997.
FY-END OPTION VALUE(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FY-END(#)
----------------------------
<S> <C> <C>
NAME EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------------------------------------------- ----------------------------
Nicholas L. Ribis..................................................................... 53,333 130,000
Robert M. Pickus...................................................................... N/A 30,000
John P. Burke......................................................................... N/A 30,000
R. Bruce McKee........................................................................ N/A 30,000
Joseph A. Fusco....................................................................... N/A 20,000
</TABLE>
- ------------------------
(1) Based on a closing sale price of $6.688 per share of THCR Common Stock on
December 31, 1997, all of the options were out of the money at fiscal year
end.
EMPLOYMENT AGREEMENTS
Trump serves as the Chairman of the THCR Board of Directors pursuant to the
Executive Agreement dated as of June 12, 1995, among Trump, THCR and THCR
Holdings (the "Executive Agreement"). In consideration for Trump's services
under the Executive Agreement, Trump receives a salary of $1 million per year.
Pursuant to the terms of the Executive Agreement, Trump provides to THCR, from
time to time, when reasonably requested, marketing, advertising, professional
and other similar and related services with respect to the operation and
business of THCR. The Executive Agreement continues in effect (i) for an initial
term of five years, and (ii) thereafter, for a three-year rolling term until
either Trump or THCR provides notice to the other of its election not to
continue extending the term, in which case the term of the Trump Executive
Agreement will end three years from the date such notice is given.
As a result of the June 1995 Offerings, THCR and THCR Holdings entered into
a revised employment agreement with Mr. Ribis (the "Ribis THCR Agreement"),
pursuant to which he agreed to serve as President and Chief Executive Officer of
THCR and Chief Executive Officer of THCR Holdings. The term of the Ribis THCR
Agreement is five years. Under the Ribis THCR Agreement, Mr. Ribis's annual
salary is $1,996,500, Mr. Ribis's annual salary is paid in equal parts by THCR,
Plaza Associates, Taj Associates and Castle Associates. In the event Mr. Ribis's
employment is terminated by THCR other than for "cause" or if he incurs a
"constructive termination without cause," Mr. Ribis will receive a severance
payment equal to one year's base salary, and the phantom stock units and options
will become fully vested. The Ribis THCR Agreement defines (a) "cause" as Mr.
Ribis's (i) conviction of certain crimes, (ii) gross negligence or willful
misconduct in carrying out his duties, (iii) revocation of his casino key
employee license or (iv) material breach of the agreement, and (b) "constructive
termination without cause" as the termination of Mr. Ribis's employment at his
initiative following the occurrence of certain events, including (i) a reduction
in compensation, (ii) failure to elect Mr. Ribis as Chief Executive Officer of
THCR, (iii) failure to elect Mr. Ribis a director of THCR or (iv) a material
diminution of his duties. The phantom stock units will also automatically vest
upon the death or disability of Mr. Ribis. The Ribis THCR Agreement also
provides for up to an aggregate of $2.0 million of loans to Mr. Ribis to be used
by him to pay his income tax liability in connection with stock options, phantom
stock units and stock bonus awards, which loans will be forgiven, including both
principal and interest, in the event of a "change of control." The Ribis THCR
Agreement defines "change of control" as the occurrence of any of the following
events: (i) any person (other than THCR Holdings, Trump or an affiliate of
either) becomes a beneficial owner of
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50% or more of the voting stock of THCR, (ii) the majority of the Board of
Directors of THCR consists of individuals that were not directors on June 12,
1995 (the "June 12 Directors"), PROVIDED, HOWEVER, that any person who becomes a
director subsequent to June 12, 1995, shall be considered a June 12 Director if
his election or nomination was supported by three-quarters of the June 12
Directors, (iii) THCR adopts and implements a plan of liquidation or (iv) all or
substantially all of the assets or business of THCR are disposed of in a sale or
business combination in which shareholders of THCR would not beneficially own
the same proportion of voting stock of the successor entity. The Ribis THCR
Agreement also provides certain demand and piggyback registration rights for
THCR Common Stock issued pursuant to the foregoing. Pursuant to the Ribis THCR
Agreement, Mr. Ribis has agreed that upon termination of his employment other
than for "cause" or following a "change of control," he would not engage in any
activity competitive with THCR for a period of up to one year.
Mr. Ribis had an employment agreement with Taj Associates and Castle
Associates pursuant to which Mr. Ribis acted as Chief Executive Officer of Taj
Associates and Castle Associates, respectively. These agreements were terminated
in connection with the Taj Acquisition and the Castle Acquisition, and now Mr.
Ribis is compensated for his services to Taj Associates and Castle Associates
under the Ribis THCR Agreement.
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 term of which expires on December 31, 2000 if
not extended, provides for annual compensation of $295,000 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.
THCR Holdings has an employment agreement with Joseph A. Fusco (the "Fusco
Agreement") pursuant to which he serves as Executive Vice President of
Government Relations and Regulatory Affairs. The Fusco Agreement, the term of
which expires on December 31, 2000, if not extended, provides for an initial
annual compensation of $285,000 plus bonus, subject to annual review. Employment
may be terminated only for "cause," which is defined in the Fusco Agreement as
Mr. Fusco's (i) denial or 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. Fusco will receive only
compensation earned to the date of termination. Pursuant to the Fusco Agreement,
Mr. Fusco may not accept employment for or on behalf of any other casino hotel
located in Atlantic City during the term of the Fusco Agreement.
COMPENSATION OF DIRECTORS
Directors of THCR who are also employees or consultants of THCR and its
affiliates receive no directors' fees. Non-employee directors are paid an annual
directors fee $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 Trump AC Funding or
Trump AC Holding receive no additional compensation. All such fees are paid by
THCR Holdings in accordance with the THCR Holdings Partnership Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
THCR has an Executive Committee, an Audit Committee, a Special Committee, a
Stock Incentive Plan Committee and a Compensation Committee. The Executive
Committee is composed of Messrs. Trump and Ribis. The Audit Committee and the
Special Committee are composed of
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Messrs. Askins, Ryan and Thomas, each of whom is an independent director of
THCR. The Stock Incentive Plan Committee is composed of Messrs. Trump, Askins,
Ryan and Thomas. The Compensation Committee is composed of Messrs. Trump, Ribis,
Askins and Thomas. The Special Committee was established pursuant to the THCR
By-Laws and the THCR Holdings Partnership Agreement and is empowered to vote on
any matters which require approval of a majority of the independent directors of
THCR, including affiliated transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In general, the compensation of executive officers of THCR is determined by
the Compensation Committee of the THCR Board of Directors, which consists of
Messrs. Trump, Ribis, Askins and Thomas. No officer or employee of THCR, other
than Messrs. Trump and Ribis who serve on the THCR Board of Directors,
participated in the deliberations of the THCR Board of Directors concerning
executive compensation.
TAJ ACQUISITION. On April 17, 1996, a subsidiary of THCR was merged with
and into THCR Holding Corp. and each outstanding share of THCR Holding Corp.
Class A Common Stock, which in the aggregate represented 50% of the economic
interest in Taj Associates, was converted into the right to receive, at each
holder's election, either (a) $30 in cash or (b) that number of shares of THCR
Common Stock having a market value equal to $30. Trump held the remaining 50%
interest in Taj Associates and contributed such interest in Taj Associates to
Trump AC in exchange for limited partnership interests in THCR Holdings. The
outstanding shares of THCR Holding Corp. Class C Common Stock, all of which were
held by Trump, were canceled in connection with the Taj Acquisition. In
addition, Trump received the Trump Warrants. See "Business--The Taj Mahal--Taj
Acquisition."
CASTLE ACQUISITION. On October 7, 1996, THCR Holdings acquired from Trump
all of the outstanding equity of Castle Associates. See "Business--Trump
Marina--Historical Background--Castle Acquisition."
CERTAIN RELATED PARTY TRANSACTIONS--THCR. 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
provided that it would be automatically canceled in the event that at any time
during the periods set forth below, the THCR Common Stock trades on the NYSE, or
any other applicable national exchange or over-the-counter market, at a price
per share equal to or greater than the prices set forth below (subject to
adjustment in certain circumstances) for any ten trading days during any 15
consecutive trading day period:
<TABLE>
<S> <C>
If on or prior to June 12, 1997..................................... $ 25.00
If on or prior to June 12, 1998..................................... $ 27.50
If on or prior to June 12, 1999..................................... $ 30.00
If on or prior to June 12, 2000..................................... $ 32.50
</TABLE>
On March 27, 1996, such $3.0 million promissory note was canceled in
accordance with its terms.
THCR has entered into a ten-year lease with Trump-Equitable Company, dated
as of July 1, 1995, for the lease of office space in The Trump Tower in New York
City, which THCR may use for its general executive and administrative offices.
The fixed rent is $115,500 per year, paid in equal monthly installments, for the
period from July 1, 1995 to June 30, 2000 and will be $129,250 per year, paid in
equal monthly installments, for the period from July 1, 2000 to June 30, 2005.
In addition, THCR will pay as
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additional rent, among other things, a portion of the property taxes due each
year. THCR has the option to terminate this lease upon ninety days' written
notice and payment of $32,312.50.
CERTAIN RELATED PARTY TRANSACTIONS--PLAZA ASSOCIATES. Seashore Four was the
fee owner of a parcel of land constituting a portion of the Plaza Casino Parcel,
which it leased to Plaza Associates. Plaza Associates recorded rental expenses
of approximately $1.0 million in 1996 concerning rent owed to Seashore Four. In
January 1997, Plaza Associates exercised the option to purchase the land under
the lease with Seashore Four for $10 million.
Trump Seashore was the fee owner of a parcel of land constituting a portion
of the Plaza Casino Parcel, which it leased to Plaza Associates. Plaza
Associates made rental payments to Trump Seashore of approximately $1.0 million
in 1996. In September 1996, Plaza Associates exercised the option to purchase
the land under the lease with Trump Seashore for $14.5 million.
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.
("MBI"), a wholly owned subsidiary of Midlantic National Bank ("Midlantic"), in
exchange for a reduction in indebtedness to Midlantic, (ii) MBI leased Trump
Plaza East to Trump (the "Trump Plaza East Lease") for a term of five years,
which would have expired on June 30, 1998, during which time Trump would have
been obligated to pay MBI $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. On April 17,
1996, in connection with the Taj Acquisition, Plaza Associates purchased Trump
Plaza East and the Trump Plaza East Lease, and related obligations were
terminated.
CERTAIN RELATED PARTY TRANSACTIONS--TAJ ASSOCIATES. Taj Associates has a
lease with Trump-Equitable Company, for the lease of office space in The Trump
Tower in New York City, which Taj Associates uses as a marketing office. 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.
From October 4, 1991 until April 17, 1996, Taj Associates leased the
Specified Parcels from Realty Corp., consisting of land adjacent to the site of
the Taj Mahal, which is 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. On April 17, 1996, in
connection with the Taj Acquisition, Taj Associates purchased the Specified
Parcels from Realty Corp. and the lease and related obligations were terminated.
On October 4, 1991, Taj Associates entered into a guarantee with First
Fidelity Bank, National Association (now known as First Union National Bank)
("First Fidelity") of the performance by Realty Corp. of its obligations under a
loan of approximately $78 million owing to First Fidelity (the "First Fidelity
Loan"), which loan was secured by a mortgage on the Specified Parcels. Such
guarantee was 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, Realty Corp.'s obligations to First Fidelity
under the First Fidelity Loan were satisfied and First Fidelity, among other
things, released Taj Associates from the guarantee.
Taj Associates and Trump were parties to an agreement, which became
effective in April 1991, and which provided that Trump would render to Taj
Associates marketing, advertising, promotional and related services with respect
to the business operations of Taj Associates through December 31, 1999 (the "Taj
Services Agreement"). In consideration for the services to be rendered, Taj
Associates paid an annual fee (the "Annual Fee") equal to 1% 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. During the year 1995,
and the period from January 1, 1996 to April 17, 1996, Trump earned
approximately $1.7 million and $0.4 million, respectively, in respect of the
Annual Fee, including amounts paid to a third party pursuant to an
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assignment agreement. In addition, during the year 1995, and the period from
January 1, 1996 to April 17, 1996, Taj Associates reimbursed Trump $261,000 and
$148,000, respectively, for expenses pursuant to the Taj Services Agreement. Taj
Associates 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. The Taj Services Agreement
was terminated upon consummation of the Taj Acquisition on April 17, 1996.
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 had
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 Taj Mahal
(collectively, the "Taj Marks"), in its advertising, marketing and promotional
activities through December 31, 1999. Upon consummation of the Taj Acquisition,
the Taj License Agreement was terminated and the Taj Marks were licensed to THCR
under the License Agreement.
CERTAIN RELATED PARTY TRANSACTIONS--CASTLE ASSOCIATES. On December 28,
1993, Castle Associates entered into a Services Agreement with TCI-II (the
"Castle Services Agreement"). In general, the Castle Services Agreement
obligates TCI-II to provide to Castle Associates, from time-to-time when
reasonably requested, consulting services on a non-exclusive basis, relating to
marketing, advertising, promotional and other services (the "Castle Services")
with respect to the business and operations of Castle Associates, in exchange
for certain fees to be paid only in those years in which EBITDA (EBITDA
represents income from operations before depreciation, amortization,
restructuring costs and the non-cash write-down of CRDA investments) exceeds
prescribed amounts.
In consideration for the Castle Services to be rendered by TCI-II, Castle
Associates will pay an annual fee (which is identical to the fee which was
payable under the previously existing management agreement) to TCI-II in the
amount of $1.5 million for each year in which EBITDA exceeds the following
amounts for the years indicated: 1993--$40.5 million; 1994--$45.0 million; 1995
and thereafter--$50.0 million. If EBITDA in any fiscal year does not exceed the
applicable amount, no annual fee is due. In addition, TCI-II will be entitled to
an incentive fee, beginning with the fiscal year ending December 31, 1994, in an
amount equal to 10% of EBITDA in excess of $45.0 million for such fiscal year.
Castle Associates will also be required to advance to TCI-II $125,000 a month
which will be applied toward the annual fee, provided, however, that no advances
will be made during any year if and for so long as the Managing Partner (defined
in the Castle Services Agreement as Trump) determines, in his good faith
reasonable judgment, that Castle Associates' budget and year-to-date performance
indicate that the minimum EBITDA levels (as specified above) for such year will
not be met. If for any year during which annual fee advances have been made it
is determined that the annual fee was not earned, TCI-II will be obligated to
promptly repay any amounts previously advanced. For purposes of calculating
EBITDA under the Castle Services Agreement, any incentive fees paid in respect
of 1994 or thereafter shall not be deducted in determining net income. During
the year ended 1996, there were no fees payable by Castle Associates under the
Castle Services Agreement. As Castle Associates did not meet the required level
of EBITDA in 1996, the monthly advances to TCI-II related to the Castle Services
Agreement were suspended and on October 6, 1996, Castle Associates recorded a
receivable in the amount of $1.25 million which represents the amounts advanced
to TCI-II during the year. The Castle Services Agreement expires on December 31,
2005.
Trump has granted Castle Associates a license to use the Marks in connection
with the operations of Trump Marina since June 17, 1985. The license expires on
August 15, 1998. See "Business--Trademark/ Licensing."
OTHER RELATIONSHIPS. The Commission requires registrants to disclose the
existence of any other corporation in which both (i) an executive officer of the
registrant serves on the board of directors and/or
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compensation committee, and (ii) a director of the registrant serves as an
executive officer. Messrs. Ribis, Pickus and Burke, executive officers of THCR,
have served on the boards of directors of other entities in which members of the
THCR 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 THCR Board of Directors in
the last fiscal year.
Trump is the sole director of TACC, a general partner of Plaza Associates,
of which Messrs. Trump, Ribis and Pickus are executive officers. Messrs. Trump
and Ribis also serve on the Board of Directors of Trump AC Holding, of which
Messrs. Trump, Ribis and Burke are also executive officers. Trump is not
compensated by such entities for serving as an executive officer, however, he
has entered into a personal services agreement with Plaza Associates and THCR.
Messrs. Ribis and Burke are not compensated by the foregoing entities, however,
they are compensated by Plaza Associates for their service as executive
officers.
Messrs. Ribis, Pickus, and Burke serve on the Board of Directors of THCR
Holding Corp., which held, prior to April 17, 1996, an indirect equity interest
in Taj Associates, of which Trump is an executive officer. Such persons also
serve on the Board of Directors of THCR/LP, the former managing general partner
of Taj Associates, of which Messrs. Trump and Ribis are executive officers. See
"--Employment Agreements."
Mr. Ribis also serves on the Board of Directors of Realty Corp., which,
prior to the Taj Acquisition, leased certain real property to Taj Associates, of
which Trump is an executive officer. Trump, however, does not receive any
compensation for serving as an executive officer of Realty Corp.
Messrs. Ribis, Pickus and Burke are members of the Board of Partner
Representatives of Castle Associates and members of the Board of Directors of
TCHI, the general partner of Castle Associates of which Messrs Ribis, Pickus and
Burke are executive officers. In addition, Trump is the sole director and an
officer of Castle Funding. Messrs Ribis, Pickus and Burke received no
compensation from these entities other than from Castle Associates for their
services as executive officers. Trump is not compensated by these entities other
than pursuant to the Castle 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.
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ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP
THCR. The following table sets forth, as of March 23, 1998, certain
information regarding the beneficial ownership of THCR Common Stock by (i) each
of THCR's executive officers, (ii) each director of THCR, (iii) each person who
is known to THCR to own beneficially more than 5% of the THCR Common Stock and
(iv) all officers and directors of THCR as a group. In the case of persons other
than officers and directors of THCR, such information is based solely on a
review of Schedules 13G filed with the Commission.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------
<S> <C> <C>
NAME NUMBER PERCENT
- ---------------------------------------------------------------------------------------- ------------ -----------
Donald J. Trump......................................................................... 15,718,973(1) 43.2%
Nicholas L. Ribis....................................................................... 149,153(2) *
John P. Burke........................................................................... 700(3) *
R. Bruce McKee.......................................................................... 0 0%
Robert M. Pickus........................................................................ 1,000 *
Joseph A. Fusco......................................................................... 1,000 *
Wallace B. Askins....................................................................... 3,000 *
Don M. Thomas........................................................................... 1,500 *
Peter M. Ryan........................................................................... 10,000 *
Conesco, Inc............................................................................ 2,010,000(4) 9.7%
Mario J. Gabelli........................................................................ 1,885,000(5) 9.1%
Bay Harbour Management, L.C............................................................. 1,643,100(6) 7.9%
Dimensional Fund Advisors Inc........................................................... 1,371,300(7) 6.6%
Oppenheimer Group, Inc.................................................................. 2,470,849(8) 11.9%
All officers and directors of THCR (8 persons).......................................... 15,885,326 43.6%
</TABLE>
The above persons have sole voting and investment power, unless otherwise
indicated below.
- ------------------------
* Less than 1%.
(1) 725 Fifth Avenue, New York, New York 10022. These shares include 10,300,456,
1,407,017, and 2,211,250 shares of THCR Common Stock into which Trump's,
TCI's and TCI-II's limited partnership interests in THCR Holdings are
convertible, subject to certain adjustments. TCI and TCI-II are corporations
wholly owned by Trump. These shares also include (a) 250 shares of THCR
Common Stock, 100 of which are held for Trump's account and 150 of which are
held as custodian for his children, and (b) 1,800,000 shares of THCR Common
Stock underlying currently exercisable warrants to purchase THCR Common
Stock held by Trump of which (i) 600,000 shares may be purchased on or
before April 17, 1999 at $30.00 per share, (ii) 600,000 shares may be
purchased on or before April 17, 2000 at $35.00 per share and (iii) 600,000
shares may be purchased on or before April 17, 2001 at $40.00 per share.
Trump beneficially owns an approximately 37% limited partnership interest in
THCR Holdings, of which approximately 4% is held directly by TCI and 6% by
TCI-II. Trump is also the beneficial owner of all of the outstanding shares
of THCR Class B Common Stock (1,000 shares) of which he holds 850 shares
directly and holds 50 shares through TCI and 100 shares through TCI-II.
(2) Includes (i) a fully vested stock bonus award of 66,667 shares, (ii) 10,000
shares held by Mr. Ribis, (iii) 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, and (iv) 26,667 shares underlying currently
exercisable options to purchase THCR Common Stock at $14.00 per share until
June 12, 2005.
(3) Mr. Burke shares voting and dispositive power of 200 of these shares with
his wife. These shares also include 200 shares beneficially owned solely by
his wife, of which shares Mr. Burke disclaims beneficial ownership.
(4) 11825 North Pennsylvania Street, Carmel, Indiana 46032. These shares are
beneficially owned by Bankers Life and Casualty Company, an insurance
company, of which Conseco, Inc. is the parent holding company.
(5) One Corporate Center, Rye, New York 10580-1434. Mario J. Gabelli claims
beneficial ownership of these shares through various entities which he
directly or indirectly controls or for which he acts as chief investment
officer.
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(6) 777 South Harbour Island Boulevard, Suite 270, Tampa, Florida 33602. Bay
Harbour Management, L.C. ("Bay Harbour") is an investment advisor and claims
beneficial ownership of 1,628,100 of these shares. Also includes 15,000
shares owned by Steven A. Van Dyke, the sole stockholder and President of
Tower Investment Group, Inc. ("Tower"), the majority stockholder of Bay
Harbour, of which shares Bay Harbour, of which shares Bay Harbour and Tower
disclaim beneficial ownership.
(7) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 1,371,300 shares of THCR
Common Stock as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(8) 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 2,317,249 shares beneficially
owned by Oppenheimer Capital, an investment adviser, of which Oppenheimer is
the parent holding company. Oppenheimer disclaims beneficial ownership of
these shares.
As security for certain indebtedness of Trump and his affiliates (other than
THCR and its subsidiaries) owed to a lender, Trump pledged 830 shares of his
THCR Class B Common Stock and an approximately 22.7% limited partnership
interest in THCR Holdings, and caused TCI to pledge its 50 shares of THCR Class
B Common Stock and its 5.5% limited partnership interest in THCR Holdings. A
foreclosure on all of such collateral could result in a change of control of
THCR.
THCR HOLDINGS. THCR Holdings is a limited partnership of which THCR is a
59.87743% general partner, Trump is a 27.06458% limited partner, THCR/LP is a
3.55096% limited partner, TCI is a 3.69695% limited partner and TCI II is a
5.81009% limited partner.
THCR FUNDING. THCR Holdings owns 100% of the common stock of THCR Funding.
CHANGES IN CONTROL
On June 12, 1995, as a part of the June 1995 Offerings, THCR Holdings and
THCR Funding issued the Senior Notes. Pursuant to the Senior Note indenture,
THCR Holdings pledged for the benefit of the holders of the Senior Notes, among
other things, 100% of the common stock of THCR Funding. A foreclosure on all of
such collateral would result in a change of control of THCR Funding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Affiliate party transactions are governed by the provisions of the Senior
Note Indenture, the TAC I Note Indenture, the TAC II Note Indenture and the TAC
III Note Indenture, which provisions generally require that such transactions be
on terms as favorable as would be obtainable from an unaffiliated party, and
require the approval of a majority of the independent directors of THCR for
certain affiliated transactions. Affiliated transactions with respect to Castle
Associates are governed by the indentures under which the Castle Notes were
issued.
Trump, Ribis and certain affiliates have engaged in certain related party
transactions with respect to THCR and its subsidiaries. See "Executive
Compensation--Compensation Committee Interlocks and Insider
Participation--Certain Related Party Transactions--THCR," "--Plaza Associates,"
"--Taj Associates," "--Castle Associates" and "--Other Relationships."
Plaza Associates, Taj Associates and Castle Associates have joint insurance
coverage with other entities affiliated with Trump, for which the annual
premiums paid by Plaza Associates, Taj Associates and Castle Associates was
approximately $4.0 million for the year ended December 31, 1997.
Plaza Associates leased portions of its Egg Harbor Parcel to Castle
Associates. Lease payments by Castle Associates to Plaza Associates totaled
$5,000 in 1996. Castle Associates did not make any lease payments to Plaza
Associates in 1997.
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In November 1996, Castle Associates assigned to THCR Holdings, with the
consent of Roger P. Wagner, Castle Associates' employment agreement with Mr.
Wagner, pursuant to which Mr. Wagner served as the President and Chief Operating
Officer of Castle Associates and TCHI. The assigned agreement provides for an
annual salary of $375,000 reviewed on an annual basis. Mr. Wagner was the Acting
General Manager of Trump Indiana and resigned his position with THCR Holdings in
February 1998.
INDEMNIFICATION AGREEMENTS. In addition to the indemnification provisions
in THCR's and its subsidiaries' employment agreements (see "Executive
Compensation--Employment Agreements"), certain former and current directors of
Plaza Funding entered into separate indemnification agreements in May 1992 and
June 1993 with Plaza Associates pursuant to which such persons are afforded the
full benefits of the indemnification provisions of the partnership agreement
governing Plaza Associates. Plaza Associates also entered into an
indemnification trust agreement in November 1992 with Midlantic (the
"Indemnification Trustee") pursuant to which the sum of $100,000 was deposited
by Plaza Associates with the Indemnification Trustee for the benefit of the
directors of Plaza Funding and certain former directors of Trump Plaza GP to
provide a source for indemnification for such persons if Plaza Associates, Plaza
Funding or Trump Plaza GP, as the case may be, fails to immediately honor a
demand for indemnification by such persons. The indemnification agreements with
the directors of Plaza Funding and directors of Trump Plaza GP were amended in
June 1993 to provide, among other things, that Plaza Associates would (i) not
terminate, amend or modify certain agreements in a manner which may adversely
affect the rights or interests of such directors unless an additional sum of
$600,000 was first deposited with the Indemnification Trustee, and (ii) maintain
directors' and officers' insurance covering such persons during the ten-year
term (subject to extension) of the indemnification agreements; provided,
however, that if such insurance would not be available on a commercially
practicable basis, Plaza Associates could, in lieu of obtaining such insurance,
annually deposit an amount in a trust fund equal to $500,000 for the benefit of
such directors; PROVIDED FURTHER that deposits relating to the failure to obtain
such insurance shall not exceed $2.5 million. Such directors are covered by
directors' and officers' insurance maintained by Plaza Associates. In June 1993,
an additional sum of $600,000 was deposited with the Indemnification Trustee for
the benefit of the directors of Plaza Funding and certain former directors of
Trump Plaza GP.
In connection with the Taj Acquisition, Trump AC has agreed to provide to
the former officers and Directors of THCR Holding Corp. and THCR/LP (the "Taj
Indemnified Parties"), including Messrs. Ribis, Pickus and Burke,
indemnification as provided in the THCR's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws until April 17, 2002. In
addition, THCR agreed, and agreed to cause THCR Holding Corp. and THCR/LP to
agree, that until April 17, 2002, unless otherwise required by law, the
Certificate of Incorporation and By-Laws of THCR Holding Corp. and THCR/LP shall
not be amended, repealed or modified to reduce or limit the rights of indemnity
afforded to the former directors, officers and employees of THCR Holding Corp.
and THCR/LP or the ability of THCR Holding Corp. or THCR/LP to indemnify such
persons, nor to hinder, delay or make more difficult the exercise of such rights
of indemnity or the ability to indemnify. In addition, Trump AC has also agreed
to purchase and maintain in effect, until April 17, 2002, directors' and
officers' liability insurance policies covering the Taj Indemnified Parties on
terms no less favorable than the terms of the then current insurance policies'
coverage or, if such directors' and officers' liability insurance is unavailable
for an amount no greater than 150% of the premium paid by THCR Holding Corp. (on
an annualized basis) for directors' and officers' liability insurance during the
period from January 1, 1996, to April 17, 1996, Trump AC has agreed to obtain as
much insurance as can be obtained for a premium not in excess (on an annualized
basis) of such amount.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS. See the Index immediately following the signature
page.
(b) REPORTS ON FORM 8-K. The Registrants did not file any reports on Form
8-K during the quarter ended December 31, 1997.
(c) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
2.1(12) Agreement, dated as of June 24, 1996, among Trump Hotels & Casino Resorts, Inc.,Trump Hotels &
Casino Resorts Holdings, L.P., TC/GP, Inc., Trump's Castle Hotel & Casino, Inc. and Donald J.
Trump.
3.1(9) Amended and Restated Certificate of Incorporation of Trump Hotels & Casino Resorts, Inc.
3.2(9) Amended and Restated By-Laws of Trump Hotels & Casino Resorts, Inc.
3.1.3(14) Amendment to the Amended and Restated Certificate of Incorporation of Trump Hotels & Casino
Resorts, Inc.
4.1(4) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as issuer, Trump Plaza Associates, as
guarantor, and First Bank National Association, as trustee.
4.2(4) Indenture of Mortgage, between Trump Plaza Associates, as mortgagor, and Trump Plaza Funding, Inc.,
as mortgagee.
4.3(4) Assignment Agreement between Trump Plaza Funding, Inc., and First Bank National Association, as
trustee.
4.4(4) Assignment of Operating Assets from Trump Plaza Associates to Trump Plaza Funding, Inc.
4.5(4) Assignment of Leases and Rents from Trump Plaza Associates to Trump Plaza Funding, Inc.
4.6(4) Indenture of Mortgage between Trump Plaza Associates and First Bank National Association, as
trustee.
4.7(4) Assignment of Leases and Rents from Trump Plaza Associates to First Bank National Association, as
trustee.
4.8(4) Assignment of Operating Assets from Trump Plaza Associates to First Bank National Association, as
trustee.
4.9(4) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(4) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(4) 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.
4.17.1(9) 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.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
4.17.2(11) Supplemental Indenture by Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. with respect to their 15 1/2% Senior Secured Notes due 2005.
4.17.3(11) Second Supplemental Indenture by Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels &
Casino Resorts Funding, Inc. with respect to their 15 1/2% Senior Secured Notes due 2005.
4.18(9) Senior Secured Note Certificate (included in Exhibit 4.17).
4.19.1(9) 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.
4.19.2(9) 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(9) 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(9) 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.
4.19.5(11) Pledge Agreement, dated April 17, 1996, from Trump Hotels & Casino Resorts Holdings, L.P. as
pledgor to First Bank National Association as Senior Note Trustee.
4.19.6(11) Pledge Agreement, dated April 17, 1996, from Trump Atlantic City Associates as pledgor to First
Bank National Association as Senior Note Trustee.
4.19.7(11) Pledge Agreement, dated April 17, 1996, from Trump Atlantic City Holding, Inc. as pledgor to First
Bank National Association as Senior Note Trustee.
4.19.8(11) Pledge Agreement, dated April 17, 1996, from Trump Atlantic City Corporation as pledgor to First
Bank National Association as Senior Note Trustee.
4.20(14) Pledge Agreement, dated as of October 7, 1996, by and between Trump Hotels & Casino Resorts
Holdings, L.P. and First Bank National Association, as trustee.
4.21(14) Pledge Agreement, dated as of October 7, 1996, by and between Trump's Castle Hotel & Casino, Inc.
and First Bank National Association, as trustee.
4.22-4.23 Intentionally omitted.
4.24(9) 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(8) Certificate of Common Stock of Trump Hotels & Casino Resorts, Inc.
4.26(11) Indenture, dated April 17, 1996, among Trump Atlantic City Associates and Trump Atlantic City
Funding, Inc., as issuers, Trump Plaza Associates, Trump Taj Mahal Associates and The Trump Taj
Mahal Corporation, as guarantors, and First Bank National Association as trustee.
4.27(11) First Mortgage Note Certificate (included in Exhibit 4.26.1).
4.28.1(11) Indenture of Mortgage and Security Agreement among Trump Taj Mahal Associates, as mortgagor, and
First Bank National Association, as collateral agent, as mortgagee.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
4.28.2(11) Indenture of Mortgage and Security Agreement among Trump Plaza Associates, as mortgagor, and First
Bank National Association, as collateral agent, as mortgagee.
4.29.1(11) Assignment of Leases and Rents among Trump Taj Mahal Associates, as assignor, and First Bank
National Association, as collateral agent, as mortgagee.
4.29.2(11) Assignment of Leases and Rents among Trump Plaza Associates, as assignor, and First Bank National
Association, as collateral agent, as mortgagee.
4.30(11) Collateral Agency Agreement among First Bank National Association, as collateral agent, First Bank
National Association, as trustee, Trump Atlantic City Associates, Trump Atlantic City Funding,
Inc., the other secured parties signatory thereto, and the guarantors under the First Mortgage Note
Indenture.
4.31(11) Warrants of Trump Hotels & Casino Resorts, Inc. issued to Donald J. Trump.
4.32(17) Indenture, dated as of December 10, 1997, by and among Trump Atlantic City Associates and Trump
Atlantic City Funding II, Inc., as issuers, Trump Atlantic City Corporation, Trump Casino Services,
L.L.C., Trump Communications, L.L.C., Trump Plaza Associates and Trump Taj Mahal Associates, as
guarantors, and U.S. Bank National Association, as trustee.
4.33(16) Registration Rights Agreement, dated as of December 10, 1997, by and among Trump Atlantic City
Associates and Trump Atlantic City Funding II, as issuers, Trump Atlantic City Corporation, Trump
Casino Services, L.L.C., Trump Communications, L.L.C., Trump Plaza Associates and Trump Taj Mahal
Associates as guarantors, and Donaldson, Lufkin & Jenrette Securities Corporation, as initial
purchaser.
4.34(18) Indenture, dated as of December 10, 1997, by and among Trump Atlantic City Associates and Trump
Atlantic City Funding III, Inc., as issuers, Trump Atlantic City Corporation, Trump Casino
Services, L.L.C., Trump Communications, L.L.C., Trump Plaza Associates and Trump Taj Mahal
Associates, as guarantors, and U.S. Bank National Association, as trustee.
4.35(15) Registration Rights Agreement, dated as of December 10, 1997, by and among Trump Atlantic City
Associates and Trump Atlantic City Funding III, as issuers, Trump Atlantic City Corporation, Trump
Casino Services, L.L.C., Trump Communications, L.L.C., Trump Plaza Associates and Trump Taj Mahal
Associates, as guarantors, and Donaldson, Lufkin & Jenrette Securities Corporation, as initial
purchaser.
4.36(18) Indenture of Mortgage and Security Agreement dated as of December 10, 1997, by Trump Plaza
Associates as mortgagor and U.S. Bank National Association (as Collateral Agent) as mortgagee.
4.37(18) Indenture of Mortgage and Security Agreement dated as of December 10, 1997, by Trump Taj Mahal
Associates as mortgagor and U.S. National Association (as Collateral Agent) as mortgagee.
4.38(18) Assignment of Leases and Rents dated as of December 10, 1997, by Trump Plaza Associates as assignor
and U.S. Bank National Association (as Collateral Agent) as assignee.
4.39(18) Assignment of Leases and Rents dated as of December 10, 1997, by Trump Taj Mahal Associates as
assignor and U.S. Bank National Association (as Collateral Agent) as assignee.
10.1-10.6 Intentionally omitted.
10.7(6) Employment Agreement between Trump Plaza Associates and Barry Cregan.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
10.8-10.27 Intentionally omitted.
10.28(1) Option Agreement, dated as of February 2, 1993, between Donald J. Trump and Trump Plaza Associates.
10.29 Intentionally omitted.
10.30(2) Amended and Restated Services Agreement between Trump Plaza Associates and Trump Plaza Management
Corp.
10.31-10.32 Intentionally omitted.
10.33(3) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg and Robert Rothenberg, dated
October 3, 1983.
10.34(3) Intentionally omitted.
10.35.1(3) Mortgage from Trump Plaza Associates to The Mutual Benefit Life Insurance Company, dated October 5,
1990.
10.35.2(3) 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.
10.38.1(5) Employment Agreement between Trump Plaza Associates and Nicholas L. Ribis.
10.38.2(9) Employment Agreement between Trump Hotels & Casino Resorts Holdings, L.P. and Nicholas L. Ribis
(with exhibits).
10.39.1(5) Severance Agreement between Trump Plaza Associates and Robert M. Pickus.
10.39.2(15) Employment Contract, dated July 7, 1995, between Trump Hotels & Casino Resorts Holdings, L.P. and
Robert M. Pickus.
10.40(7) Employment Agreement, dated as of February 7, 1995, between Trump Plaza Associates and Kevin S.
Smith.
10.41(7) Employment Agreement between Trump Plaza Associates and James A. Rigot.
10.42(7) Option and Right of First Offer Agreement between Trump Plaza Associates and Missouri Boardwalk
Inc., dated June 24, 1993.
10.43(7) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated June 24, 1993.
10.44(7) Sublease between Donald J. Trump and Missouri Boardwalk Inc., dated June 24, 1993.
10.45 Intentionally omitted.
10.46.1(9) Executive Agreement among Donald J. Trump, Trump Hotels & Casino Resorts, Inc. and Trump Hotels &
Casino Resorts Holdings, L.P.
10.46.2(13) Amendment to Executive Agreement, dated as of May 16, 1996, by and among Donald J. Trump, Trump
Hotels & Casino Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47.1(9) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts, Inc.
10.47.2(13) Amendment No. 1 to Trump Hotels & Casino Resorts, Inc. 1995 Stock Incentive Plan.
10.50(8) Acquisition Agreement, dated April 27, 1995, between Trump Oceanview, Inc. and The New Jersey
Sports and Exposition Authority.
10.51.1(8) Amended and Restated Partnership Agreement of Trump Hotels & Casino Resorts Holdings, L.P.
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
10.51.2(11) Second Amended and Restated Agreement of Limited Partnership of Trump Hotels & Casino Resorts
Holdings, L.P.
10.51.3(14) Third Amended and Restated Agreement of Limited Partnership of Trump Hotels & Casino Resorts
Holdings, L.P., dated as of October 7, 1996.
10.52.1(9) Exchange and Registration Rights Agreement, dated June 12, 1995, between Trump Hotels & Casino
Resorts, Inc. and Donald J. Trump.
10.52.2(11) Amended and Restated Exchange and Registration Rights Agreement, dated April 17, 1996, among Trump
Hotels & Casino Resorts, Inc., Donald J. Trump and Trump Casinos, Inc.
10.52.3(14) Second Amended and Restated Exchange and Registration Rights Agreement among Donald J. Trump, Trump
Casinos, Inc., Trump Casinos II, Inc. and Trump Hotels & Casino Resorts, Inc., dated as of October
7, 1996.
10.53.1(9) Contribution Agreement, dated June 12, 1995, between Trump Hotels & Casino Resorts Holdings, L.P.
and Donald J. Trump.
10.53.2(11) 1996 Contribution Agreement among Trump Hotels & Casino Resorts Holdings, L.P., Donald J. Trump,
THCR/LP Corporation (formerly known as TM/GP Corporation) and Trump Casinos, Inc. (formerly known
as Trump Taj Mahal, Inc.).
10.54.1(9) Trademark License Agreement, dated June 12, 1995, between Donald J. Trump and Trump Hotels & Casino
Resorts, Inc.
10.54.2(11) Amendment to Trademark License Agreement, dated April 17, 1996, between Donald J. Trump and Trump
Hotels & Casino Resorts, Inc.
10.55.1(9) Trademark Security Agreement, dated June 12, 1995, between Trump Hotels & Casino Resorts, Inc. and
Donald J. Trump.
10.55.2(11) Amendment to Trademark Security Agreement, dated April 17, 1996, between Donald J. Trump and Trump
Hotels & Casino Resorts, Inc.
10.56(8) Agreement of Sublease between Donald J. Trump and Time Warner Entertainment Company, L.P., as
amended.
10.57 Intentionally omitted.
10.59(10) 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.
10.60.1(10) Loan and Security Agreement, by and between debis Financial Services, Inc. and Trump Indiana, Inc.,
dated August 30, 1995.
10.60.2(10) Amendment Agreement to Loan and Security Agreement, by and between debis Financial Services, Inc.
and Trump Indiana, Inc., dated as of October 25, 1995.
10.61(10) Voting Agreement between Donald J. Trump and Trump Hotels & Casino Resorts, Inc., dated January 8,
1996.
10.63(11) Third Amended and Restated Partnership Agreement of Trump Plaza Associates.
10.64(11) Amended and Restated Partnership Agreement of Trump Atlantic City Associates.
10.65.1(13) Services Agreement, dated as of July 8, 1996, among Trump Plaza Associates, Trump Taj Mahal
Associates and Trump Casino Services, L.L.C.
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
10.65.2(14) Amended and Restated Services Agreement, dated as of October 23, 1996, by and among Trump Plaza
Associates, Trump Taj Mahal Associates, Trump's Castle Associates, L.P. and Trump Casino Services,
L.L.C.
10.66(13) Thermal Energy Service Agreement, dated as of June 30, 1996, by and between Atlantic Jersey Thermal
Systems, Inc. and Trump Taj Mahal Associates.
10.67.1(14) Amendment to the Second Amended and Restated Partnership Agreement of Trump's Castle Associates,
dated as of October 7, 1996.
10.67.2(14) Third Amended and Restated Partnership Agreement of Trump's Castle Associates, L.P., dated as of
October 7, 1996.
10.68(14) Registration Agreement among Donald J. Trump, Trump Casinos, Inc., Trump Casinos II, Inc., Trump
Hotels & Casino Resorts, Inc. and Donaldson Lufkin & Jenrette, Inc., dated as of October 7, 1996.
10.69(14) Thermal Energy Service Agreement, dated as of September 26, 1996, by and between Atlantic Jersey
Thermal Systems, Inc. and Trump Plaza Associates.
10.70 Employment Agreement, dated May 3, 1996, between Trump Hotels & Casinos Resorts Holdings, L.P. and
Joseph A. Fusco.
10.71 Promissory Note of Nicholas L. Ribis in favor of Trump Hotels & Casino Resorts Holdings, L.P.,
dated December 4, 1996.
21 List of Subsidiaries of Trump Hotels & Casino Resorts, Inc.
23 Independent Auditors' Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule of Trump Hotels & Casino Resorts, Inc.
27.2 Financial Data Schedule of Trump Hotels & Casino Resorts Holdings, L.P.
27.3 Financial Data Schedule of Trump Hotels & Casino Resorts Funding Inc.
</TABLE>
- ------------------------
(1) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year ended
December 31, 1992.
(2) Previously filed in the Registration Statement on Form S-1, Registration No.
33-58608, of Trump Atlantic City Associates (formerly Trump Plaza Holding
Associates).
(3) 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.
(4) 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).
(5) 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.
(6) 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.
(7) 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.
(8) 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.
81
<PAGE>
(9) 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.
(10) Incorporated by reference to the identically numbered Exhibit in the
Registration Statement on Form S-1, Registration No. 333-639, of Trump
Hotels & Casino Resorts, Inc.
(11) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc. for the
quarter ended March 31, 1996.
(12) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Trump Hotels & Casino Resorts, Inc., dated June 25, 1996.
(13) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc. for the
quarter ended June 30, 1996.
(14) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc. for the
quarter ended September 30, 1996.
(15) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-43975, of Trump
Atlantic City Associates and Trump Atlantic City Funding III, Inc.
(16) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-43979, of Trump
Atlantic City Associates and Trump Atlantic City Funding II, Inc.
(17) Incorporated herein by reference to the identically numbered Exhibit in
Amendment No. 1 to Registration Statement on Form S-4, Registration No.
333-43979, of Trump Atlantic City Associates and Trump Atlantic City Funding
II, Inc.
(18) Incorporated herein by reference to the identically numbered Exhibit to the
Annual Report on Form 10-K of Trump Atlantic City Associates, Trump Atlantic
City Funding, Inc., Trump Atlantic City Funding II, Inc. and Trump Atlantic
City Funding III, Inc. for the year ended December 31, 1997.
(d) FINANCIAL STATEMENT SCHEDULES. See "Financial Statements and
Supplementary Data--Index to Financial Statements and Financial Statement
Schedules" for a list of the financial statement schedules included in this
Annual Report.
82
<PAGE>
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of the Registrant, the
Registrant notes that there are various factors that could cause actual results
to differ materially from those set forth in any such forward-looking
statements. The forward-looking statements contained in this Annual Report were
prepared by management and are qualified by, and subject to, significant
business, economic, competitive, regulatory and other uncertainties and
contingencies, all of which are difficult or impossible to predict and many of
which are beyond the control of the Registrant. Accordingly, there can be no
assurance that the forward-looking statements contained in this Annual Report
will be realized or that actual results will not be significantly higher or
lower. The statements have not been audited by, examined by, compiled by or
subjected to agreed-upon procedures by independent accountants, and no
third-party has independently verified or reviewed such statements. Readers of
this Annual Report should consider these facts in evaluating the information
contained herein. In addition, the business and operations of the Registrant are
subject to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Annual Report. The inclusion of the
forward-looking statements contained in this Annual Report should not be
regarded as a representation by the Registrant or any other person that the
forward-looking statements contained in this Annual Report will be achieved. In
light of the foregoing, readers of this Annual Report are cautioned not to place
undue reliance on the forward-looking statements contained herein.
83
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRUMP HOTELS & CASINO RESORTS, INC.
BY: /S/ NICHOLAS L. RIBIS
-----------------------------------------
Nicholas L. Ribis
Title: President, Chief Executive Officer
and Chief Financial Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DONALD J. TRUMP Chairman of the Board of
- ------------------------------ Directors March 31, 1998
Donald J. Trump
President, Chief Executive
/s/ NICHOLAS L. RIBIS Officer and Director
- ------------------------------ (Principal Executive March 31, 1998
Nicholas L. Ribis Officer)
Senior Vice President,
/s/ R. BRUCE MCKEE Corporate Finance and
- ------------------------------ Chief Financial Officer March 31, 1998
R. Bruce McKee (Principal Accounting and
Financial Officer)
/s/ WALLACE B. ASKINS Director
- ------------------------------ March 31, 1998
Wallace B. Askins
/s/ DON M. THOMAS Director
- ------------------------------ March 31, 1998
Don M. Thomas
/s/ PETER M. RYAN Director
- ------------------------------ March 31, 1998
Peter M. Ryan
84
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
By: TRUMP HOTELS & CASINO RESORTS, INC.
its general partner
By: /s/ NICHOLAS L. RIBIS
-----------------------------------------
Nicholas L. Ribis
Title: President, Chief Executive Officer
and Chief Financial Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DONALD J. TRUMP Chairman of the Board of
- ------------------------------ Directors March 31, 1998
Donald J. Trump
President, Chief Executive
/s/ NICHOLAS L. RIBIS Officer and Director
- ------------------------------ (Principal Executive March 31, 1998
Nicholas L. Ribis Officer)
Senior Vice President,
/s/ R. BRUCE MCKEE Corporate Finance and
- ------------------------------ Chief Financial Officer March 31, 1998
R. Bruce McKee (Principal Accounting and
Financial Officer)
/s/ WALLACE B. ASKINS Director
- ------------------------------ March 31, 1998
Wallace B. Askins
/s/ DON M. THOMAS Director
- ------------------------------ March 31, 1998
Don M. Thomas
/s/ PETER M. RYAN Director
- ------------------------------ March 31, 1998
Peter M. Ryan
85
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
BY: /S/ NICHOLAS L. RIBIS
-----------------------------------------
Nicholas L. Ribis
Title: President, Chief Executive Officer
and Chief Financial Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DONALD J. TRUMP Chairman of the Board of
- ------------------------------ Directors March 31, 1998
Donald J. Trump
President, Chief Executive
/s/ NICHOLAS L. RIBIS Officer and Director
- ------------------------------ (Principal Executive March 31, 1998
Nicholas L. Ribis Officer)
Senior Vice President,
/s/ R. BRUCE MCKEE Corporate Finance and
- ------------------------------ Chief Financial Officer March 31, 1998
R. Bruce McKee (Principal Accounting and
Financial Officer)
/s/ WALLACE B. ASKINS Director
- ------------------------------ March 31, 1998
Wallace B. Askins
/s/ DON M. THOMAS Director
- ------------------------------ March 31, 1998
Don M. Thomas
/s/ PETER M. RYAN Director
- ------------------------------ March 31, 1998
Peter M. Ryan
86
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Trump Hotels & Casino Resorts, Inc.
Report of Independent Public Accountants................................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997............................................. F-3
Consolidated Statements of Operations for the period from inception (June 12, 1995) through December 31,
1995 and for the years ended December 31, 1996 and 1997................................................ F-4
Consolidated Statements of Stockholders' Equity for the period from inception (June 12, 1995) through
December 31, 1995 and for the years ended December 31, 1996 and 1997................................... F-5
Consolidated Statements of Cash Flows for the period from inception (June 12, 1995) through December 31,
1995 and for the years ended December 31, 1996 and 1997................................................ F-6
Trump Hotels & Casino Resorts Holdings, L.P.
Report of Independent Public Accountants................................................................. F-7
Consolidated Balance Sheets as of December 31, 1996 and 1997............................................. F-8
Consolidated Statements of Operations for the period from inception (June 12, 1995) through December 31,
1995 and for the years ended December 31, 1996 and 1997................................................ F-9
Consolidated Statements of Partners' Capital for the period from inception (June 12, 1995) through
December 31, 1995 and for the years ended December 31, 1996 and 1997................................... F-10
Consolidated Statements of Cash Flows for the period from inception (June 12, 1995) through December 31,
1995 and for the years ended December 31, 1996 and 1997................................................ F-11
Notes to Consolidated Financial Statements of Trump Hotels & Casino Resorts, Inc. and Trump Hotels &
Casino Resorts Holdings, L.P........................................................................... F-12
Financial Statement Schedules
Reports of Independent Public Accountants................................................................ S-1
Schedule II--Trump Hotels & Casino Resorts, Inc. and Trump Hotel & Casino Resorts Holdings, L.P.
Valuation and Qualifying Accounts for the Period from Inception (June 12, 1995) to December 31, 1995
and for the years ended December 31, 1996 and 1997..................................................... S-3
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.
We have audited the accompanying consolidated balance sheets of Trump Hotels
& Casino Resorts, Inc. (a Delaware corporation) as of December 31, 1996 and
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the period from inception (June 12, 1995) through
December 31, 1995 and for each of the two years in the period ended December 31,
1997. 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 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 Hotels & Casino
Resorts, Inc. as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the period from inception (June 12, 1995)
through December 31, 1995 and for each of the two years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 5, 1998
F-2
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
<CAPTION>
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents............................................................... $ 175,749 $ 140,328
Trade receivables, net of allowances for doubtful accounts of $19,087 and $18,625,
respectively (Note 3)................................................................ 46,781 55,745
Accounts receivable, other (Note 3)................................................... 7,614 12,330
Inventories........................................................................... 10,710 13,011
Due from Affiliates (Note 8).......................................................... 207 14,113
Prepaid expenses and other current assets............................................. 10,021 13,892
--------- ---------
Total current assets.............................................................. 251,082 249,419
--------- ---------
INVESTMENT IN BUFFINGTON HARBOR (Note 3).................................................. 45,782 43,535
INVESTMENT IN TRUMP'S CASTLE PIK NOTES (Note 4)........................................... 44,191 53,381
PROPERTY AND EQUIPMENT (Notes 2, 3 and 4):
Land and land improvements............................................................ 250,307 262,282
Buildings and building improvements................................................... 1,685,721 1,740,287
Riverboat............................................................................. 29,369 29,716
Furniture, fixtures and equipment..................................................... 228,040 261,806
Leasehold improvements................................................................ 2,404 2,428
Construction in progress.............................................................. 24,679 5,169
--------- ---------
2,220,520 2,301,688
Less accumulated depreciation and amortization........................................ (211,259) (296,937)
--------- ---------
Net property and equipment........................................................ 2,009,261 2,004,751
--------- ---------
CASH RESTRICTED FOR FUTURE CONSTRUCTION................................................... -- 13,000
DEFERRED BOND AND LOAN ISSUANCE COSTS, net of accumulated amortization of $6,781 and
$14,561, respectively (Note 4).......................................................... 48,602 45,071
DUE FROM AFFILIATES....................................................................... 3,068 3,493
--------- ---------
OTHER ASSETS (Note 6)..................................................................... 53,657 60,659
--------- ---------
Total assets...................................................................... $2,455,643 $2,473,309
--------- ---------
--------- ---------
<CAPTION>
LIABILITIES AND CAPITAL
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 4)......................................... $ 19,356 $ 21,890
Accounts payable...................................................................... 36,563 36,293
Accrued payroll....................................................................... 23,422 24,226
Accrued interest payable.............................................................. 28,393 29,038
Due to affiliates (Note 8)............................................................ 1,378 940
Other accrued expenses................................................................ 36,092 20,498
Self insurance reserves (Note 6)...................................................... 16,681 16,267
Other current liabilities............................................................. 3,803 12,205
--------- ---------
Total current liabilities......................................................... 165,688 161,357
NON-CURRENT LIABILITIES:
Long-Term debt, net of current maturities (Note 4).................................... 1,713,425 1,817,569
Deferred income taxes................................................................. 4,272 4,272
Other long-term liabilities........................................................... 11,559 12,808
--------- ---------
Total liabilities................................................................... 1,894,944 1,996,006
--------- ---------
MINORITY INTEREST......................................................................... 172,604 148,418
COMMITMENTS AND CONTINGENCIES (Notes 6 and 9)
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000,000 shares authorized, none issued and
outstanding in 1996 and 1997, respectively........................................... -- --
Common Stock, $.01 par value, 75,000,000 shares authorized, 24,140,090 and 24,206,756
issued and outstanding in 1996 and 1997, respectively................................ 241 242
Class B Common Stock, $.01 par value, 1,000 shares authorized, issued and outstanding
in 1996 and 1997, respectively....................................................... -- --
Additional paid-in capital............................................................ 455,452 455,645
Accumulated deficit................................................................... (67,598) (109,726)
Less treasury stock, 1,706,500 shares of common stock, at cost (Note 11).............. -- (17,276)
--------- ---------
Total stockholders' equity........................................................ 388,095 328,885
--------- ---------
Total liabilities and stockholders' equity........................................ $2,455,643 $2,473,309
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-3
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995 AND
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 12,
1995)
THROUGH
DECEMBER 31,
1995 1996 1997
-------------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Gaming........................................................... $ 175,208 $ 883,441 $ 1,280,245
Rooms............................................................ 12,310 72,172 100,674
Food and Beverage................................................ 26,065 107,698 153,702
Other............................................................ 6,284 26,665 47,608
-------------- ------------ ------------
Gross Revenues............................................... 219,867 1,089,976 1,582,229
Less--Promotional allowances..................................... 24,394 123,032 182,856
-------------- ------------ ------------
Net Revenues................................................. 195,473 966,944 1,399,373
-------------- ------------ ------------
COSTS AND EXPENSES:
Gaming........................................................... 95,533 537,770 810,329
Rooms............................................................ 1,305 23,471 31,062
Food and Beverage................................................ 11,178 35,500 49,971
General and Administrative....................................... 44,792 192,082 271,110
Depreciation and Amortization.................................... 9,219 69,663 89,094
Pre-opening...................................................... -- 13,839 --
Development Costs (Note 3)....................................... -- -- 4,607
-------------- ------------ ------------
162,027 872,325 1,256,173
-------------- ------------ ------------
Income from operations....................................... 33,446 94,619 143,200
-------------- ------------ ------------
NON-OPERATING INCOME AND (EXPENSE): (Note 5)
Interest income.................................................. 3,741 11,186 6,529
Interest expense................................................. (35,014) (150,716) (211,537)
Other non-operating income (expense)............................. (4,094) 14,869 (1,028)
-------------- ------------ ------------
(35,367) (124,661) (206,036)
-------------- ------------ ------------
Loss before equity in loss of Buffington Harbor, L.L.C.,
extraordinary loss and minority interest........................... (1,921) (30,042) (62,836)
Equity in loss of Buffington Harbor, L.L.C.(Note 3).................. -- (925) (3,478)
-------------- ------------ ------------
Loss before extraordinary loss and minority interest................. (1,921) (30,967) (66,314)
Extraordinary loss (Note 12)......................................... -- (60,732) --
Minority Interest.................................................... -- 26,022 24,186
-------------- ------------ ------------
Net Loss............................................................. $ (1,921) $ (65,677) $ (42,128)
-------------- ------------ ------------
-------------- ------------ ------------
Basic Loss Per Share................................................. $ (.19) $ (3.27) $ (1.85)
-------------- ------------ ------------
-------------- ------------ ------------
Dilutive Loss Per Share.............................................. $ (.19) $ (3.27) $ (1.85)
-------------- ------------ ------------
-------------- ------------ ------------
Average Number of Shares Outstanding................................. 10,133,333 20,081,122 22,794,921
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-4
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995 AND
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------------- ADDITIONAL
CLASS B PAID IN ACCUMULATED TREASURY
COMMON COMMON AMOUNT CAPITAL DEFICIT STOCK TOTAL
------------ ----------- ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 12, 1995................ -- 1,000 $ -- $ (75,543) $ -- $ -- $ (75,543)
Proceeds from issuance of Common
Stock............................... 10,000,000 -- 100 126,748 -- -- 126,848
Issuance of Stock Grant Award......... 66,667 -- 1 933 -- -- 934
Accretion of Phantom Stock Units...... -- -- -- 273 -- -- 273
Net Loss.............................. -- -- -- -- (1,921) -- (1,921)
------------ ----- ----- ----------- ------------ ---------- ----------
Balance, December 31, 1995............ 10,066,667 1,000 101 52,411 (1,921) -- 50,591
Proceeds from issuance of Common
Stock............................... 13,250,000 -- 132 385,930 -- -- 386,062
Issuance of Common Stock pursuant to
Taj Merger.......................... 323,423 -- 3 9,316 -- -- 9,319
Issuance of Common Stock for
acquisition of specified parcels.... 500,000 -- 5 10,495 -- -- 10,500
Cancellation of Trump Note............ -- -- -- (3,167) -- -- (3,167)
Accretion of Phantom Stock Units...... -- -- -- 467 -- -- 467
Net Loss.............................. -- -- -- -- (65,677) -- (65,677)
------------ ----- ----- ----------- ------------ ---------- ----------
Balance, December 31, 1996............ 24,140,090 1,000 241 455,452 (67,598) -- 388,095
Purchase of Treasury Stock, 1,706,500
shares of THCR Common Stock, at
cost................................ -- -- -- -- -- (17,276) (17,276)
Accretion of Phantom Stock Units...... -- -- -- 193 -- -- 193
Issuance of Common Stock for Phantom
Stock Units......................... 66,666 -- 1 -- -- -- 1
Net Loss.............................. -- -- -- -- (42,128) -- (42,128)
------------ ----- ----- ----------- ------------ ---------- ----------
Balance, December 31, 1997............ 24,206,756 1,000 $ 242 $ 455,645 $ (109,726) $ (17,276) $ 328,885
------------ ----- ----- ----------- ------------ ---------- ----------
------------ ----- ----- ----------- ------------ ---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-5
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 12, 1995)
THROUGH
DECEMBER 31, 1995 1996 1997
----------------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................... $ (1,921) $ (65,677) $ (42,128)
Adjustments to reconcile net loss to net cash flows (used in)
provided by operating activities:
Non Cash Charges:
Issuance of stock grant awards and accretion of phantom stock
units........................................................ 1,207 467 194
Issuance of debt in exchange for accrued interest.............. -- 4,589 10,156
Extraordinary loss............................................. -- 60,732 --
Depreciation and amortization.................................. 9,219 69,035 89,094
Minority interest in net loss.................................. -- (26,022) (24,186)
Accretion of discount on mortgage notes and amortization of
loan costs................................................... 818 7,475 11,062
Provisions for losses on receivables........................... 559 9,140 9,160
Equity in loss of Buffington Harbor L.L.C...................... -- 925 3,478
Interest income Castle-PIK notes............................... -- (5,491) (9,190)
Utilization of CRDA credits and donations...................... 320 -- 86
Valuation allowance of CRDA investments and amortization of
Indiana gaming costs......................................... (1,249) 3,371 8,858
Increase in receivables........................................ (1,722) (19,661) (25,138)
(Increase) decrease in inventories............................. 815 175 (2,301)
Decrease (increase) due to affiliates, net..................... 367 (1,230) (14,769)
Decrease (increase) in prepaid expenses and other current
assets....................................................... 6,518 1,129 (3,454)
Decrease (increase) in other assets............................ 507 (15,992) (538)
(Decrease) increase in accounts payable, accrued expenses, and
other current liabilities.................................... (5,123) 16,866 (7,110)
Increase (decrease) in accrued interest payable................ (19,534) (33,499) 645
Decrease in other long-term liabilities........................ -- (1,872) (2,864)
----------------- ---------- ---------
Net cash flows provided by (used in) operating
activities............................................... (9,219) 4,460 1,055
----------------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net............................ (115,430) (245,424) (79,246)
Restricted cash.................................................... (52,043) 52,043 (13,000)
Purchase of CRDA investments....................................... (1,677) (7,122) (11,996)
Investment in Buffington Harbor LLC................................ (21,823) (24,884) (1,231)
Investment in Trump's Castle PIK Notes............................. -- (38,700) --
Purchase of Taj Holding, net of cash received...................... -- 46,714 --
Purchase of Trump's Castle, net of cash received................... -- 17,604 --
----------------- ---------- ---------
Net cash flows used in investing activities................ (190,973) (199,769) (105,473)
----------------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock......................................... -- -- (17,276)
Issuance of Common Stock, net...................................... 126,848 386,062 --
Issuance of Senior Secured Notes, net.............................. 144,258 -- --
Retirement of PIK Notes............................................ (81,746) -- --
Issuance of Trump AC Notes......................................... -- 1,200,000 95,605
Retirement of long-term debt....................................... -- (1,156,836) --
Retirement of NatWest loan......................................... -- (36,500) --
Debt issuance costs................................................ -- (41,405) (4,254)
Issuance of note receivable........................................ (3,000) -- --
Debt payments--other............................................... (4,186) (39,187) (21,518)
Proceeds from other borrowings..................................... 9,040 39,716 16,440
----------------- ---------- ---------
Net cash flows provided by financing activities............ 191,214 351,850 68,997
----------------- ---------- ---------
Net (decrease) increase in cash and cash equivalents................... (8,978) 156,541 (35,421)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................... 28,186 19,208 175,749
----------------- ---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 19,208 $ 175,749 $ 140,328
----------------- ---------- ---------
----------------- ---------- ---------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts Holdings, L.P.:
We have audited the accompanying consolidated balance sheets of Trump Hotels
& Casino Resorts Holdings, L.P. (a Delaware limited partnership) and
Subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of operations, partners' capital and cash flows for the period from
inception (June 12, 1995) through December 31, 1995 and for each of the two
years in the period ended December 31, 1997. These consolidated financial
statements are the responsibility of the management of Trump Hotels & Casino
Resorts Holdings, L.P. 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 Hotels & Casino
Resorts Holdings, L.P. and Subsidiaries as of December 31, 1996 and 1997, and
the results of their operations and their cash flows for the period from
inception (June 12, 1995) through December 31, 1995 and for each of the two
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 5, 1998
F-7
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1996 1997
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents................................................... $ 175,745 $ 140,324
Trade receivables, net of allowances for doubtful accounts of $19,087 and
$18,625, respectively (Note 3).......................................... 46,781 55,745
Accounts receivable, other (Note 3)....................................... 7,614 12,330
Inventories............................................................... 10,710 13,011
Due from Affiliates (Note 8).............................................. 207 14,113
Prepaid expenses and other current assets................................. 10,021 13,892
---------- ----------
Total current assets.................................................. 251,078 249,415
---------- ----------
INVESTMENT IN BUFFINGTON HARBOR (Note 3)...................................... 45,782 43,535
INVESTMENT IN TRUMP'S CASTLE PIK NOTES (Note 4)............................... 44,191 53,381
PROPERTY AND EQUIPMENT (Notes 2, 3 and 4):
Land and land improvements................................................ 250,307 262,282
Buildings and building improvements....................................... 1,685,721 1,740,287
Riverboat................................................................. 29,369 29,716
Furniture, fixtures and equipment......................................... 228,040 261,806
Leasehold improvements.................................................... 2,404 2,428
Construction in progress.................................................. 24,679 5,169
---------- ----------
2,220,520 2,301,688
Less--accumulated depreciation and amortization........................... (211,259) (296,937)
---------- ----------
Net property and equipment............................................ 2,009,261 2,004,751
---------- ----------
CASH RESTRICTED FOR FUTURE CONSTRUCTION....................................... -- 13,000
DEFERRED BOND AND LOAN ISSUANCE COSTS, net of accumulated amortization of
$6,781 and $14,561, respectively (Note 4)................................... 48,602 45,071
DUE FROM AFFILIATES (Note 8).................................................. 3,068 3,493
OTHER ASSETS (Note 6)......................................................... 53,657 60,659
---------- ----------
Total assets.......................................................... $2,455,639 $2,473,305
---------- ----------
---------- ----------
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 4)............................. $ 19,356 $ 21,890
Accounts payable.......................................................... 36,563 36,293
Accrued payroll........................................................... 23,422 24,226
Accrued interest payable.................................................. 28,393 29,038
Due to affiliates (Note 8)................................................ 1,378 940
Other accrued expenses.................................................... 36,092 20,498
Self insurance reserves (Note 6).......................................... 16,681 16,267
Other current liabilities................................................. 3,803 12,205
---------- ----------
Total current liabilities............................................. 165,688 161,357
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 4)........................ 1,713,425 1,817,569
Deferred income taxes..................................................... 4,272 4,272
Other long-term liabilities............................................... 11,559 12,808
---------- ----------
Total liabilities..................................................... 1,894,944 1,996,006
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 9)
PARTNERS' CAPITAL
Partners' capital......................................................... 652,503 652,503
Accumulated deficit....................................................... (91,808) (157,928)
Less treasury stock....................................................... -- (17,276)
---------- ----------
Total partners' capital............................................... 560,695 477,299
---------- ----------
Total liabilities and partners' capital............................... $2,455,639 $2,473,305
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-8
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995 AND
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 12, 1995)
THROUGH
DECEMBER 31, 1995 1996 1997
----------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Gaming........................................................ $ 175,208 $ 883,441 $ 1,280,245
Rooms......................................................... 12,310 72,172 100,674
Food and Beverage............................................. 26,065 107,698 153,702
Other......................................................... 6,284 26,665 47,608
-------- ------------ ------------
Gross Revenues............................................ 219,867 1,089,976 1,582,229
Less--Promotional allowances.................................. 24,394 123,032 182,856
-------- ------------ ------------
Net Revenues.............................................. 195,473 966,944 1,399,373
-------- ------------ ------------
Costs and expenses:
Gaming........................................................ 95,533 537,770 810,329
Rooms......................................................... 1,305 23,471 31,062
Food and Beverage............................................. 11,178 35,500 49,971
General and Administrative.................................... 43,447 191,615 270,916
Depreciation and Amortization................................. 9,219 69,663 89,094
Pre-opening................................................... -- 13,839 --
Development Costs (Note 3).................................... -- -- 4,607
-------- ------------ ------------
160,682 871,858 1,255,979
-------- ------------ ------------
Income from operations.................................... 34,791 95,086 143,394
-------- ------------ ------------
Non-operating income and income (expense) (Note 5):
Interest income............................................... 3,741 11,186 6,529
Interest expense.............................................. (35,014) (150,716) (211,537)
Other non-operating income (expense).......................... (4,094) 14,869 (1,028)
-------- ------------ ------------
(35,367) (124,661) (206,036)
-------- ------------ ------------
Loss before equity in loss of Buffington Harbor, L.L.C. and
extraordinary loss.............................................. (576) (29,575) (62,642)
Equity in loss of Buffington Harbor, L.L.C. (Note 3).............. -- (925) (3,478)
-------- ------------ ------------
Loss before extraordinary loss.................................... (576) (30,500) (66,120)
Extraordinary loss (Note 12)...................................... -- (60,732) --
-------- ------------ ------------
Net loss.......................................................... $ (576) $ (91,232) $ (66,120)
-------- ------------ ------------
-------- ------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-9
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995 AND
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
PARTNERS' ACCUMULATED THCR
CAPITAL DEFICIT COMMON STOCK TOTAL
---------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Balance, June 12, 1995..................................... $ (75,543) -- -- $ (75,543)
Capital Contributed by THCR (Note 1)....................... 126,848 -- -- 126,848
Net Loss................................................... -- (576) -- (576)
---------- ------------ -------------- ----------
Balance, December 31, 1995................................. 51,305 (576) -- 50,729
Contributed Capital--Taj Merger (Note 1)................... 436,381 -- -- 436,381
Cancellation of Trump Note (Note 7)........................ (3,167) -- -- (3,167)
Distributions to THCR...................................... (142) -- -- (142)
Contributed Capital--Trump Castle Merger (Note 1).......... 168,126 -- -- 168,126
Net Loss................................................... -- (91,232) -- (91,232)
---------- ------------ -------------- ----------
Balance, December 31, 1996................................. 652,503 (91,808) -- 560,695
Purchase of 1,706,500 shares of THCR Common Stock.......... -- -- (17,276) (17,276)
Net Loss................................................... -- (66,120) -- (66,120)
---------- ------------ -------------- ----------
Balance, December 31, 1997................................. $ 652,503 $ (157,928) $ (17,276) $ 477,299
---------- ------------ -------------- ----------
---------- ------------ -------------- ----------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-10
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 12,
1995)
THROUGH
DECEMBER 31,
1995 1996 1997
-------------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................... $ (576) $ (91,232) $ (66,120)
Adjustments to reconcile net loss to net cash flows (used in) provided by
operating activities:
Non Cash Charges:
Issuance of debt in exchange for accrued interest....................... -- 4,589 10,156
Extraordinary loss...................................................... -- 60,732 --
Depreciation and amortization........................................... 9,219 69,035 89,094
Accretion of discount on mortgage notes and amortization of loan
costs................................................................. 818 7,475 11,062
Provisions for losses on receivables.................................... 559 9,140 9,160
Equity in loss of Buffington Harbor L.L.C............................... -- 925 3,478
Interest income Castle-PIK notes........................................ -- (5,491) (9,190)
Utilization of CRDA credits and donations............................... 320 -- 86
Valuation allowance of CRDA investments and amortization of Indiana
gaming costs.......................................................... (1,249) 3,371 8,858
Increase in receivables................................................. (1,722) (19,661) (25,138)
(Increase) decrease in inventories...................................... 815 175 (2,301)
Decrease (increase) due to affiliates, net.............................. 157 (1,020) (14,769)
Decrease (increase) in prepaid expenses and other current assets........ 6,581 1,066 (3,454)
Decrease (increase) in other assets..................................... 507 (15,992) (538)
(Decrease) increase in accounts payable, accrued expenses, and other
current liabilities................................................... (5,123) 16,866 (7,110)
Increase (decrease) in accrued interest payable......................... (19,534) (33,499) 645
Decrease in other long-term liabilities................................. -- (1,872) (2,864)
-------------- ---------- ---------
Net cash flows provided by (used in) operating activities............. (9,228) 4,607 1,055
-------------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net..................................... (115,430) (245,424) (79,246)
Restricted cash............................................................. (52,043) 52,043 (13,000)
Purchase of CRDA investments................................................ (1,677) (7,122) (11,996)
Investment in Buffington Harbor LLC......................................... (21,823) (24,884) (1,231)
Investment in Trump(1)s Castle PIK Notes.................................... -- (38,700) --
Purchase of Taj Holding, net of cash received............................... -- 46,714 --
Purchase of Trump(1)s Castle, net of cash received.......................... -- 17,604 --
-------------- ---------- ---------
Net cash flows used in investing activities........................... (190,973) (199,769) (105,473)
-------------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of THCR Common Stock............................................... -- -- (17,276)
Contributed capital......................................................... 126,848 385,920 --
Issuance of Senior Secured Notes, net....................................... 144,258 -- --
Retirement of PIK Notes..................................................... (81,746) -- --
Issuance of Trump AC Notes.................................................. -- 1,200,000 95,605
Retirement of long-term debt................................................ -- (1,156,836) --
Retirement of NatWest loan.................................................. -- (36,500) --
Debt issuance costs......................................................... -- (41,405) (4,254)
Issuance of note receivable................................................. (3,000) -- --
Debt payments-other......................................................... (4,186) (39,187) (21,518)
Proceeds from other borrowings.............................................. 9,040 39,716 16,440
-------------- ---------- ---------
Net cash flows provided by financing activities....................... 191,214 351,708 68,997
-------------- ---------- ---------
Net increase (decrease) in cash and cash equivalents.......................... (8,987) 156,546 (35,421)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............................. 28,186 19,199 175,745
-------------- ---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................... $ 19,199 $ 175,745 $ 140,324
-------------- ---------- ---------
-------------- ---------- ---------
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-11
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump
Hotels & Casino Resorts, Inc. ("THCR"), a Delaware corporation, and Trump Hotels
& Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR
Holdings"), and Subsidiaries. THCR Holdings is an entity which is currently
owned approximately 63.4% by THCR as both a general and limited partner, and
approximately 36.6% by Donald J. Trump ("Trump"), as a limited partner. Trump's
limited partnership interest in THCR Holdings represents his economic interests
in the assets and operations of THCR Holdings. Such limited partnership interest
is convertible at Trump's option into 13,918,723 shares of THCR's common stock,
par value $.01 per share (the "THCR Common Stock") (subject to certain
adjustments) representing approximately 38.2% of the outstanding shares of THCR
Common Stock. Accordingly, the accompanying consolidated financial statements
include those of (i) THCR and its 63.4% owned subsidiary, THCR Holdings, and
(ii) THCR Holdings and its wholly owned subsidiaries:
- Trump Atlantic City Associates ("Trump AC") and its subsidiaries, Trump
Plaza Associates ("Plaza Associates"), Trump Taj Mahal Associates ("Taj
Associates"), Trump Atlantic City Funding, Inc. ("Trump AC Funding"),
Trump Atlantic City Funding II, Inc. ("Trump AC Funding II"), Trump
Atlantic City Funding III, Inc. ("Trump AC III"), Trump Atlantic City
Corporation ("TACC"), Trump Casino Services, L.L.C. ("Trump Services"),
and Trump Communications, L.L.C. Plaza Associates owns and operates the
Trump Plaza Hotel and Casino ("Trump Plaza") located in Atlantic City, New
Jersey. Taj Associates owns and operates the Trump Taj Mahal Casino Resort
(the "Taj Mahal"), located in Atlantic City, New Jersey. Taj Associates
was acquired on April 17, 1996.
- Trump Indiana, Inc. ("Trump Indiana"), which commenced operations on June
8, 1996, owns and operates a riverboat gaming facility at Buffington
Harbor, on Lake Michigan, Indiana (the "Indiana Riverboat").
- Trump's Castle Associates, L.P. ("Castle Associates"), which was acquired
on October 7, 1996. Castle Associates owns and operates Trump Marina Hotel
Casino ("Trump Marina") located in Atlantic City, New Jersey.
- Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding"), the issuer
of $145,000,000 15 1/2% Senior Secured Notes, due 2005 (the "Senior
Notes").
THCR and THCR Holdings commenced operations on June 12, 1995. THCR, THCR
Holdings and THCR Funding have no operations and their ability to service their
debt is dependent on the successful operations of Trump AC, Trump Indiana and
Castle Associates. THCR, through THCR Holdings and its subsidiaries, is the
exclusive vehicle through which Trump engages in new gaming activities in
emerging or established gaming jurisdictions.
All significant intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements.
(2) PUBLIC OFFERINGS AND MERGER
On June 12, 1995, THCR completed a public offering of 10,000,000 shares of
common stock at $14.00 per share (the "Stock Offering") for gross proceeds of
$140,000,000. Concurrent with the Stock Offering,
F-12
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(2) PUBLIC OFFERINGS AND MERGER (CONTINUED)
THCR Holdings, together with its subsidiary, THCR Funding, issued the 1995
Senior Notes for gross proceeds of $155,000,000 (the "Note Offering" and,
together with the 1995 Stock Offerings, the "1995 Offerings"). From the proceeds
of the 1995 Stock Offering, THCR contributed $126,848,000 to THCR Holdings, in
exchange for an approximately 60% general partnership interest in THCR Holdings.
Prior to the 1995 Offerings, Trump was the sole stockholder of THCR and sole
beneficial owner of THCR Holdings. Concurrent with the 1995 Offerings, Trump
contributed to THCR Holdings his 100% beneficial interest in Plaza Associates.
Trump also 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 but excluding his interests in Taj Associates and Castle
Associates. In exchange for his contributions to THCR Holdings, Trump received
an approximate 40% limited partnership interest in THCR Holdings.
On April 17, 1996, pursuant to the Agreement and Plan of Merger, as amended
(the "Taj Merger Agreement"), pursuant to which a wholly owned subsidiary of
THCR was merged (the "Taj Merger") with and into Taj Mahal Holding Corp., now
known as THCR Holding Corp. ("Taj Holding"), each outstanding share of Class A
Common Stock of Taj Holding (the "Taj Holding Class A Common Stock"), which in
the aggregate represented 50% of the economic interest in Taj Associates, was
converted into the right to receive, at each holder's election, either (a) $30
in cash or (b) that number of shares of THCR Common Stock having a market value
equal to $30. Trump held the remaining 50% interest in Taj Associates and
contributed such interest in Taj Associates to Trump AC in exchange for limited
partnership interests in THCR Holdings. In addition, the outstanding shares of
Taj Holding's Class C Common Stock, all of which were held by Trump, were
canceled in connection with the Taj Merger. The following transactions occurred
in connection with the Taj Merger (collectively referred to as the "Taj Merger
Transaction"):
(a) the payment of an aggregate of $31,181,000 in cash and the issuance
of 323,423 shares of THCR Common Stock to the holders of Taj Holding Class A
Common Stock;
(b) the contribution by Trump to Trump AC of all of his direct and
indirect ownership interests in Taj Associates, and the contribution by THCR
to Trump AC of all of its indirect ownership interests in Taj Associates
acquired in the Taj Merger;
(c) the public offerings by (i) THCR of 13,250,000 shares of THCR Common
Stock (the "1996 Stock Offering") for net proceeds of $386,062,000 and (ii)
Trump AC and Trump Atlantic City Funding, Inc. ("Trump AC Funding"), of
$1,200,000,000 aggregate principal amount of 11 1/4% First Mortgage Notes
due 2006 (the "Trump AC Mortgage Notes") (the "1996 Notes Offering" and,
together with the 1996 Stock Offering, the "1996 Offerings");
(d) the redemption of the outstanding shares of Taj Holding's Class B
Common Stock, immediately prior to the Taj Merger for $.50 per share in
accordance with its terms;
(e) the redemption of the outstanding 11.35% Mortgage Bonds, Series A,
due 1999 of Trump Taj Mahal Funding, Inc. (the "Taj Bonds");
(f) the retirement of the outstanding 10 7/8% Mortgage Notes due 2001 of
Trump Plaza Funding, Inc.;
F-13
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(2) PUBLIC OFFERINGS AND MERGER (CONTINUED)
(g) the satisfaction of the indebtedness of Taj Associates under its
loan agreement with National Westminster Bank USA;
(h) the purchase of certain real property used in the operation of the
Taj Mahal that was leased from a corporation wholly owned by Trump (the
"Specified Parcels");
(i) the purchase of certain real property used in the operation of Trump
Plaza that was leased from an unaffiliated third party;
(j) the payment to Bankers Trust Company ("Bankers Trust") to obtain
releases of liens and guarantees that Bankers Trust had in connection with
indebtedness owed by Trump to Bankers Trust; and
(k) the issuance to Trump of warrants (the "Trump Warrants") to purchase
an aggregate of 1,800,000 shares of THCR Common Stock (i) 600,000 shares of
which may be purchased on or prior to April 17, 1999, at $30 per share, (ii)
600,000 shares of which may be purchased on or prior to April 17, 2000, at
$35 per share, and (iii) 600,000 shares of which may be purchased on or
prior to April 17, 2001, at $40 per share.
As a result of the contribution by Trump to Trump AC of his ownership
interests in Taj Associates and the contribution by THCR to Trump AC of its
indirect ownership interests in Taj Associates acquired in the Taj Merger,
together with THCR's contribution to THCR Holdings of the proceeds from the 1996
Stock Offerings, Trump's aggregate beneficial equity interest in THCR Holdings
decreased from approximately 40% to approximately 25%, and THCR's aggregate
beneficial equity interest in THCR Holdings increased from approximately 60% to
approximately 75%.
The Taj Merger Transaction has been accounted for as a "purchase" for
accounting and reporting purposes and the results of Taj Associates have been
included in the accompanying financial statements since the date of the Taj
Merger. Accordingly, the excess of the purchase price over the fair value of the
net assets acquired ($200,782,000), which was allocated to land ($7,979,000) and
building ($192,803,000) based on an appraisal on a pro rata basis, consists of
the following:
(a) $40,500,000 representing the payment of $30.00 for each of the
1,350,000 shares of Taj Holding Class A Common Stock. Holders of 298,739
shares of Taj Holding Class A Common Stock elected to receive 323,423 shares
of THCR Common Stock and holders of 1,051,261 shares of Taj Holding Class A
Common Stock elected to receive $31,181,000 in cash;
(b) $40,500,000, representing the contribution by Trump to Trump AC of
his ownership interest in 50% of Taj Associates;
(c) $9,900,000 of fees and expenses associated with the Taj Merger
Transaction;
(d) $108,574,000, representing the negative book value of Taj Associates
at the date of the Merger Transaction; and
(e) $1,308,000 of closing costs associated with the purchase of the
Specified Parcels.
F-14
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(2) PUBLIC OFFERINGS AND MERGER (CONTINUED)
In connection with the Taj Merger Transaction, THCR purchased the Specified
Parcels from Trump Taj Mahal Realty Corp., a corporation owned by Trump, and Taj
Associates was released from its guarantee to First Union National Bank (the
"Guarantee"). The aggregate cost of acquiring the Specified Parcels was
$50,600,000 in cash and 500,000 shares of THCR Common Stock valued at
$10,500,000 (an average value of $21.00 per share). The obligation of Taj
Associates which had been accrued with respect to the Guarantee ($17,923,000)
was eliminated. In addition, THCR exercised the option to purchase a tower
adjacent to Trump Plaza's main tower ("Trump Plaza East") for $28,084,000, which
amount has been included in land and building.
On October 7, 1996, THCR Holdings acquired from Trump all of his outstanding
equity interest in Castle Associates (the "Castle Acquisition") pursuant to the
terms of the Agreement dated as of June 24, 1996, as amended (the "Castle
Agreement"), by and among THCR, THCR Holdings, Trump Casinos II, Inc., formerly
known as TC/GP, Inc. ("TCI-II"), Trump's Castle Hotel & Casino, Inc. ("TCHI")
and Trump.
On October 7, 1996, the closing date of the Castle Acquisition, the
following transactions were effected:
(a) Trump contributed to THCR Holdings his 61.5% equity interest in
Castle Associates, in consideration of which he received a 9.52854% limited
partnership interest in THCR Holdings, exchangeable into 3,626,450 shares of
THCR Common Stock (valuing each share at $28.80) (the "THCR Stock
Contribution Value");
(b) TCI-II contributed to THCR Holdings its 37.5% equity interest in
Castle Associates, in consideration of which it received a 5.81009% limited
partnership interest in THCR Holdings, exchangeable into 2,211,250 shares of
THCR Common Stock (valuing each share at the THCR Stock Contribution Value);
and
(c) THCR-TCHI Merger Corp., a Delaware corporation and a wholly owned
subsidiary of THCR Holdings, merged with and into TCHI (holder of 1% equity
interest in Castle Associates) whereupon (i) each holder of common stock of
TCHI and (ii) each holder of the outstanding warrants (the "Castle
Warrants") received an aggregate of $1,769,000 in cash.
In the aggregate, Trump received a limited partnership interest in THCR
Holdings convertible into 5,837,700 shares of THCR Common Stock. The
contribution by Trump of his equity interests was valued at $168,126,000
(valuing each share at the THCR Stock Contribution Value).
The Castle Acquisition was accounted for as a "purchase" for accounting and
reporting purposes and the results of Castle Associates were included in the
accompanying financial statements since the date of acquisition. Accordingly the
excess of the purchase price over the fair value of the net assets acquired
($196,109,000), was allocated to land ($38,438,000) and building ($157,671,000)
based on an appraisal on a pro rata basis, and consisted of the following:
(a) $168,126,000 representing the value assigned to the 5,837,700 shares
of THCR Common Stock received by Trump for the contribution of his equity
interests;
F-15
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(2) PUBLIC OFFERINGS AND MERGER (CONTINUED)
(b) $1,769,000 in cash, representing the amounts paid for the shares of
TCHI Common Stock and outstanding Castle Warrants;
(c) $20,714,000, representing the negative book value of Castle
Associates at the date of the Acquisition; and
(d) $5,500,000 of fees and expenses associated with the Castle
Acquisition.
As a result of the contribution by Trump to THCR Holdings of his ownership
interests in Castle Associates, Trump's aggregate beneficial equity interest in
THCR Holdings increased from approximately 25% to 36.6% and THCR's aggregate
beneficial equity interest in THCR Holdings decreased from approximately 75% to
approximately 63.4%.
Unaudited pro forma information, assuming that the Taj Merger and the Castle
Acquisition had occurred on January 1, 1996, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Net revenues............................................................... $ 1,327,637,000
Income from operations..................................................... 104,625,000
Loss before extraordinary loss............................................. (87,006,000)
Extraordinary loss......................................................... (60,732,000)
-----------------
Loss before Minority Interest.............................................. (147,738,000)
Minority Interest.......................................................... 36,364,000
-----------------
Net loss................................................................... $ (111,374,000)
-----------------
Basic loss per share....................................................... $ (4.60)
-----------------
Diluted loss per share..................................................... $ (4.60)
</TABLE>
The pro forma information is presented for informational purposes only and
does not purport to present what the results of operations would have been had
the Taj Merger Transaction and the Castle Acquisition, in fact, occurred on
January 1, 1996 or to project the results of operations for any future period.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
THCR has no operations, except for its ownership of Plaza Associates, Taj
Associates, Castle Associates and Trump Indiana. Through these entities Trump
Holdings operates luxury casino hotels located in Atlantic City, New Jersey and
a luxury riverboat gaming facility at Buffington Harbor, on Lake Michigan,
Indiana. A substantial portion of THCR's revenues are derived from its gaming
operations. Competition in the Atlantic City and Indiana casino markets is
intense and management believes that this competition will continue as more
casinos are opened and new entrants into the gaming industry become operational.
F-16
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. Revenue from
hotel and other services are recognized at the time the related service is
performed.
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>
FOR THE PERIOD
FROM INCEPTION
(JUNE 12, 1995)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31,1997
----------------- ----------------- ----------------
<S> <C> <C> <C>
Rooms................................ $ 3,075,000 $ 17,340,000 $ 30,432,000
Food and beverage.................... 10,301,000 60,123,000 86,833,000
Other................................ 2,574,000 10,983,000 21,401,000
----------------- ----------------- ----------------
$ 15,950,000 $ 88,446,000 $ 138,666,000
----------------- ----------------- ----------------
----------------- ----------------- ----------------
</TABLE>
INVENTORIES
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
F-17
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and is depreciated on the
straight-line method using rates based on the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and building improvements.............................. 40 years
Vessel........................................................... 30 years
3-10
Furniture, fixtures and equipment................................ years
4-40
Leasehold improvements........................................... years
</TABLE>
Interest associated with borrowings used to finance construction projects
has been capitalized and is being amortized over the estimated useful lives of
the assets. Interest of approximately $529,000, $459,000 and $101,000 was
capitalized in 1995, 1996 and 1997, respectively.
During the second quarter of 1997, Taj Associates, Plaza Associates and
Castle Associates revised their estimates for the useful lives of buildings,
building improvements, furniture and fixtures which were acquired in 1996.
Building and building improvements were re-evaluated to have a forty year life
and furniture and fixtures were determined to have a seven year life. During the
third quarter 1997, Trump Indiana revised its estimates of the useful life of
the riverboat and its improvements from fifteen to thirty years. THCR believes
these changes more appropriately reflect the timing of the economic benefits to
be received from these assets during their estimated useful lives. For the year
ended December 31, 1997, the net effect of applying these new lives was to
decrease THCR Holdings' and THCR's net loss by $10,458,000 and $6,634,000,
respectively, and decrease basic loss per share by $.29.
INVESTMENT IN BUFFINGTON HARBOR RIVERBOATS, L.L.C.
THCR accounts for its investment in the Buffington Harbor Riverboats, L.L.C.
("BHR") (a 50% joint venture between Trump Indiana and the Majestic Star Casino,
L.L.C. ("Barden")) under the equity method of accounting. 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 are equally responsible for the operating expenses of the common
land-based facilities at the site. There can be no assurance that Trump Indiana
and/or Barden will be able to fund their respective share of future capital
contributions or operating expenses. In accordance with the BHR Agreement, Trump
Indiana and Barden pay berthing and other fees in an amount to cover the
operating expenses of Buffington Harbor. Berthing fees and other fees paid are
included in general and administrative expenses in the accompanying statement of
operations.
LONG-LIVED ASSETS
The provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets" ("SFAS No. 121") requires,
among other things, that an entity review its long-lived assets and certain
related intangibles for impairment whenever changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. Impairment of
long-lived assets exists if, at a minimum, the future expected cash flows
(undiscounted and without interest charges) from an entity's
F-18
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operations are less than the carrying value of these assets. As a result of its
review, THCR does not believe that any such changes have occurred.
INCOME TAXES
Income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
SFAS No. 109 requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and the tax basis of assets and liabilities using enacted tax rates.
The accompanying financial statements do not include a provision for federal
income taxes since (i) Plaza Associates', Taj Associates' and Castle Associates'
income or losses are allocated to the partners and are reportable for federal
income tax purposes by the partners, and (ii) Trump Indiana, which is a C
Corporation, had no taxable income for financial reporting purposes for the
years ended December 31, 1996 and 1997.
Under the New Jersey Casino Control Act (the "Casino Control Act"), Plaza
Associates, Taj Associates and Castle Associates are required to file a New
Jersey corporation business tax return. No provision (benefit) for state income
taxes has been reflected in the accompanying consolidated financial statements
of THCR Holdings, since for state income tax purposes, available net operating
loss carryforwards have been utilized to offset taxable income, if any. As of
December 31, 1997, Plaza Associates, Taj Associates and Castle Associates had
net operating loss carryforward of approximately $100,000,000, $225,000,000 and
$171,600,000, respectively, for New Jersey State Income Tax purposes. No tax
benefits have been reflected in the accompanying financial statements for Plaza
Associates, Taj Associates and Castle Associates operating loss carryforwards as
utilization of such carryforwards is not considered more likely than not.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, cash and cash equivalents
include hotel and casino funds, funds on deposit with banks and temporary
investments purchased with a maturity of three months or less.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 12, 1995)
THROUGH
DECEMBER 31, 1995 1996 1997
----------------- -------------- --------------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest....................... $ 48,768,000 $ 182,333,000 $ 190,086,000
Cash paid during the year for state and Federal taxes........ 1,000,000 1,050,000
Equipment purchased under capital leases..................... 12,385,000 3,569,000
</TABLE>
F-19
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Supplemental Schedule of noncash investing and financing activities:
During 1996, THCR purchased all of the capital stock of Taj Holding for
$31,181,000 in cash and 323,423 shares of its common stock value at $9,319,000
In addition, the contribution by Trump of his 50% interest in Taj Associates
amounting to $40,500,000 was reflected as minority interest, net of $10,000,000
distribution to Bankers Trust. In conjunction with the acquisition, the
accumulated deficit amounting to $108,574,000 was reflected as an increase to
Property, Plant & Equipment. This transaction has been recorded by THCR
Holdings.
<TABLE>
<S> <C>
Fair value of assets acquired................................ $1,005,816,000
Cash paid for the capital stock and payment to Bankers
Trust...................................................... (41,181,000)
Minority interest of Trump................................... (30,500,000)
-------------
Liabilities Assumed...................................... $ 934,135,000
-------------
-------------
</TABLE>
THCR issued 5,837,700 shares of THCR Common Stock valued at $168,126,000 and
paid $1,769,000 in cash in connection with the purchase of Trump's Castle. In
connection with the acquisition, the accumulated deficit amounting to
$20,714,000 was recorded as an increase to Property, Plant & Equipment.
<TABLE>
<S> <C>
Fair value of assets acquired................................. $385,951,000
Cash paid for the THCR Common Stock........................... (1,769,000)
-----------
Liabilities Assumed....................................... $384,182,000
-----------
-----------
</TABLE>
In connection with the purchase of the Specified Parcels in 1996, THCR
issued 500,000 shares of its common stock valued at $10,500,000 and contributed
the specified parcels to THCR Holdings.
A note receivable from Trump in the amount of $3,167,000 was forgiven.
BASIC LOSS PER SHARE
In the fourth quarter of 1997, THCR adopted Statement of Financial
Accounting Standards Board, Statement No. 128 "Earnings per Share" ("SFAS No.
128"). SFAS No. 128 requires the presentation in the consolidated statement of
operations for all years presented of both basic and to the extent applicable,
dilutive earnings per share. Basic loss per share calculated under this
Statement does not differ from earnings per share reported in prior periods.
Basic loss per share is based on the weighted average number of shares of
THCR common stock outstanding, including phantom stock units granted to the
President, Chief Executive Officer and Chief Financial Officer (see Note 9).
Diluted earnings per share are the same as basic earnings per share as common
stock equivalents have not been included as they would be anti-dilutive. The
shares of THCR Class B Common Stock owned by Trump have no economic interest and
therefore are not considered in the calculation of weighted average shares
outstanding.
F-20
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs associated with the issuance of debt are being
amortized using the effective interest method over the terms of the related
debt.
DEVELOPMENT COSTS
Costs associated with new casino developments are deferred and written off
upon opening or termination of the project. At December 31, 1997, development
costs of $2,950,000 are included in other assets.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year financial statements
to conform to the current year presentation.
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- ----------------
<S> <C> <C>
Trump AC Funding 11 1/4% First Mortgage Notes, due 2006 (a).................. $ 1,200,000,000 $ 1,200,000,000
Trump AC Funding II 11 1/4% First Mortgage Notes, due 2006, net of
unamortized discount of $2,900,000 (b)..................................... -- 72,100,000
Trump AC Funding III 11 1/4% First Mortgage Notes due 2006, net of
unamortized discount of $1,427,000 (b)..................................... -- 23,573,000
THCR Holdings 15 1/2% Senior Secured Notes due 2005 (c)...................... 145,000,000 145,000,000
Castle Associates 11 3/4% Mortgage Notes due 2003, net of unamortized
discount of $33,071,000 and $30,170,000, respectively (d).................. 209,070,000 211,971,000
Castle Associates Pay-In-Kind 13 7/8% Notes (Castle PIK Notes) due 2005, net
of unamortized discount of $7,509,000 and $7,197,000, respectively (e)..... 63,231,000 73,699,000
Castle Associates Term Loan (f).............................................. 34,833,000 32,933,000
Castle Associates Senior Notes (g)........................................... 27,000,000 27,000,000
Trump Indiana (h)............................................................ 29,453,000 36,875,000
Other notes payable (i)...................................................... 24,194,000 16,308,000
---------------- ----------------
1,732,781,000 1,839,459,000
Less--current maturities................................................. 19,356,000 21,890,000
---------------- ----------------
$ 1,713,425,000 $ 1,817,569,000
---------------- ----------------
---------------- ----------------
</TABLE>
(a) On April 17, 1996 Trump AC together with Trump AC Funding issued the Trump
AC Mortgage Notes in the aggregate principal amount of $1,200,000,000 which
bear interest at 11 1/4% and are due May 1, 2006. Interest on the Trump AC
Mortgage Notes is due semiannually. The Trump AC Mortgage Notes are
guaranteed as to payment of principal and interest, jointly and severally,
by Taj Associates, Plaza
F-21
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(4) LONG-TERM DEBT (CONTINUED)
Associates, Trump AC and all future subsidiaries of Trump AC (other than
Trump AC Funding). The Trump AC Mortgage Notes are jointly and severally
secured by mortgages representing a first lien and security interest on
substantially all the assets of Taj Associates and Plaza Associates.
The indenture pursuant to which the Trump AC Mortgage Notes were issued
restricts the ability of Trump AC and its subsidiaries to make distributions
or to pay dividends, as the case may be, unless certain financial ratios are
achieved. In addition, the ability of Plaza Associates and Taj Associates to
make payments of dividends or distributions (except for payment of interest)
through Trump AC to THCR Holdings may be restricted by the CCC.
(b) On December 10, 1997, Trump AC together with Trump AC Funding II and Trump
AC Funding III issued the Trump AC Mortgage Notes in an aggregate principal
amount of $75,000,000 and $25,000,000, respectively, which bear interest at
11 1/4% and are due May 1, 2006. Interest on the Trump AC Mortgage Notes is
due semi-annually. The Trump AC Mortgage Notes are guaranteed as to payment
of principal and interest jointly and severally by Taj Associates, Plaza
Associates, Trump AC and all future subsidiaries of Trump AC (other than
Trump AC Funding, Trump AC Funding II and Trump AC Funding III). The Trump
AC Mortgage Notes are jointly and severally secured by mortgages
representing a first lien and security interest on substantially all of the
assets of Taj Associates and Plaza Associates.
(c) 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 and mature in
2005. Interest on these notes is payable semiannually at 15 1/2%, and is
secured by substantially all of the assets of THCR Holdings. During 1996,
THCR Holdings redeemed $10,000,000 of the Senior Notes for $11,600,000. This
resulted in an extraordinary loss of $1,600,000.
(d) The Castle Mortgage Notes bear interest, payable in cash, semiannually, at
11 3/4% and mature on November 15, 2003. The Castle Mortgage Notes may be
redeemed at Castle Funding's option at a specified percentage of the
principal amount commencing in 1998. The Castle Mortgage Notes are secured
by a mortgage on Trump's Castle and substantially all of the other assets of
Castle Associates. The Castle Mortgage Notes are expressly subordinated to
the indebtedness described in (g) (the "Senior Notes") and the liens of the
mortgages securing the Castle Mortgage Notes are subordinate to the liens
securing the Senior Notes. The terms of the Castle Mortgage Notes include
limitations on the amount of additional indebtedness Castle Associates may
incur, distributions of Partnership capital, investments, and other business
activities.
(e) The Castle PIK Notes bear interest, payable at Castle Funding's option, in
whole or in part in cash and through the issuance of additional Castle PIK
Notes, semiannually at the rate of 13 7/8% through November 15, 2003. After
November 15, 2003, interest on the Castle PIK Notes is payable in cash at
the rate of 13 7/8%. The Castle PIK Notes mature on November 15, 2005 and
may be redeemed at Castle Funding's option at 100% of the principal amount
under certain conditions, as defined in the PIK Note Indenture, and are
required to be redeemed from a specified percentage of any equity offering
which includes Castle Associates. Interest on the Castle PIK Notes has been
accrued using the effective interest method.
F-22
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(4) LONG-TERM DEBT (CONTINUED)
On May 21, 1996, THCR Holdings acquired approximately 90% of the outstanding
Castle PIK Notes for approximately $38,700,000, in exchange for which THCR
Holdings received an aggregate of approximately $59,300,000 of Castle PIK
Notes.
The terms of the Castle PIK Notes include limitations on the amount of
additional indebtedness Castle Associates may incur, distributions of
Partnership capital, investments, and other business activities. The Castle
PIK Notes are expressly subordinated to the Senior Notes. THCR Holdings has
recorded its investment in Castle Associates PIK Notes at cost, plus accrued
interest, in the accompanying balance sheet, as THCR Holdings investment in
the Castle PIK Notes has been pledged as collateral to the Senior Notes.
(f) Castle Associates has a term loan with a bank (the "Term Loan") with a
maturity date of May 28, 2000, and bears interest at the prime rate plus 3%
which was 11 1/2% at December 31, 1997, but in no event can be less than 9%
per annum. The outstanding principal amount of the Term Loan is being repaid
at $158,000 per month through the maturity date, at which time the balance
of $28,500,000 is due. The Term Loan is secured by a mortgage lien on Castle
Associates that is prior to the lien securing Castle Associates Mortgage
Notes and the Senior Notes described in (g) below.
(g) On December 28, 1993, Castle Funding issued $27,000,000 of Castle Senior
Notes. Similar to the Castle Mortgage Notes, the Castle Senior Notes are
secured by an assignment of a promissory note of Castle Associates which in
turn is secured by a mortgage on Trump Marina and substantially all of the
other assets of Castle Associates. The Castle Senior Notes are subordinated
to the Term Loan described above. Interest on the Castle Senior Notes is
payable semiannually at the rate of 11 1/2%; however, in the event that the
PIK Notes are redeemed prior to November 15, 1998, the interest rate will be
reduced to 11 1/4%. The Senior Notes mature on November 15, 2000, and are
subject to a sinking fund, which requires the retirement of 15% of the
Senior Notes on each May 31, 1998 and 1999.
(h) Various notes payable, including:
-- Trump Indiana $15,828,000 loan payable over 9 years, with a call at the
lender's option in June 2001. Interest on this note is payable monthly
in arrears based on the prime rate plus 1.5% (10.00% at December 31,
1997). The Note is secured by the Indiana Riverboat.
-- Trump Indiana $8,047,000 note payable in equal monthly installments of
approximately $461,500, including interest at a rate of 10.5%. The note
matures on July 1, 1999 and is secured by certain equipment installed on
the Indiana Riverboat.
-- Trump Indiana $13,000,000 note is payable (beginning on the conversion
date as defined in the agreement) in monthly installments based on a ten
year amortization schedule, until June 1, 2001, at which time all
remaining principal and interest is due in full. The interest rate as
defined in the agreement is equal to the bank's reference rate plus 1.5%
(10% at December 31, 1997). The note is secured by restricted cash and
the hotel construction after the date of the first advance.
(i) Mortgage notes payable and capitalized lease obligations with interest rates
ranging from 7.9% to 18%. The notes and lease obligations are due at various
dates between 1998 and 2012 and are secured by underlying real property or
equipment.
F-23
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(4) LONG-TERM DEBT (CONTINUED)
The aggregate maturities of long-term debt as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998......................................................... $ 21,890,000
1999......................................................... 15,737,000
2000......................................................... 51,109,000
2001......................................................... 13,233,000
2002......................................................... 1,923,000
Thereafter................................................... 1,735,567,000
-------------
$1,839,459,000
-------------
-------------
</TABLE>
The ability of THCR to repay its long-term debt when due will depend on the
ability of Plaza Associates, Taj Associates, Castle Associates and Trump Indiana
to generate cash from operations sufficient for such purposes or on the ability
of THCR to refinance such indebtedness. Cash flow from operations may not be
sufficient to repay a substantial portion of the principal amount of the
indebtedness upon maturity. 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 THCR. There can be no assurance
that the future operating performance of Plaza Associates, Taj Associates,
Castle Associates or Trump Indiana 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.
The various debt agreements restrict the ability of THCR Holdings and its
subsidiaries to make distributions or pay dividends unless certain financial
ratios are achieved. In addition, the ability of Plaza Associates, Taj
Associates or Castle Associates to make payments to THCR Holdings may be
restricted by the New Jersey Casino Control Commission ("CCC"). Similarly, the
ability of Trump Indiana to make distributions or pay dividends to THCR Holdings
may be restricted by the Indiana Gaming Commission ("IGC").
(5) NON-OPERATING INCOME (EXPENSE)
Non-operating income (expense) in 1995 and 1996 includes $2,045,000 and
$806,000, respectively, of costs associated with Trump Plaza East and Trump
World's Fair (see Note 8), net of miscellaneous non-operating credits.
During 1996, Plaza Associates and Taj Associates each entered into an
agreement with Atlantic Thermal Systems, Inc. ("Atlantic Thermal") pursuant to
which Atlantic Thermal was granted an exclusive license to use, operate and
maintain certain steam and chilled water production facilities located at the
respective properties. In consideration for the license, Atlantic Thermal paid
Plaza Associates and Taj Associates a $10,000,000 and a $5,000,000
non-refundable license fee. This amount has been included in other non-operating
income in the accompanying financial statements.
Non-operating income (expense) in 1997 includes $1,028,000 of settlement
costs incurred in connection with the assertion by certain Indiana residents of
rights to purchase stock in Trump Indiana.
F-24
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(6) COMMITMENTS AND CONTINGENCIES
LEASES
Pursuant to the acquisition of Trump World's Fair described in Note 8, Plaza
Associates entered into an easement agreement with the New Jersey Sports and
Exposition Authority ("NJSEA"). Under the terms of the agreement, Plaza
Associates has an exclusive easement over, in and through portions of the
Atlantic City Convention Center. The easement is for a 25-year term with annual
payments of $2,000,000, adjusted every five years for changes in the Consumer
Price Index.
THCR has entered into leases for certain property (primarily land), office,
warehouse space, certain parking space, and various equipment under operating
leases. Rent expense for the period from inception (June 12, 1995) through
December 31, 1995 and for the years ended December 31, 1996 and 1997 was
$2,751,000, $8,357,000 and $13,206,000, respectively, of which $1,275,000,
$2,098,000 and $118,000, respectively, relates to affiliates.
Future minimum lease payments under the noncancellable commitments as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
TOTAL
--------------
<S> <C>
1998.......................................................................... $ 13,176,000
1999.......................................................................... 9,230,000
2000.......................................................................... 6,719,000
2001.......................................................................... 5,823,000
2002.......................................................................... 3,619,000
Thereafter.................................................................... 117,457,000
--------------
$ 156,024,000
--------------
--------------
</TABLE>
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms.
EMPLOYMENT AGREEMENTS
THCR has entered into employment agreements with certain key employees. As
of December 31, 1997, THCR had approximately $17,000,000 of annual commitments
under employment agreements. These commitments mature at various dates through
2001.
On June 12, 1995, Nicholas L. Ribis ("Ribis"), the President, Chief
Executive Officer and Chief Financial Officer of THCR and THCR Holdings, entered
into a five-year employment agreement ("Agreement") with THCR and THCR Holdings.
Pursuant to the employment agreement, Ribis shall be employed as the President
and Chief Executive Officer of THCR and THCR Holdings and shall receive a base
salary of $1,996,500 annually. In addition, the terms of the employment
agreement provide for up to an aggregate of $2,000,000 in loans to be used by
Ribis to pay his income tax liability in connection with the stock bonus award
(see Note 8), which loan, including interest, will be forgiven in the event of a
change in control, as defined in such employment agreement. As of December 31,
1997, $665,000 was outstanding under the employment agreement.
F-25
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
CAFRA AGREEMENT
Taj Associates has received a permit under the Coastal Area Facilities
Review Act ("CAFRA") which included a condition (also a condition of Taj
Associates' casino license) that initially required Taj Associates to begin
construction of certain improvements on the Steel Pier by October 1992, which
improvements were to be completed within 18 months of commencement. Taj
Associates initially proposed a concept to improve the Steel Pier, the estimated
cost of which was $30,000,000. Such concept was approved by the New Jersey
Department of Environmental Protection, the agency which administers CAFRA. In
March 1993, Taj Associates obtained a modification of its CAFRA permit providing
for the extension of the required commencement and completion dates of the
improvements to the Steel Pier for one year, which extension has been renewed
annually, based upon an interim use of the Steel Pier for an amusement park. Taj
Associates has received additional one-year extensions of the required
commencement and completion dates of the improvements of the Steel Pier based
upon the same interim use of the Steel Pier as an amusement park pursuant to a
sublease ("Pier Sublease") with an amusement park operator. The Pier Sublease
terminates on December 31, 1998 unless extended.
NEW JERSEY 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, Taj Associates and Castle Associates are
required to maintain certain licenses. Casino licenses must be renewed
periodically, are not transferable, are dependent on the financial stability of
the licensee and can be revoked at any time.
In June 1995, the CCC renewed Plaza Associates', Taj Associates' and Castle
Associates' licenses to operate Trump Plaza, Trump Taj Mahal and Trump's Castle.
The CCC renewed each casino license for a period of four years through 1999.
Upon revocation, suspension for more than 120 days, or failure to renew a 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.
INDIANA GAMING REGULATIONS
The ownership and operation of Riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act (the "Act")
and the administrative rules promulgated thereunder. In June 1996, the IGC
granted Trump Indiana a riverboat owner's license, which must be renewed by
2001. 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 Act. Indiana
is a new jurisdiction and the emerging regulatory framework is not yet complete.
The IGC has adopted certain rules and has published others in proposed or draft
form which are proceeding through the review and final adoption process. The IGC
has broad rule making power, and it is impossible to predict what effect, if
F-26
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
any, the amendment of existing rules or the finalization of currently new rules
might have on the operations of Trump Indiana.
TRUMP INDIANA CERTIFICATE OF SUITABILITY
As a condition to the Certificate of Suitability, Trump Indiana has
committed to invest approximately $153,000,000 in the Indiana Riverboat,
including certain related projects of 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 Trump Indiana will be able to comply
with the terms of the Certificate of Suitability. As part of the $153,000,000
commitment discussed above, Trump Indiana is obligated to fund $18,500,000 of
specified economic development and infrastructure projects of the City of Gary.
This obligation is being accrued over the five-year license period and
approximately $2,086,000 and $3,700,000 have been charged to expense during 1996
and 1997, respectively. As of December 31, 1997, $263,000 of payments for the
City of Gary projects have been made. As of December 31, 1997, Trump Indiana has
paid $10,000,000 for a surety bond which guarantees the mandated municipal
infrastructure improvements. This amount is included in other assets in the
accompanying December 31, 1997 consolidated balance sheet.
CITY OF GARY DEVELOPMENT AGREEMENT
On September 29, 1995, as amended on October 6, 1995, Trump Indiana entered
into a Memorandum of Understanding with respect to a Development Agreement
entered into with the City of Gary in order to promote the economic development,
urban development and employment of citizens of the City of Gary. As part of the
$153,000,000 Certificate of Suitability investment described above and in
addition to the $18,500,000 off-site development infrastructure projects
described above, Trump Indiana contributed $5,205,000 to the City of Gary. As of
December 31, 1996 and 1997, other assets in the accompanying consolidated
balance sheets include $6,477,000 of payments made by Trump Indiana under this
Memorandum of Understanding. These costs are being amortized over the five-year
license period.
LEGAL PROCEEDINGS
THCR and its subsidiaries, certain members of its former Executive
Committee, 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, judgments, fines and penalties)
incurred by them in said legal proceedings.
Various legal proceedings are now pending against THCR and its subsidiaries.
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, Taj Associates and Castle Associates are also a party to
various administrative proceedings involving allegations that they have violated
certain provisions of the Casino Control Act. Plaza Associates, Taj Associates
and Castle Associates believe that the final outcome of these proceedings
F-27
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
will not, either individually or in the aggregate, have a material adverse
effect on their financial condition, results of operations or on their ability
to otherwise retain or renew any casino or other licenses required under the
Casino Control Act for the operation of the respective properties.
Commencing in early 1994, THCR, through its Indiana counsel, had discussions
with eight Indiana residents regarding the potential purchase by such residents
of 7.5% of the nonvoting stock of Trump Indiana. These residents have asserted a
right to purchase 7.5% of the stock of Trump Indiana. THCR does not believe that
these individuals have any rights with respect to the purchase of the stock of
Trump Indiana. Discussions are ongoing with respect to the resolution of this
matter.
SELF-INSURANCE RESERVES
Self-insurance reserves represent the estimated amounts of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the normal course of business. These
reserves are established by management based upon specific review of open
claims, with consideration of incurred but not reported claims as of the balance
sheet date. Actual results may differ from these reserve amounts.
FEDERAL INCOME TAX EXAMINATION
Plaza Associates and Taj Associates are currently involved in examinations
with the Internal Revenue Service ("IRS") concerning Plaza Associates' federal
partnership income tax returns for the tax years 1989 through 1992 and Taj
Associates' federal partnership income tax returns for the tax years 1992 and
1993. While any adjustment which results from this examination could affect
Plaza Associates' and Taj Associates' state income tax returns, Plaza Associates
and Taj Associates do not believe that adjustments, if any, will have a material
adverse effect on its financial condition or results of operations.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY OBLIGATIONS
Pursuant to the provisions of the Casino Control Act, Plaza Associates, Taj
Associates and Castle Associates must either obtain investment tax credits (as
defined in the Casino Control Act), in an amount equivalent to 1.25% of its
gross casino revenues, or pay an alternative tax of 2.5% of its gross casino
revenues (as defined in the Casino Control Act). Investment tax credits may be
obtained by making qualified investments or by the purchase of bonds at below
market interest rates from the Casino Reinvestment Development Authority
("CRDA"). Plaza Associates, Taj Associates and Castle Associates intend on
satisfying their obligations primarily by depositing funds and donations of
funds deposited. Plaza Associates, Taj Associates and Castle Associates are
required to make quarterly deposits with the CRDA based on 1.25% of their gross
revenue. For the period from inception (June 12, 1995) through December 31, 1995
and for the years ended December 31, 1996 and 1997, THCR Holdings, charged to
operations $670,000, $3,577,000 and $5,104,000, 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 Note 8), the CRDA has approved the
use of up to $14,135,000 in deposits made by Plaza Associates for site
improvements. At December 31, 1997, THCR
F-28
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Holdings had recorded a receivable from the CRDA of $5,115,000. While the
receivable is fully realizable by THCR Holdings, the amount of actual
reimbursements received, in any one year, is limited to 75% and 50%, of the
amount of funds Plaza Associates has deposited with the CRDA to cover its
Atlantic City non-housing and South Jersey obligations, respectively.
Accordingly, THCR Holdings has recorded $2,836,000 in other current assets and
$2,279,000 is other assets in the accompanying financial statements.
CONCENTRATIONS OF CREDIT RISK
In accordance with casino industry practice, THCR extends credit to a
limited number of casino patrons, after background checks and investigations of
credit worthiness. As of both December 31, 1996 and 1997, approximately 41% of
THCR casino receivables (before allowances) were from customers whose primary
residence is outside the United States, of which approximately 31% and 26%,
respectively, represents credit extended to patrons from the Far East.
(7) EMPLOYEE BENEFIT PLANS
THCR 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 THCR will match 50% of
the first 5% of an eligible employee's contributions. In connection with this
Plan, THCR recorded charges of $410,000, $2,098,000 and $3,927,000 for the
period from inception (June 12, 1995) through December 31, 1995 and for the
years ended December 31, 1996 and 1997, respectively.
Plaza Associates, Taj Associates and Castle Associates make payments to
various trusteed multiemployer pension plans under industry-wide union
agreements. The payments are based on the hours worked by or gross wages paid to
covered employees. Under the Employee Retirement Income Security Act, THCR may
be liable for its share of unfunded liabilities, if any, if the plans are
terminated. Based upon 1996 information, the most recent information available,
the withdrawal liability of THCR related to the most significant plan's unfunded
status approximates $4,671,000. Pension expense for the period from inception
(June 12, 1995) through December 31, 1995 and for the years ended December 31,
1996 and 1997 was $229,000, $1,186,000 and $2,142,000, respectively.
THCR provides no other material, post-retirement or post-employment
benefits.
F-29
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(8) TRANSACTIONS WITH AFFILIATES
Amounts due from (owed to) affiliates at December 31, consists of:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
ASSETS
Officers(a)..................................................... $ 1,818,000 $ 15,648,000
Trump Management Fees (see below)............................... 1,250,000 1,250,000
Trump Organization(c)........................................... 184,000 708,000
Other........................................................... 23,000 --
------------- -------------
Total Assets.................................................. 3,275,000 17,606,000
Less-current portion.......................................... 207,000 14,113,000
------------- -------------
Long term portion............................................. $ 3,068,000 $ 3,493,000
------------- -------------
------------- -------------
LIABILITIES
Seashore Four(b)................................................ $ (571,000) $ --
Buffington Harbor, L.L.C. (Note 3).............................. (807,000) (940,000)
------------- -------------
Total Liabilities............................................. $ (1,378,000) $ (940,000)
------------- -------------
------------- -------------
</TABLE>
- ------------------------
(a) In January 1998, $13,000,000 was repaid.
(b) Plaza Associates previously leased two parcels of land under long-term
ground leases from Seashore Four Associates and Trump Seashore Associates.
For the year ended December 31, 1996, THCR Holdings paid $1,000,000 to
Seashore Four Associates, and $981,000 to Trump Seashore Associates. Plaza
Associates purchased the tract from Seashore Four in January 1997 and the
tract from Seashore Associates in September 1996 for $10,000,000 and
$14,500,000, respectively.
(c) THCR engages in various transactions with the other entities owned by Trump.
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 paid 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, Plaza charged approximately $718,000 and $1,000,000 to
expense for the period from inception (June 12, 1995) through December 31, 1995
and for the year ended December 31, 1996, respectively. The service agreement
was terminated in August 1996.
F-30
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(8) TRANSACTIONS WITH AFFILIATES (CONTINUED)
Taj Associates had entered into a Services Agreement which provided that
Trump 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 was to 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 plus expenses.
For the year ended December 31, 1995 and for the period from January 1, 1996
through April 17, 1996 (date of termination), Taj Associates incurred $2,004,000
and $512,000, respectively, under the Services Agreement.
TRUMP MANAGEMENT FEE
Castle Associates has a Services Agreement with TCI-II, a corporation wholly
owned by Trump. Pursuant to the terms of the Services Agreement, TCI-II is
obligated to provide Castle 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 with respect to
the business and operations of Castle Associates, including such other services
as the Managing Partner may reasonably request.
Pursuant to the Services Agreement, Castle Associates is required to pay an
annual fee in the amount of $1,500,000 to TCI-II for each year in which Earnings
Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined,
exceeds certain levels. In addition, TCI-II is to receive an incentive fee equal
to 10% of the excess EBITDA over $45,000,000 for such fiscal year.
During 1996, Castle Associates incurred no fees and expenses under the
Services Agreement. As Castle Associates did not meet the required level of
EBITDA during 1996, the monthly advances to TCI-II related to the Services
Agreement were suspended, and at December 31, 1996, Castle Associates recorded a
receivable in the amount of $1,250,000, which represents the amounts advanced
during the year. The Services Agreement expires on December 31, 2005. No fees
and expenses were incurred during 1997.
PARTNERSHIP AGREEMENT
Under the terms of a Partnership Agreement between Castle Associates and
TCI-II, Castle Associates is required to pay all costs incurred by TCI-II. For
the year ended December 31, 1996, THCR Holdings paid $72,000 of expenses on
behalf of TCI-II which were charged to general and administrative expense in the
accompanying consolidated financial statements.
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 plus reimbursement for expenses.
F-31
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(8) TRANSACTIONS WITH AFFILIATES (CONTINUED)
TRUMP WORLD'S FAIR
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel) and (ii) certain
promissory notes made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate assets
located in New York, unrelated to Plaza Associates. In connection with such
Option Agreement, Trump assigned his rights to Plaza Associates.
On June 12, 1995, the option to purchase the Trump World's Fair was
exercised. The option price of $60,000,000 was funded with $58,150,000 from the
capital contributed by THCR Holdings (See Note 1), and $1,850,000 of option
payments made by Plaza Associates.
TRUMP PLAZA EAST
Under an agreement with Midlantic National Bank ("Midlantic"), Trump had (i)
an option to acquire Trump Plaza East and (ii) a lease agreement for Trump Plaza
East requiring $260,000 per month in lease payments. In October 1993, Plaza
Associates assumed the lease agreement from Trump.
Until such time as the Trump Plaza East Purchase Option was exercised or
expired, Plaza Associates was obligated, from and after the date it entered into
the Trump Plaza East Option, to pay the net expenses associated with Trump Plaza
East. During 1996, Plaza Associates incurred approximately $1,100,000 of such
expenses of which $348,000, is included in non-operating expenses in the
accompanying financial statements.
In connection with the Taj Merger Transaction described in Note 1, Plaza
Associates exercised its option to acquire Trump Plaza East. The purchase price
of $28,084,000 has been included in land and building in the accompanying
financial statements.
NOTE RECEIVABLE FROM TRUMP
Prior to consummation of the June 1995 Offerings Trump incurred $3,000,000
of 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 would be automatically canceled in the event that, at any time during the
period defined in the Trump Note, the THCR Common Stock traded at a price per
share equal to or greater than the prices set forth in the Trump Note (subject
to adjustment in certain circumstances). The Trump Note was canceled on March
27, 1996 in accordance with its terms.
(9) 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
F-32
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(9) STOCK INCENTIVE PLAN (CONTINUED)
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
("ISOs"), 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 the 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.
A SAR granted as an alternative or a supplement to 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 by the applicable award agreement, on each date on
which the shares of THCR Common Stock covered by the awards would otherwise have
been delivered or become restricted, 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 1995 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 entitled the President, Chief Executive
Officer and Chief Financial Officer of THCR to receive 66,666 shares of THCR
Common Stock two years following such award, subject to certain conditions. The
compensation expense associated with the phantom stock award was approximately
$934,000. This amount was amortized over two years and was approximately
$273,000, $467,000 and $194,000 for the period from inception to December 31,
1995 and for the years ended December 31, 1996 and 1997, respectively. This
award became fully vested on June 12, 1997. The President, Chief Executive
Officer and Chief Financial Office of THCR also received an award of NQSOs for
the purchase of 133,333 shares of THCR Common Stock, subject to certain
conditions (including a vesting rate of 20% per year over a five-year period).
The options have an
F-33
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(9) STOCK INCENTIVE PLAN (CONTINUED)
exercise price of $14.00 per share. As of December 31, 1997, 53,333 options were
exercisable under this grant.
In December 1996, THCR granted certain employees 668,000 options to purchase
THCR Common Stock at a price of $14.00 per share. The options will vest and
become exercisable on the earlier of five years after the date of grant, or a
change of control, as defined, occurs. The options expire 10 years after the
date of issuance. No options were exercised, cancelled, or granted during 1997.
Effective January 1, 1996, THCR adopted the provisions of Statement No. 123,
Accounting for Stock-Based Compensation. As permitted by the Statement, THCR has
chosen to continue to account for stock-based compensation using the intrinsic
value method. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for awards described above. Had the
fair value method of accounting been applied to the THCR's stock option plans,
which requires recognition of compensation cost ratably over the vesting period
of the underlying equity instruments, net loss would have been increased by
$154,000 or $(.02) per share in 1995 and $1,079,000 or $(.05) per share in 1996
and 1997. This pro forma impact only takes into account options granted since
the date of inception, June 12, 1995, and is likely to increase in future years
as additional options are granted and amortized ratably over the vesting period.
The average fair value of options granted during 1995 and 1996 was $5.76 and
$6.93, respectively. No options were granted during 1997. The fair value was
estimated using the Black-Scholes option-pricing model based on the weighted
average market price at grant date of $14.00 in 1995, $12.75 in 1996 and the
following weighted average assumptions: risk-free interest rate of 6.07% for
1995 and 6.41% for 1996, expected life of 5 years and 7 years for 1995 and 1996,
respectively and dividend yield of 0% for 1995 and 1996.
(10) 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, 1997
----------------------------------
CARRYING AMOUNT FAIR VALUE
---------------- ----------------
<S> <C> <C>
11 1/4% First Mortgage Notes............................. $ 1,200,000,000 $ 1,170,000,000
Trump AC Funding II Mortgage Notes....................... 72,100,000 72,100,000
Trump AC Funding III Mortgage Notes...................... 23,573,000 23,573,000
15 1/2% Senior Secured Notes............................. 145,000,000 145,000,000
11 3/4% Castle Associates Notes.......................... 211,971,000 229,429,000
13 7/8% Castle Associates Pay-In-Kind Notes.............. 73,699,000 76,042,000
</TABLE>
The fair values of the above instruments are based on quoted market prices
as of December 31, 1997. The fair value of the Trump AC Funding II Mortgage Note
and the Trump AC Funding III Mortgage Note approximate the carrying values based
upon the short term nature of the period outstanding.
F-34
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
There are no quoted market prices for bank borrowings, Castle Associates
Senior Notes, Mortgage Notes payable and other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
(11) PURCHASE OF TREASURY STOCK
The THCR Board of Directors has authorized the repurchase by THCR Holdings
of up to 2,500,000 shares of THCR's Common Stock, from time to time in the open
market or privately negotiated transactions. The repurchase program is effective
until the end of 1998. As of December 31, 1997, THCR Holdings have repurchased
1,706,500 shares of THCR Common Stock.
In January 1998, THCR Holdings repurchased an additional 305,000 shares of
THCR Common Stock. As of February 1998, a total of 2,011,500 shares of THCR
Common Stock has been repurchased.
(12) EXTRAORDINARY LOSS
The extraordinary loss in 1996 consists of the following:
<TABLE>
<S> <C>
Early redemption of Plaza Associates 10 7/8% Mortgage Notes due
2001......................................................... $59,132,000
Early redemption of $10,000,000 of THCR Holdings 15 1/2% Senior
Notes due 2005 (Note 4)...................................... 1,600,000
----------
$60,732,000
----------
----------
</TABLE>
(13) FINANCIAL INFORMATION -- THCR FUNDING
Financial information relating to THCR Funding is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Total Assets (including Mortgage
Notes receivable of $145,000,000
at December 31, 1996 and 1997).... $145,936,000 $145,936,000
----------- -----------
----------- -----------
Total Liabilities and Capital
(including $145,000,000 of Senior
Secured Notes Due 2005)........... $145,936,000 $145,936,000
----------- -----------
----------- -----------
Interest Income from THCR
Holdings.......................... $13,214,000 $23,797,000 $22,475,000
---------- ----------- -----------
---------- ----------- -----------
Interest Expense.................... $13,214,000 $23,797,000 $22,475,000
---------- ----------- -----------
---------- ----------- -----------
Net income.......................... $ -- $ -- $ --
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
F-35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc. and
Subsidiaries:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Trump Hotels & Casino Resorts, Inc.
("THCR") and Subsidiaries included in this Form 10-K and have issued our report
thereon dated February 5, 1998. 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 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 consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 5, 1998
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts Holdings, L.P.
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Trump Hotels & Casino Resorts Holdings,
L.P. "(THCR Holdings") included in this Form 10-K and have issued our report
thereon dated February 5, 1998. 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 THCR Holdings' management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 5, 1998
S-2
<PAGE>
SCHEDULE II
TRUMP HOTELS & CASINO RESORTS, INC.
AND TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) TO DECEMBER 31, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
BALANCE CHARGED BALANCE
AT TO OTHER AT
BEGINNING COSTS AND CHANGES END OF
OF PERIOD EXPENSES (DEDUCTIONS) PERIOD
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995)
THROUGH DECEMBER 31, 1995
Allowances for doubtful accounts............... $ 8,490,000 $ 559,000 $ (972,000 (a) $ 8,077,000
Valuation allowance for interest differential
on CRDA bonds................................ $ 2,144,000 $ 670,000 $ (1,737,000 (b) $ 1,077,000
YEAR ENDED DECEMBER 31, 1996.......................
Allowances for doubtful accounts............... $ 8,077,000 8,904,000 $ 2,106,000(c) $ 19,087,000
Valuation allowance for interest differential
on CRDA bonds................................ $ 1,077,000 $ 3,577,000 $ 10,311,000(d) $ 14,965,000
YEAR ENDED DECEMBER 31, 1997.......................
Allowances for doubtful accounts............... $ 19,087,000 $ 9,160,000 $ (9,622,000 (a) $ 18,625,000
Valuation allowance for interest differential
on CRDA bonds................................ $ 14,965,000 $ 5,104,000 $ (920,000 (b) $ 19,149,000
</TABLE>
- ------------------------
(a) Write-off uncollectible accounts.
(b) Adjustment of allowance applicable to contribution of CRDA deposits.
(c) Includes $(7,497,000) representing the write-of of uncollectible accounts,
$7,596,000 which represents Taj Associates' beginning balance at April 17,
1996 and $2,007,000 which represents Castle Associates' beginning balance at
October 7, 1996.
(d) Includes $(476,000) representing the adjustment of allowance applicable to
the contribution of CRDA deposits, $8,371,000 which represents Taj
Associates' beginning balance at April 17, 1996 and $2,416,000 which
represents Castle Associates' beginning balance at October 7, 1996.
S-3
<PAGE>
Exhibit 21
SUBSIDIARIES OF TRUMP HOTELS & CASINO RESORTS, INC.:
- ----------------------------------------------------
THCR Holding Corp. (Delaware corporation)
THCR/LP Corporation (Delaware corporation)
Trump Hotels & Casino Resorts Holdings, L.P. (Delaware limited partnership)
Trump Hotels & Casino Resorts Funding, Inc. (Delaware corporation)
Trump Atlantic City Holding, Inc. (Delaware corporation)
Trump Atlantic City Funding, Inc. (Delaware corporation)
Trump Atlantic City Funding II, Inc. (Delaware corporation)
Trump Atlantic City Funding III, Inc. (Delaware corporation)
Trump Atlantic City Associates (New Jersey general partnership)
Trump Casino Services, L.L.C. (New Jersey limited liability company)
Trump Communications, L.L.C. (New Jersey limited liability company)
Trump Taj Mahal Associates (New Jersey general partnership)
Trump Plaza Associates (New Jersey general partnership)
Trump Atlantic City Corporation (Delaware corporation)
THCR Enterprises, Inc. (Delaware corporation)
THCR Enterprises, L.L.C. (New Jersey limited liability company)
THCR Ventures, Inc. (Delaware corporation)
Trump Motor City Casino, L.L.C. (Delaware limited liability company)
Trump Hotels & Casino Resorts Development Company, L.L.C. (Delaware limited
liability company)
Trump International Casino Ltd. (Ontario corporation)
<PAGE>
Trump Internet Casino, L.L.C. (Delaware limited liability company)
Trump Management Services, L.L.C. (Delaware limited liability company)
Trump Diamondhead Casino, L.L.C. (Delaware limited liability company)
Trump Indiana, Inc. (Delaware corporation)
Trump's Castle Hotel & Casino, Inc. (New Jersey corporation)
Trump's Castle Funding, Inc. (New Jersey corporation)
Trump's Castle Associates, L.P. (New Jersey limited partnership)
SUBSIDIARIES OF TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.:
- -------------------------------------------------------------
Trump Hotels & Casino Resorts Funding, Inc. (Delaware corporation)
Trump Atlantic City Holding, Inc. (Delaware corporation)
Trump Atlantic City Funding, Inc. (Delaware corporation)
Trump Atlantic City Funding II, Inc. (Delaware corporation)
Trump Atlantic City Funding III, Inc. (Delaware corporation)
Trump Atlantic City Associates (New Jersey general partnership)
Trump Casino Services, L.L.C. (New Jersey limited liability company)
Trump Communications, L.L.C. (New Jersey limited liability company)
Trump Taj Mahal Associates (New Jersey general partnership)
Trump Plaza Associates (New Jersey general partnership)
Trump Atlantic City Corporation (Delaware corporation)
THCR Enterprises, Inc. (Delaware corporation)
THCR Enterprises, L.L.C. (New Jersey limited liability company)
THCR Ventures, Inc. (Delaware corporation)
-2-
<PAGE>
Trump Motor City Casino, L.L.C. (Delaware limited liability company)
Trump Hotels & Casino Resorts Development Company, L.L.C. (Delaware limited
liability company)
Trump International Casino Ltd. (Ontario corporation)
Trump Internet Casino, L.L.C. (Delaware limited liability company)
Trump Management Services, L.L.C. (Delaware limited liability company)
Trump Diamondhead Casino, L.L.C. (Delaware limited liability company)
Trump Indiana, Inc. (Delaware corporation)
Trump's Castle Hotel & Casino, Inc. (New Jersey corporation)
Trump's Castle Funding, Inc. (New Jersey corporation)
Trump's Castle Associates, L.P. (New Jersey limited partnership)
SUBSIDIARIES OF TRUMP HOTELS & CASINO RESORTS FUNDING, INC.:
- ------------------------------------------------------------
None
-3-
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into Trump Hotels & Casino Resorts, Inc.'s
previously filed Registration Statement File No. 333-22601.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000943320
<NAME> TRUMP HOTELS & CASINO RESORTS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 140,328
<SECURITIES> 0
<RECEIVABLES> 86,700
<ALLOWANCES> 18,625
<INVENTORY> 13,011
<CURRENT-ASSETS> 249,419
<PP&E> 2,301,688
<DEPRECIATION> 296,937
<TOTAL-ASSETS> 2,473,309
<CURRENT-LIABILITIES> 161,357
<BONDS> 1,726,343
242
0
<COMMON> 0
<OTHER-SE> 328,643
<TOTAL-LIABILITY-AND-EQUITY> 2,473,309
<SALES> 1,399,373
<TOTAL-REVENUES> 1,582,229
<CGS> 0
<TOTAL-COSTS> 891,362<F1>
<OTHER-EXPENSES> 364,811<F2>
<LOSS-PROVISION> 9,160
<INTEREST-EXPENSE> 211,537
<INCOME-PRETAX> (42,128)
<INCOME-TAX> 0
<INCOME-CONTINUING> (42,128)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,128)
<EPS-PRIMARY> (1.85)
<EPS-DILUTED> (1.85)
<FN>
<F1>Includes gaming, lodging, food & beverage and other
<F2>Includes general & administration, depreciation & amortization and development
costs.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000943322
<NAME> TRUMP HOTELS & CASINO RESORTS HOTELS, LP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 140,324
<SECURITIES> 0
<RECEIVABLES> 86,700
<ALLOWANCES> 18,625
<INVENTORY> 13,011
<CURRENT-ASSETS> 249,415
<PP&E> 2,301,688
<DEPRECIATION> 296,937
<TOTAL-ASSETS> 2,473,305
<CURRENT-LIABILITIES> 161,357
<BONDS> 1,726,343
0
0
<COMMON> 0
<OTHER-SE> 477,299
<TOTAL-LIABILITY-AND-EQUITY> 2,473,305
<SALES> 1,399,373
<TOTAL-REVENUES> 1,582,229
<CGS> 0
<TOTAL-COSTS> 891,362<F1>
<OTHER-EXPENSES> 364,617<F2>
<LOSS-PROVISION> 9,160
<INTEREST-EXPENSE> 211,537
<INCOME-PRETAX> (66,120)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,120)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,120)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes gaming, lodging, food & beverage and other
<F2>Includes general & administration and depreciation & amortization and
development costs.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000943323
<NAME> TRUMP HOTELS & CASINO RESORTS, FUNDING, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 936
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 936
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 145,936
<CURRENT-LIABILITIES> 936
<BONDS> 145,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 145,936
<SALES> 0
<TOTAL-REVENUES> 22,475
<CGS> 0
<TOTAL-COSTS> 0<F1>
<OTHER-EXPENSES> 0<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,475
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes gaming, lodging, food & beverage and other
<F2>Includes general & administration and depreciation & amortization
</FN>
</TABLE>
