================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-K
----------
(Mark One)
[X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 1-13794
------------------------------
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
Incorporation or Organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
COMMISSION FILE NO.: 33-90786
-----------------------------
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
(Exact name of registrant as specified in its Charter)
DELAWARE 13-3818407
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
COMMISSION FILE NO.: 33-90786
-----------------------------
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 13-3818405
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock of Trump Hotels New York Stock Exchange
& Casino Resorts, Inc.,
par value $.01 per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
================================================================================
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 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 25, 1999 was approximately:
$88,942,937
As of March 25, 1999, there were 22,195,256 shares of Trump Hotels &
Casino Resorts, Inc. Common Stock outstanding.
Documents Incorporated by Reference--Not applicable
<PAGE>
<TABLE>
<CAPTION>
FORM 10-K
TABLE OF CONTENTS
<S> <C>
PART I...................................................................................1
ITEM 1. BUSINESS...................................................................1
Recent Events..................................................................1
General........................................................................1
Trump Plaza....................................................................3
The Taj Mahal..................................................................8
Trump Marina..................................................................12
Indiana Riverboat.............................................................16
Trademark/Licensing...........................................................17
Certain Indebtedness of THCR..................................................18
Atlantic City Market..........................................................20
Competition...................................................................21
Gaming and Other Laws and Regulations.........................................25
ITEM 2. PROPERTIES................................................................36
THCR..........................................................................36
Trump Plaza...................................................................36
Taj Mahal.....................................................................38
Trump Marina..................................................................40
Indiana Riverboat.............................................................41
ITEM 3. LEGAL PROCEEDINGS.........................................................41
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................44
PART II.................................................................................44
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTER .................................................................44
ITEM 6. SELECTED FINANCIAL DATA...................................................46
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ..................................................47
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................56
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............................57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ...................................................57
PART III................................................................................58
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..........65
ITEM 11. EXECUTIVE COMPENSATION ...................................................65
i
<PAGE>
Employment Agreements.........................................................67
Compensation of Directors.....................................................68
Committees of the Board of Directors..........................................69
Compensation Committee Interlocks and Insider Participation...................69
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............73
Security Ownership............................................................73
Changes in Control............................................................74
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........................74
PART IV.................................................................................76
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...........76
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS...........................82
SIGNATURES - TRUMP HOTELS & CASINO RESORTS, INC....................................83
SIGNATURES - TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P...........................84
SIGNATURES - TRUMP HOTELS & CASINO RESORTS FUNDING, INC............................85
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES...................F-1
</TABLE>
ii
<PAGE>
PART I
ITEM 1. BUSINESS.
RECENT EVENTS
On January 13, 1999, Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") entered into an agreement with Hilton Hotels Corporation and
Flamingo Hilton Riverboat Casino, L.P. ("Flamingo-Kansas City") to acquire a
riverboat casino facility located in Kansas City, Missouri and substantially all
of the other assets, properties and rights of every kind and nature of
Flamingo-Kansas City. The aggregate consideration payable for the assets of
Flamingo-Kansas City is $15 million, subject to customary closing adjustments.
Consummation of the acquisition is subject to various conditions, including
obtaining certain approvals and licenses (including gaming licenses) from the
Missouri Gaming Commission and the Port Authority of Kansas City, Missouri, and
the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
GENERAL
THCR Holdings, Trump Hotels & Casino Resorts Funding, Inc. ("THCR
Funding") and Trump Hotels & Casino Resorts, Inc. ("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.
o 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 138,295 square
feet of gaming space, housing a total of approximately 4,162 slot
machines and 103 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.
o 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
<PAGE>
"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"), which included construction of a
new bus terminal, expansion of parking facilities and expansion of
casino floor space.
o 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, and (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").
o INDIANA RIVERBOAT. Trump Indiana, Inc. ("Trump Indiana"), which owns
and operates the Indiana Riverboat and hotel 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 1,320
slot machines and 51 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.
o 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.
2
<PAGE>
<TABLE>
The following table profiles THCR's current casino and hotel capacity:
<CAPTION>
TRUMP TAJ TRUMP INDIANA
PLAZA MAHAL MARINA RIVERBOAT TOTAL
----- ----- ------ --------- -----
<S> <C> <C> <C> <C> <C>
Gaming square footage...................... 138,295 147,720 75,900 37,000 398,915
Slot machines.............................. 4,162 4,152 2,167 1,320 11,801
Table games (including poker).............. 103 211 92 51 457
Hotel rooms................................ 1,404 1,250 728 300 3,682
</TABLE>
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 and
in July 1998 was renewed through July 1999. 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. In 1998, TCS, Plaza
Associates, Taj Associates, Castle Associates and Trump Indiana entered into a
second Amended and Restated Services Agreement pursuant to which TCS also
provides these same functions and services to Trump Indiana in connection with
the operation of the Indiana Riverboat. 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 Five Star Diamond Award from the
American Academy of Hospitality Sciences reflects the high quality amenities and
services that Trump Plaza provides to its casino patrons and hotel guests. These
amenities and services include a broad selection of dining choices, headline
entertainment, deluxe accommodations, tennis courts 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 gaming regulatory changes that
allow casino space to be directly visible and accessible from The Boardwalk.
3
<PAGE>
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 49,211 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.
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.
<TABLE>
The following table details Trump Plaza's current casino and hotel
capacity:
<CAPTION>
TRUMP TRUMP
PLAZA MAIN TRUMP WORLD'S
FACILITY PLAZA EAST FAIR TOTAL
-------- ---------- ------ -----
<S> <C> <C> <C> <C>
Gaming square footage....................... 74,198 14,886 49,211 138,295
Slot machines............................... 2,124 402 1,636 4,162
Table games................................. 103 0 0 103
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 and the introduction of new updated gaming
products.
ATLANTIC CITY MARKETING STRATEGY
Trump Plaza. Trump Plaza East has been integrated into Trump Plaza and
together the two are operated as a single casino hotel facility. Trump Plaza
presently intends to continue the marketing strategies it has found successful
in the past, including targeting lucrative high-end drive-in slot customers.
Management believes the additional hotel rooms and gaming facilities at Trump
Plaza East better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the typical
walk-in or bus patron.
Trump World's Fair. 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 bus
terminal that has a dedicated escalator leading directly to a separate casino
entertainment area that
4
<PAGE>
contains a 500-seat buffet- style restaurant and a casino with 508 slot
machines. The 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 559 slot machines 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
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 the reasons discussed above. In addition, this shift
in marketing strategy has allowed Plaza Associates to focus its efforts on
attracting high-end players.
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. Trump Plaza's suite product, high end slot clubs and
fine dining restaurants indicate Plaza Associates' commitment to this segment of
the market. While Trump Plaza strives to accommodate the more lucrative drive-in
patron, 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 a variety of
headline entertainment and revue shows throughout the year.
Player Development/Casino Hosts. Plaza Associates currently employs
gaming representatives in New Jersey, Pennsylvania 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.
5
<PAGE>
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's bus terminal has a
dedicated escalator leading directly to a casino entertainment area complete
with an international 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, 1996, 1997 and 1998 credit play as a percentage of total dollars wagered was
approximately 17.4%, 18.9% and 22.4%, respectively. 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 creditworthiness is necessary. In addition, depositing of
markers is regulated by the State of New Jersey. Markers in increments of $1,000
or less are deposited in a maximum of 7 days; markers of increments of $1,001 to
$5,000 are deposited in a maximum of 14 days; and markers in increments of over
$5,001 are deposited in a maximum of 45 days. Markers may be deposited sooner at
the request of patrons or at Trump Plaza's discretion.
FACILITIES AND AMENITIES
Trump Plaza. The casino in Trump Plaza's main tower currently offers
103 table games and 2,124 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
6
<PAGE>
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.
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
1,636-slot machines. 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.
Trump Plaza and Trump World's Fair are physically connected to the
original convention center. By the summer of 2001, the East Hall of this
convention center will undergo a $72 million renovation funded by the CRDA.
These improvements will convert the East Hall into a modern special events
venue, and will benefit both Trump Plaza and Trump World's Fair.
EMPLOYEES AND LABOR RELATIONS
Plaza Associates has approximately 4,800 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").
HISTORICAL BACKGROUND
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 $60 million aggregate
principal amount of 12 1/2% Pay-In-Kind Notes due 2003 (the "Plaza PIK Notes")
and the warrants to acquire an aggregate of $12 million in principal amount of
additional Plaza PIK Notes (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 Trump Plaza Funding, Inc. ("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 (as defined), 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).
7
<PAGE>
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, 1998. The Taj Mahal
capitalizes on the widespread recognition and marquee status of the "Trump" name
and its association with high quality amenities and first-class service as
evidenced by its Five Star Diamond Award from the American Academy of
Hospitality Sciences. Management believes that the breadth and diversity of the
Taj Mahal's casino, entertainment and convention facilities and its status as a
"must see" attraction will enable the Taj Mahal to benefit from growth of the
Atlantic City market.
In 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 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 is currently in the process of expanding the retail
shopping experience along the length of its parking garage promenade walkway
which immediately adjoins the Taj Mahal's main retail shopping area. The first
tenant, Starbucks, operated by Host International, Inc., opened in September
1996. Sbarro's, an Italian eatery, operated by Sbarro America Properties, Inc.,
opened in October 1998. Boardwalk Treats, Beka's Pastries and a Harley Davidson
retail merchandise outlet are expected to open in the early spring of 1999. A
Sunglass Hut, operated by Sunglass Hut International, opened in August 1998 in
another location also adjoining the Taj Mahal's main retail shopping area.
In November 1998, the Taj Mahal entered into a development agreement
with the New Jersey Casino Reinvestment Development Authority (the "CRDA") for
the redevelopment of the road corridors and surrounding neighborhoods leading
from Route 30, one of its major access routes, and the Taj Mahal. The project,
which is expected to cost approximately $20.8 million, is scheduled to be
completed in phases through the summer of 2000 and will greatly enhance the Taj
Mahal's customer's experience and ease in reaching the Taj Mahal. The project
itself will greatly improve the road infrastructure and lighting, provide
extensive landscaping, involve the acquisition and demolishing of deteriorated
buildings and involve the completion of a new housing development.
THE TAJ MAHAL OPERATIONS
General. The Taj Mahal currently has approximately 147,720 square feet
of gaming space, 211 table games and 4,152 slot machines, which includes an
approximately 12,000 square-foot poker, keno and race simulcasting room with 64
poker tables, which was added in 1993 and expanded in 1994. The casino's
offerings include blackjack, 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
8
<PAGE>
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), 19 dining and 12 beverage
locations, parking for approximately 6,950 cars, a 14-bay bus terminal and
approximately 65,000 square feet of ballroom, meeting room and pre-function area
space. In addition, the Taj Mahal features a 20,000 square-foot multi-purpose
entertainment complex known as the Xanadu Theater with seating capacity for
approximately 1,200 people which can be used as a theater, concert hall, boxing
arena or exhibition hall (the "Taj Entertainment Complex") and the Mark Etess
Arena, which comprises an approximately 63,000 square- foot exhibition hall and
entertainment facility. The Xanadu Theater and Mark Etess Arena have allowed the
Taj Mahal to offer longer running, more established productions that cater to
the tastes of the Taj Mahal's high-end international guests, and has afforded
the Taj Mahal more flexibility in the use of its facilities for sporting and
other headline programs. The Taj Mahal regularly engages well-known musicians
and entertainment personalities and will continue to emphasize weekend marquee
events such as 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 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 64 poker tables in the largest
poker room in Atlantic City. For the year ended December 31, 1998, the Taj Mahal
captured approximately 51.8% 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 horse race 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 with a propensity to wager who visit
Atlantic City frequently and have proven to be the most profitable market
segment. Comping policy is determined by a patron's propensity to wager. A
patron's propensity to wager is determined by a review of the patron's prior
9
<PAGE>
gaming history at the Taj Mahal as well as other gaming establishments in
Atlantic City. Each patron is analyzed to ensure that the patron's gaming
activity, net of any Complimentaries, is profitable to Taj Associates.
Additionally, as a result of increased regulatory flexibility, the Taj Mahal has
implemented a cash comping policy to high-end players in order to compete with
similar practices in Las Vegas and to attract international business.
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.
Promotional Activities. The Trump Card, a player identification card,
constitutes a key element in the Taj Mahal's direct marketing program. Both
table and slot machine players are encouraged to register for and utilize their
personalized Trump Card to earn various complimentaries and incentives based on
their level of play. The Trump Card is inserted during play into a card reader
attached to the table or slot machine for use in computerized rating systems.
These computer systems record data about the cardholder, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced. Sales and management personnel are able to monitor the
identity and location of the cardholder and the frequency and denomination of
such cardholder's play. They can also use this information to provide attentive
service to the cardholder while the patron is on the casino floor.
The Taj Mahal designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Trump Card and on table game wagering by the casino games supervisor.
Promotional activities at the Taj Mahal include the mailing of vouchers for
complimentary slot and table game play and utilization of a special events
calendar (e.g., birthday parties, sweepstakes and special competitions) to
promote its gaming operations.
The Taj Mahal conducts slot machine and table game tournaments in which
cash prizes are offered to a select group of players invited to participate in
the tournament based upon their tendency to play. Special events such as "Slot
Sweepstakes" and "bingo" are designed to increase mid-week business. Players at
these tournaments 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.
10
<PAGE>
Credit Policy. Historically, the Taj Mahal has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1996, 1997 and 1998, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 29.7%, 31.2% and 26.6%, 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 creditworthiness is
necessary. In addition, depositing of markers is regulated by the State of New
Jersey. Markers in increments of $1,000 or less are deposited in a maximum of 7
days; markers of increments of $1,001 to $5,000 are deposited in a maximum of 14
days; and markers in increments of over $5,001 are deposited in a maximum of 45
days. Markers may be deposited sooner at the request of patrons or at the Taj
Mahal's discretion.
EMPLOYEES
Taj Associates has approximately 4,500 full time equivalent employees
for the operation of the Taj Mahal, of whom approximately 1,900 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:
(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 Funding's 10-7/8%
First Mortgage Notes due 2001 (the "Plaza Notes");
11
<PAGE>
(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 153
suites, 97 of which are "Crystal Tower" luxury suites, and contains
approximately 75,900 square feet of gaming space. Trump Marina offers 2,167 slot
machines, 92 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.
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 the Five Star Diamond Award from
the American Academy of Hospitality Sciences, 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
12
<PAGE>
City market increased from 54.6% of the industry gaming revenue in 1988 to 70.8%
of industry gaming revenue in 1998. Trump Marina experienced a similar increase,
with slot revenue increasing from 52.5% of gaming revenue in 1988 to 71.4% of
gaming revenue in 1998. In response to this trend, management devoted more of
its casino floor space to slot machines and between 1994 and 1998 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 to wager 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. A patron's propensity
to wager is determined by a review of the patron's prior gaming history at Trump
Marina 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 Castle Associates.
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 performances have included The Beach Boys, the Atlantic City
premiere of Van Halen, the artist formerly known as Prince, 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 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
13
<PAGE>
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 31.4%, 32.4% and 30.1% for 1996,
1997 and 1998, 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.
Bus Program. Trump Marina has a bus program which transports
approximately 725 gaming patrons per day during the week and 750 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 RETHEMING
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.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1998, Castle Associates employed approximately 3,400
full and part-time employees, of whom approximately 1,200 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 300
maintenance employees. Castle Associates believes that its relationships with
its employees are satisfactory. Trump's Castle Funding, Inc. ("Castle Funding")
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. Castle Funding was incorporated under the laws of the State of
New Jersey in May 1985 and is wholly owned by Castle Associates. Trump's Castle
Hotel & Casino, Inc. ("TCHI") was incorporated under the laws of the state of
New Jersey in 1985; it is wholly owned by THCR Holdings and is the general
partner of Castle Associates. Castle Funding was formed to serve as a financing
corporation to raise funds as an agent of Castle Associates. Since Castle
Funding and TCHI have no business operations, their ability to service their
indebtedness
14
<PAGE>
is completely dependent upon funds they receive from Castle Associates.
Accordingly, the following discussion is related primarily to Castle Associates
and its operations.
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 Increasing Rate
Subordinated Pay-in-Kind Notes due 2005 of Castle Funding (the "Castle PIK
Notes") (which are currently subordinated to the New Castle Senior Notes (as
defined), the Working Capital Loan (as defined) and the Castle Mortgage Notes
(as defined)) 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.
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) Trump Casinos II, Inc. ("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.
April 1998 Refinancing. On April 17, 1998, Castle Funding refinanced a
portion of its outstanding debt, on a consolidated basis, consisting of the $38
million outstanding on a term loan with a bank (the "Castle Term
15
<PAGE>
Loan"), and its 11 1/2% Senior Secured Notes due 2000 (the "Old Castle Senior
Notes") by issuing 10 1/4% Senior Secured Notes due 2003 (the "New Castle Senior
Notes"). The proceeds from the issuance of the New Castle Senior Notes were used
to redeem all of the issued and outstanding Old Castle Senior Notes at 100% of
their principal amount and to repay the Castle Term Loan in full. In conjunction
with this refinancing, TCHI obtained a working capital credit facility (the
"Working Capital Loan"). Both the New Castle Senior Notes and the Working
Capital Loan are guaranteed by Castle Associates. The New Castle Senior Notes
have an outstanding principal amount of $62,000,000 and bear interest at the
rate of 10 1/4% per annum, payable semi-annually each April and October. The New
Castle Senior Notes mature on April 30, 2003. The Working Capital Loan has an
outstanding principal amount of $5,000,000 and bears interest at the rate of
10-1/4% per annum, payable semi-annually each April and October. The entire
principal balance of the Working Capital Loan matures on April 30, 2003.
INDIANA RIVERBOAT
The Indiana Riverboat features an approximately 280-foot luxury yacht
containing approximately 37,000 square feet of gaming space with 1,320 slot
machines, 51 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 including a 300 room hotel. 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, is $139 million through February 28,
1999. During the remainder of Trump Indiana's initial five-year license term, an
additional $14 million of funds will be required to be spent in connection with
municipal commitments required in connection with the licensure process. The
remaining $14 million required to be spent over the remainder of the initial
five-year license term is expected to be funded with cash from operations or
other available financings.
Buffington Harbor is approximately 25 miles from downtown Chicago. In
addition, the cities of Indianapolis, Fort Wayne, Toledo, Grand Rapids and
Milwaukee 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.
16
<PAGE>
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 (as defined) with
the City of Gary, Indiana, dated as of May 1, 1996, which memorialized the
commitments made by Trump Indiana to the City during the licensing process (the
"Development Agreement"). 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 "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 and 1998 contributions were made as of December 31, 1997 and
1998, respectively.
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.
17
<PAGE>
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 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
$75,000,000 principal amount of Mortgage Notes which mature on May 1, 2006 (the
"TAC II Notes"). The TAC II Notes include restrictive covenants prohibiting or
limiting, among other things, the sale of assets, the making of acquisitions and
other investments, capital expenditures, the incurrence of additional debt and
liens and the payment of dividends and distributions. Non-compliance could
result in the acceleration of such indebtedness.
TAC III Notes. In December 1997, Trump AC and Funding III issued
$25,000,000 principal amount of 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.
18
<PAGE>
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"). 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 New 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, 1998 and November 15, 1998, the semi-annual interest payments of $5.6
million and $6.0 million, 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.
On April 17, 1998, Castle Funding refinanced the Castle Term Loan and
the Old Castle Senior Notes by issuing the New Castle Senior Notes. The proceeds
from the issuance of the New Castle Senior Notes were used to redeem all of the
issued and outstanding Old Castle Senior Notes at 100% of their principal amount
and to repay the Castle Term Loan in full. In conjunction with this refinancing,
TCHI obtained the Working Capital Loan. Both the New Castle Senior Notes and the
Working Capital Loan are guaranteed by Castle Associates. The New Castle Senior
Notes have an outstanding principal amount of $62,000,000 and bear interest at
the rate of 10 1/4% per annum, payable semi-annually each April and October. The
New Castle Senior Notes mature on April 30, 2003. The Working Capital Loan has
an outstanding principal amount of $5,000,000 and bears interest at the rate of
10 1/4% per annum, payable semi-annually each April and October. The entire
principal balance of the Working Capital Loan matures on April 30, 2003.
19
<PAGE>
The terms of the Working Capital Loan, the Castle Mortgage Notes, the
Castle PIK Notes and the New 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 $39.5 million of indebtedness as
of December 31, 1998.
ATLANTIC CITY MARKET
The Atlantic City Market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $4.05 billion in gaming revenues
in 1998, an approximately 3.3% increase over 1997 gaming revenues of
approximately $3.91 billion. From 1992 to 1998, total gaming revenues in
Atlantic City have increased approximately 25.8%, while hotel rooms increased by
34.0% during that period. Although total visitor volume to Atlantic City
remained relatively constant in 1998, the volume of bus customers increased to
9.9 million in 1998, still representing a decline from 11.7 million in 1991. The
volume of customers traveling to Atlantic City has grown from 20.4 million in
1992 to 24.4 million in 1998.
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 3.9% in 1998, continuing a
trend of increases over the past six years. From 1992 through 1998, slot revenue
growth in Atlantic City has averaged 5.6% per year. Total table game revenue
increased 2.1% in 1998, while table game revenue from 1992 to 1998 has increased
on average 1.0% 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 58.8%,
while the number of table games has increased by 6.4%. Slot revenues increased
from 66% of total casino revenues in 1992 to 69.8% in 1998. 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 been reduced. In particular,
comprehensive amendments to New Jersey gaming laws were made in January 1995,
which have eliminated duplicative regulatory oversight and channeled a certain
portion of operator's funds through 2003 from regulatory support into uses of
the CRDA. Administrative costs of regulation will be reduced while increasing
funds will be available for new development in Atlantic City. In addition, in
1994, legislation was enacted which eliminated the requirement that a casino
consist of a "single room" in a casino hotel. A casino may now consist of "one
or more locations or rooms" approved by the CCC for casino gaming.
20
<PAGE>
Atlantic City's new convention center, with approximately 500,000
square feet of exhibit and pre-function space, 45 meeting rooms, food-service
facilities and a 1,600-car underground parking garage, is the largest exhibition
space between New York City and Washington, D.C. It is located at the base of
the Atlantic City Expressway and opened in May 1997. Atlantic City's old
convention center is located on The Boardwalk, physically connected to the Trump
Plaza and owned by the New Jersey Sports and Exposition Authority (the "NJSEA").
Its East Hall, which was completed in 1929 and is listed on the National
Register of Historic Places will, with funding approved by the CRDA in February
1999, undergo a $72 million renovation to be completed by the summer of 2001.
These improvements, while preserving the historic features of this landmark,
will convert it into a modern special events venue and will include new seating
for 10,000 to 14,000 in its main auditorium and new lighting, sound and
television-ready wiring systems. Construction will halt in both September 1999
and September 2000 to avoid disrupting the Miss America Pageant presentations
during those years.
In addition to the planned casino expansions, major infrastructure
improvements have been completed. The CRDA oversaw the development of the $88
million "Grand Boulevard" corridor that links the new convention center with The
Boardwalk. The project was completed in early 1998. Furthermore, as set forth in
a November 1998 agreement with the CRDA, a $20.8 million beautification project
is now in progress for the five block Virginia and Maryland Avenue corridors
which connect the thirty acre Boardwalk site of the Taj Mahal to Absecon
Boulevard (Route 30), one of Atlantic City's principal access roadways. This
comprehensive project includes the repair, resurfacing and resignalizing of
these roads and the installation of new roadside lighting, the acquisition and
demolition of deteriorated structures on Virginia Avenue and, to a lesser
extent, Maryland Avenue, and the installation and maintenance of roadside
landscaping on those sites, the construction of a twenty-two unit subdivision of
two-story, single unit and duplex residences which will front on opposing sides
of Virginia Avenue, and the improvement of the exterior facades of selected
Virginia Avenue and other structures, with consents of the owners, to achieve a
harmony and continuity of design among closely proximate properties.
Construction of the roadway and housing elements of this project is expected to
commence during or about the summer of 1999.
Management believes that these gaming regulatory reforms will serve to
permit future reductions in operating expenses of casinos in Atlantic City and
to increase the funds available for additional infrastructure development
through the CRDA. Due principally to an improved regulatory environment, general
improvement of economic conditions and high occupancy rates, significant
investment in the Atlantic City Market has been initiated and/or announced.
Management believes that these increases in hotel capacity, together with
infrastructure improvements, will be instrumental in stimulating future revenue
growth in the Atlantic City Market. See "--Competition."
COMPETITION
Atlantic City. Competition in the Atlantic City Market is intense.
Trump Plaza, the Taj Mahal and Trump Marina (the "Atlantic City Properties")
compete with other casino hotels located in Atlantic City 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 joint venture (the "Mirage Joint Venture") between
Mirage and the Boyd Gaming Corporation to be built in the Marina District which
will contain 1,200 rooms and is scheduled to be completed in the spring of 2002,
and a casino resort by MGM Grand, Inc. to be built on The Boardwalk after MGM
Grand, Inc. purchases the land chosen as the site for the casino resort).
Although management is not aware of any current construction on such sites by
third parties, infrastructure improvements in the area have begun. Mirage
intends to build a casino resort called LeJardin which will contain 3,500-4,000
rooms and will be linked to the resort created as a result of the Mirage Joint
Venture. Substantial new expansion and development activity has recently been
completed or has been announced in Atlantic City, including the expansion at
Harrah's, Hilton, Caesar's, Resorts, Tropicana and Bally's Wild West Casino,
which intensifies competitive pressures in the Atlantic City Market. While
management believes that the addition of hotel capacity would be beneficial to
the Atlantic City Market generally, there can be no assurance that such
expansion would not be
21
<PAGE>
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 (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,
Trump Marina and the Taj Mahal) experienced increased gaming revenues compared
to 1996, while four casinos experienced decreased revenues. In 1998, seven
casinos experienced increased gaming revenues compared to 1997 (including Trump
Plaza), while five casinos experienced decreased revenues (including the Taj
Mahal and Trump Marina).
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 136,200 square feet is
currently devoted to poker, keno and race simulcasting. During this same period,
172 poker tables and 5,500 slot machines were added. During 1996, a total of
approximately 65,870 square feet of casino floor space was added, an increase of
47.2%, including Trump World's Fair's 49,211 square feet. Slot machines
increased by approximately 1,911 units during 1996 and table games increased by
approximately 44 units during 1996, of which Trump World's Fair accounted for
1,518 units and 16 units, respectively. During 1997, a total of approximately
51,870 square feet of casino floor space was added. Slot machines increased by
approximately 2,153 units and table games increased by approximately 82 units
during 1997. During 1998, a total of approximately 38,350 square feet of casino
floor space was added. Slot machines increased by approximately 822 units and
table games decreased by approximately 71 units during 1998.
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. Bay Cruises is operating a
gambling cruise ship where patrons are taken from a pier in Sheepshead Bay in
Brooklyn, New York to international waters to gamble. In September 1997, another
gambling cruise ship was launched off the coast of Montauk, New York. On April
24, 1998 Freeport Casino Cruises began operating a gambling ship in Long Island,
New York. Manhattan Cruises, a company offering gambling cruises departing from
Manhattan, New York City since January 28, 1998, suspended operations in early
May 1998, but has announced plans to resume operations shortly. Other companies
(including South Shore Cruise Lines and Circle Line) are currently seeking
permission to operate similar cruises in the New York City area. On December 5,
1997, the mayor of New York City proposed the construction of a casino on
Governors Island, located in the middle of New York Harbor; however, the
proposal would require an amendment to the New York State Constitution and the
sale of the island to New York by the
22
<PAGE>
federal government. In Delaware, a total of approximately 2,600 slot machines
were installed at three horse racetracks in 1996. Initial legislation allowed a
maximum of 1,000 slot machines at each of the three racetracks. In 1998, the
Delaware legislature approved a bill which would more than double the number of
slot machines allowed at the three racetracks. At the end of 1998, there was a
total of approximately 3,000 slot machines installed and the additional approved
machines have become operational during the first quarter of 1999. West Virginia
also permits slot machines at racetracks, and track owners in several other
states, including Maryland and Pennsylvania, are seeking to do the same. In
December 1996, the temporary Casino Niagara opened in Niagara Falls, Ontario.
Ontario officials expect that two-thirds of Casino Niagara's patrons will come
from the United States, predominantly from western New York. In February 1998,
the Ontario Casino Commission designated a consortium whose principal investor
is Hyatt Hotels Corporation as the preferred developer of the permanent Casino
Niagara. Moreover, the Atlantic City Properties may also face competition from
various forms of internet gambling.
In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects of
certain of their respective marketing efforts, including the common use of the
"Trump" name, the Atlantic City Properties compete directly with each other for
gaming patrons.
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
2000. 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
23
<PAGE>
casino-style gaming (even if only for limited charity purposes) is required to
negotiate gaming compacts with federally recognized Native American tribes.
Under IGRA, Native American tribes enjoy comparative freedom from regulation and
taxation of gaming operations, which provides them with an advantage over their
competitors, including the Atlantic City Properties and the Indiana Riverboat.
In March 1996, the United States Supreme Court struck down a provision of IGRA
which allowed Native American tribes to sue states in federal court for failing
to negotiate gaming compacts in good faith. Management cannot predict the impact
of this decision on the ability of Native American tribes to negotiate compacts
with states.
In 1991, the Mashantucket Pequot Nation opened Foxwoods, a casino
facility in Ledyard, Connecticut, located in the far eastern portion of such
state, an approximately three-hour drive from New York City and an approximately
two and one- half hour drive from Boston, which currently offers 24-hour gaming
and contains approximately 6,000 slot machines. An expansion at Foxwoods,
completed in April 1998, includes additional hotel rooms, restaurants and retail
stores. A high-speed ferry operates seasonally between New York City and
Foxwoods. The Mashantucket Pequot Nation has also announced plans for a
high-speed train linking Foxwoods to the interstate highway and an airport
outside Providence, Rhode Island. In addition, in October 1996, the Mohegan
Nation opened the Mohegan Sun Resort in Uncasville, Connecticut, located 10
miles from Foxwoods. Developed by Sun International Hotels, Ltd., the Mohegan
Sun Resort has 3,000 slot machines. The Mohegan Nation has announced plans for
an expansion of the casino facilities and the construction of a hotel,
convention center and entertainment center to be completed in the fall of 2001.
In addition, the Eastern Pequots are seeking formal recognition as a Native
American tribe for the purpose of opening a casino in the North Stonington area.
There can be no assurance that any continued expansion of gaming operations of
the Mashantucket Pequot Nation, the gaming operations of the Mohegan Nation or
the commencement of gaming operations by the Eastern Pequots would not have a
materially adverse impact on the operations of the Atlantic City Properties.
A group in Cumberland County, New Jersey calling itself the "Nanticoke
Lenni Lenape" tribe has filed a notice of intent with the Bureau of Indian
Affairs seeking formal federal recognition as a Native American tribe. In March
1998, the Oklahoma-based Lenape/Delaware Indian Nation, which originated in New
Jersey and already has federal recognition, filed a lawsuit against the city of
Wildwood claiming that the city is built on ancestral land. The city of
Wildwood, which has supported the plan to build a casino, has entered settlement
negotiations, offering to deed municipal land to the tribe. The plan, which is
opposed by the State of New Jersey, required state and federal approval. In
early 1999, however, the Delaware Indian Nation's lawsuit was dismissed. In July
1993, the Oneida Nation opened a casino featuring 24-hour table gaming and
electronic gaming systems, but without slot machines, near Syracuse, New York.
The Oneida Nation opened a hotel in October 1997 that included expanded gaming
facilities, and has constructed a golf course and convention center.
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 Seneca Nation plans to negotiate with New York State to open a
casino in Western New York; however, the proposed casino would be subject to the
purchase of additional property that is declared reservation territory by the
federal government. The Narragansett Nation of Rhode Island, which has federal
recognition, is seeking to open a casino in Rhode Island. The Aquinnah Wampanoag
Tribe is seeking to open a casino in Massachusetts. Other Native American
nations are 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. ("Harrah's") to
develop and manage the casino. However, as of October 12, 1998, the agreement
with Harrah's was terminated.
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
24
<PAGE>
considering or have approved large scale land-based casinos. Additionally, since
1993, the gaming space in Las Vegas has expanded significantly, with additional
capacity planned and currently under construction. The operations of the
Atlantic City Properties could be adversely affected by such competition,
particularly if casino gaming were permitted in jurisdictions near or elsewhere
in New Jersey or in other states in the Northeast. In December 1993, the Rhode
Island Lottery Commission approved the addition of slot machine games on video
terminals at Lincoln Greyhound Park and Newport Jai Alai, where poker and
blackjack have been offered for over two years. Currently, casino gaming, other
than Native American gaming, is not allowed in other areas of New Jersey or in
Connecticut, New York or Pennsylvania. On November 17, 1995, a proposal to allow
casino gaming in Bridgeport, Connecticut was voted down by that state's Senate.
On June 18, 1998, the New York State Senate and General Assembly failed to enact
a constitutional amendment to legalize casino gambling in certain areas of New
York State, effectively postponing any referendum to authorize such a
constitutional amendment until not earlier than November 2001. To the extent
that legalized gaming becomes more prevalent in New Jersey or other
jurisdictions near Atlantic City, competition would intensify. In particular,
proposals have been introduced to legalize gaming in other locations, including
Philadelphia, Pennsylvania. In February 1999, the Pennsylvania State General
Assembly approved a bill allowing in May 1999 a non-binding public referendum on
a variety of legalized gaming issues including riverboats, video poker in
taverns and slot machines at racetracks, but the Pennsylvania State Senate
failed to enact the General Assembly Bill. In addition, legislation has from
time to time been introduced in the New Jersey State Legislature relating to
types of statewide legalized gaming, such as video games with small wagers. To
date, no such legislation, which may require a state constitutional amendment,
has been enacted. Management is unable to predict whether any such legislation,
in New Jersey, Indiana, Illinois or elsewhere, will be enacted or whether, if
passed, it would have a material adverse impact on 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 casino
license held by 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 Taj Associates'
license to operate the Taj Mahal through March 1999, renewed Castle Associates'
license to operate Trump Marina through May 1999, and 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, and
in December 1996, the CCC approved Plaza Associates' application to operate
Trump Plaza and Trump World's Fair under one casino license
25
<PAGE>
through May 1999. In June 1996, the CCC granted TCS a casino license through
July 1997, which license has been renewed annually through July 1999. Timely
applications have been filed for renewal of the Plaza Associates, Taj
Associates, Castle Associates and TCS casino licenses, and a petition has been
filed with the CCC seeking consolidation of the hearings on the casino license
renewals. It is anticipated that the CCC will act favorably on the petition
seeking consolidation of the license renewal hearings, and extend the casino
licenses allowing for a consolidated hearing on the license renewals to be
conducted in June 1999.
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.
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."
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
26
<PAGE>
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.
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
27
<PAGE>
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 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"), the New Castle
Senior Notes, the Castle Mortgage Notes, and the Castle PIK Notes were issued,
and the terms of the Working Capital Loan, 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.
28
<PAGE>
Interim Casino Authorization. Interim casino authorization is a process
which permits a person who enters into a contract to obtain property relating to
a casino operation or who obtains publicly-traded securities relating to a
casino licensee to close on the contract or own the securities until plenary
licensure or qualification. During the period of interim casino authorization,
the property relating to the casino operation or the securities is held in
trust.
Whenever any person enters into a contract to transfer any property
which relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already licensed
or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed trust
agreement in a form approved by the CCC. If, after the report of the Division
and a hearing by the CCC, the CCC grants interim authorization, the property
will be subject to a trust. If the CCC denies interim authorization, the
contract may not close or settle until the CCC makes a determination on the
qualifications of the applicant. If the CCC denies qualification, the contract
will be terminated for all purposes and there will be no liability on the part
of the transferor.
If, as the result of a transfer of publicly-traded securities of a
licensee, a holding or intermediary company or entity qualifier of a licensee,
or a financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for licensure
or qualification within 30 days after the CCC determines that qualification is
required or declines to waive qualification. The application must include a
fully executed trust agreement in a form approved by the CCC or, in the
alternative, within 120 days after the CCC determines that qualification is
required, the person whose qualification is required must divest such securities
as the CCC may require in order to remove the need to qualify.
The CCC may grant interim casino authorization where it finds by clear
and convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for residency;
and (iv) interim operation will best serve the interests of the public.
When the CCC finds the applicant qualified, the trust will terminate.
If the CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to sell,
assign, convey or otherwise dispose of the property subject to the trust to such
persons who are licensed or qualified or shall themselves obtain interim casino
authorization.
Where a holder of publicly-traded securities is required, in applying
for qualification as a financial source or qualifier, to transfer such
securities to a trust in application for interim casino authorization and the
CCC thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the casino
hotel or receive any return on its investment or debt security holdings; and
(ii) after disposition, if any, of the securities by the trustee, proceeds
distributed to the unqualified holder may not exceed the lower of their actual
cost to the unqualified holder or their value calculated as if the investment
had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit an existing licensee,
such as one of the Atlantic City Properties, to increase its casino space if the
licensee agrees to add a prescribed number of qualifying sleeping units within
two years after the commencement of gaming operations in the additional casino
space. However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed.
Persons who are parties to the lease for an approved hotel building or
who have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines that
29
<PAGE>
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,
1996, 1997 and 1998, Plaza Associates' gross revenue tax was approximately $29.8
million, $30.1 million and $30.2 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $4.4 million,
$6.0 million and $5.2 million, respectively. For the years ended December 31,
1996, 1997 and 1998, Taj Associates' gross revenue tax was approximately $40.7
million, $41.7 million and $41.1 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $5.0 million,
$3.9 million and $4.4 million, respectively. For the years ended December 31,
1996, 1997 and 1998, Castle Associates' gross revenue tax was approximately
$19.9 million, $21.1 million and $21.1 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $4.0 million,
$3.5 million and $3.7 million, respectively.
Investment Alternative Tax Obligations. An investment alternative tax
imposed on the gross casino revenues of each licensee in the amount of 2.5% is
due and payable on the last day of April following the end of the calendar year.
A licensee is obligated to pay the investment alternative tax for a period of 30
years. Estimated payments of the investment alternative tax obligation must be
made quarterly in an amount equal to 1.25% of estimated gross revenues for the
preceding three-month period. Investment tax credits may be obtained by making
qualified investments or by the purchase of bonds issued by the CRDA ("CRDA
Bonds"). CRDA Bonds may have terms as long as 50 years and bear interest at
below market rates, resulting in a value lower than the face value of such CRDA
Bonds.
For the first ten years of its tax obligation, the licensee is entitled
to an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of the CRDA Bonds issued to the licensee.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such CRDA Bonds or twice the amount
of its investments authorized in lieu of such bond investments or made in
projects designated as eligible by the CRDA and (ii) has the option of entering
into a contract with the CRDA to have its tax credit comprised of direct
investments in approved eligible projects which may not comprise more than 50%
of its eligible tax credit in any one year.
From the monies made available to the CRDA, the CRDA is required to set
aside $175 million for investment in hotel development projects in Atlantic City
undertaken by a licensee which result in the construction or rehabilitation of
at least 200 hotel rooms. These monies will be held to fund up to 27% of the
cost to casino
30
<PAGE>
licensees of expanding their hotel facilities to provide additional hotel rooms,
a portion of which has been required to be available with respect to the new
Atlantic City Convention Center.
Minimum Casino Parking Charges. As of July 1, 1993, each casino
licensee was required to pay the New Jersey State Treasurer a $1.50 charge for
every use of a parking space for the purpose of parking motor vehicles in a
parking facility owned or leased by a casino licensee or by any person on behalf
of a casino licensee. This amount is paid into a special fund established and
held by the New Jersey State Treasurer for the exclusive use of the CRDA. Plaza
Associates, 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 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
31
<PAGE>
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. 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.
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
32
<PAGE>
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.
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.
33
<PAGE>
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 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. ss.18(a); and any
other additional information the IGC may request to insure compliance with
Indiana gaming laws.
Each institutional investor who, individually or in association with
others, acquires, directly or indirectly, the beneficial ownership of 15% or
more of any class of voting securities of a publicly-traded corporation that
owns a riverboat owner's license or 15% or more of the beneficial interest in a
riverboat licensee through any class of voting securities of any holding company
or intermediary company of a riverboat licensee shall apply to the IGC for a
finding of suitability within 45 days after acquiring the securities.
The Certificate of Incorporation 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
34
<PAGE>
respect to the qualification of other financial backers, mortgagees, bond
holders, holders of indentures, or other financial contributors.
Minority and Women Business Participation. Indiana gaming laws provide
that the opportunity for full minority and women's business enterprise
participation in the riverboat industry in Indiana is essential to social and
economic parity for minority and women business persons. The IGC has the power
to review compliance with the goals of participation by minority and women
business persons and impose appropriate conditions on licensees to insure that
goals for such business enterprises are met.
Under Indiana gaming laws, a riverboat licensee or a riverboat license
applicant shall designate certain minimum percentages of the value of its
contracts for goods and services to be expended with minority business
enterprises and women's business enterprises such that 10% of the dollar value
of the riverboat licensee's or the riverboat license applicant's contracts be
expended with minority business enterprises and 5% of the dollar value of the
riverboat licensee's or the riverboat license applicant's contracts be expended
with women's business enterprises. Expenditures with minority and women's
business enterprises are not mutually exclusive.
IGC Action. All licensees subject to the jurisdiction of the IGC have a
continuing duty to maintain suitability for licensure. The IGC may initiate an
investigation or disciplinary action or both against a licensee whom the
commission has reason to believe is not maintaining suitability for licensure,
is not complying with licensure conditions, and/or is not complying with Indiana
gaming laws or regulations. The IGC may suspend, revoke, restrict, or place
conditions on the license of a licensee; require the removal of a licensee or an
employee of a licensee; impose a civil penalty or take any other action deemed
necessary by the IGC to insure compliance with Indiana gaming laws.
CLEAN WATER REGULATIONS
Operation of the Indiana Riverboat must be in 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
35
<PAGE>
nonresident aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively feasible.
From 1992 through 1995, the Service conducted an audit of Currency
Transaction Reports filed by Taj Associates for the period from April 2, 1990
through December 31, 1991. The Treasury has received a report detailing the
audit as well as the response of Taj Associates. As a result of Taj Associates'
audit, the Treasury 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.
36
<PAGE>
Plaza Casino Parcel. Trump Plaza's main tower is located on The
Boardwalk in Atlantic City, New Jersey, next to the Atlantic City Convention
Center. It occupies the entire city block (approximately 2.38 acres) bounded by
The Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the "Plaza
Casino Parcel").
The Plaza Casino Parcel consists of four tracts of land, three of which
are currently owned by Plaza Associates and one of which is leased by Plaza
Hotel Management Company ("PHMC") to Plaza Associates pursuant to a
non-renewable ground lease, which expires on December 31, 2078 (the "PHMC
Lease"). The land which is subject to the PHMC Lease is referred to as the
"Plaza Leasehold Tract." Seashore Four Associates ("Seashore Four") and Trump
Seashore Associates ("Trump Seashore") had leased to Plaza Associates two of the
tracts which are now owned by Plaza Associates. Trump Seashore and Seashore Four
are 100% beneficially owned by Trump and are, therefore, affiliates of THCR.
Plaza Associates purchased the tract from Seashore Four in January 1997 and the
tract from Trump Seashore in September 1996 for $10.1 million and $14.5 million,
respectively.
The PHMC Lease is a "net lease" pursuant to which Plaza Associates, in
addition to the payment of fixed rent, is responsible for all costs and expenses
with respect to the use, operation and ownership of the Plaza Leasehold Tract
and the improvements now, or which may in the future be, located thereon,
including, but not limited to, all maintenance and repair costs, insurance
premiums, real estate taxes, assessments and utility charges. The improvements
located on the Plaza Leasehold Tract are owned by Plaza Associates during the
term of the PHMC Lease, and upon the expiration of the term of the PHMC Lease
(for any reason), ownership of such improvements will vest in PHMC. The PHMC
Lease also contains an option pursuant to which Plaza Associates may purchase
the Plaza Leasehold Tract at certain times during the term of such PHMC Lease
under certain circumstances.
Trump Plaza East. In connection with the Taj Acquisition, Plaza
Associates exercised its option to purchase certain of the fee and leasehold
interests comprising Trump Plaza East for a purchase price of $28.0 million.
During the year ended December 31, 1996, Plaza Associates incurred approximately
$1.1 million 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,
37
<PAGE>
Mississippi Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has
constructed the Transportation Facility on the Plaza Garage Parcel. An enclosed
pedestrian walkway from the parking garage accesses Trump Plaza at the casino
level. Parking at the parking garage is available to Trump Plaza's guests, as
well as to the general public.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet ("Additional Parcel 1")
and owns another parcel on Mississippi Avenue adjacent to Additional Parcel 1
consisting of approximately 5,750 square feet.
Plaza Associates also owns five parcels of land, aggregating
approximately 43,300 square feet, and subleases one parcel consisting of
approximately 3,125 square feet. All of such parcels are contiguous and are
located along Atlantic Avenue, in the same block as the Plaza Garage Parcel.
They are used for signage and surface parking and are not encumbered by any
mortgage liens other than that of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey, containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1998, of approximately $1.3 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
38
<PAGE>
based upon an interim use of the Steel Pier for an amusement park. Taj
Associates received additional one-year extensions of the required commencement
and completion dates of the improvements of the Steel Pier based upon the same
interim use of the Steel Pier as an amusement park pursuant to a sublease ("Pier
Sublease") with an amusement park operator. The Pier Sublease terminates on
December 31, 1999 unless extended.
Office and Warehouse Space. Taj Associates owns an office building
located on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Castle Associates which are presently leased to commercial tenants
and used for office space and vehicle maintenance facilities. In connection with
the Taj Acquisition, Taj Associates purchased from Realty Corp. a warehouse
complex of approximately 34,500 square feet. This warehouse complex is expected
to be sold to the CRDA as part of the location of a new neighborhood housing
development to be completed as part of the redevelopment of the road corridors
and adjoining neighborhoods to the Taj Mahal.
Taj Associates 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 $2,285.
Parking. The Taj Mahal provides parking for approximately 6,950 cars of
which 6,725 spaces are located in indoor parking garages and 225 surface spaces
are located on land purchased from Realty Corp. in connection with the Taj
Acquisition. In addition, Taj Associates entered into a lease agreement with
South Jersey Transportation Authority for employee parking facilities.
Themed Restaurants and Retail Shopping. Hard Rock Cafe International
(N.J.), Inc. ("Hard Rock") has entered into a fifteen-year lease (the "Hard Rock
Cafe Lease") with Taj Associates for the lease of space at the Taj Mahal for a
Hard Rock Cafe. The basic rent under the Hard Rock Cafe Lease is $750,000 per
year, paid in equal monthly installments, for the first 10 years of the lease
term, and will be $825,000 per year, paid in equal monthly installments, for the
remaining 5 years of the lease term. In addition, Hard Rock will pay percentage
rent in an amount equal to 10% of Hard Rock's annual gross sales in excess of
$10,000,000. Hard Rock has the right to terminate the Hard Rock Cafe Lease on
the tenth anniversary thereof and also has the option to extend the term of the
lease for an additional five-year period at an annual basic rent of $907,500
during such renewal term. The Hard Rock Cafe opened in November 1996.
All Star Cafe, Inc. ("All Star") 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. Commencing September 1, 1998 the Stage Deli Lease
was amended to eliminate the basic rent provisions and provide for monthly
percentage rents of 8% or 10% of gross monthly sales based on actual average
sales volumes as defined in the Stage Deli Lease.
Time Warner has entered into a ten-year lease (the "Time Warner Taj
Lease") with Taj Associates for the lease of space at the Taj Mahal for a Warner
Brothers Studio Store. Time Warner has an option to renew the Time Warner Taj
Lease for two additional five-year terms. Time Warner pays percentage rent
monthly in an amount equal to (i) 7.5% of gross annual sales up to $5.0 million
and (ii) 10% sales of gross annual sales in excess of $5.0
39
<PAGE>
million. No minimum or "base" rent is payable under the Time Warner Taj Lease.
The terms of the lease give Time Warner the right to terminate the lease if (i)
gross annual sales are less than $2.5 million for the second year of the lease
or less than $2.5 million as adjusted by CPI for the third through ninth years
of the lease; and (ii) the Taj Mahal ceases to operate as a first class hotel.
The Warner Brothers Studio Store opened in May 1997.
The Taj Mahal is currently in the process of expanding the retail
shopping experience along the length of its parking garage promenade walkway
which immediately adjoins the Taj Mahal's main retail shopping area. The first
tenant, Starbucks, operated by Host International, Inc., opened in September
1996. Sbarro's, an Italian eatery, operated by Sbarro America Properties, Inc.,
opened in October 1998. Boardwalk Treats, Beka's Pastries and a Harley Davidson
retail merchandise outlet are expected to open in the early spring of 1999. A
Sunglass Hut, operated by Sunglass Hut International, opened in August 1998 in
another location also adjoining the Taj Mahal's main retail shopping area.
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 92 table games, 2,167 slot machines and race simulcasting
facilities. In addition to the casino, Trump Marina consists of a 27-story hotel
with 728 guest rooms, including 153 suites, of which 97 are "Crystal Tower"
luxury suites. Renovation of 210, 90 and 64 of the guest rooms was completed in
1996, 1997 and 1998, 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 1998, 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.
40
<PAGE>
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 Casino Reinvestment Development Authority
("CRDA"), as required, 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. 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 constructed and
presently operates and 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 five 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
court, in a July 20, 1998 opinion, directed entry of judgments dismissing the
CRDA actions with respect to the remaining three parcels, which if acquired,
would be included in the public park and parking area of the project, on the
basis of its determination that the CRDA had failed to establish that a valid
primarily public purpose justified acquisition of the parcels. Written orders of
dismissal were entered by the court on July 28. The right of the CRDA to appeal
these judgments expired on September 11, 1998. The judgments were not appealed.
Additionally, with respect to the two parcels to be included in the
public park portion of the project, the CRDA, by a separate motion, sought an
order that Plaza Associates' application and credit agreement be deemed amended
to terminate the CRDA's obligation to acquire the two parcels and to enable the
CRDA to abandon the condemnation proceedings with respect to these two parcels.
This motion was opposed by Plaza Associates. By order dated April 1, 1998, the
Court denied the motion but granted the CRDA leave to amend its pleadings by a
filing within 14 days from date thereof formally asserting a claim for specific
performance of the alleged agreement. The CRDA did not file any such amended
pleading within this permitted time period.
Also, 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 were 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, through its
Indiana legal counsel, had discussions with eight Indiana residents regarding
(1) the potential purchase by such residents of nonvoting stock
41
<PAGE>
of Trump Indiana, representing a total of 7.5% of the value of Trump Indiana,
and (2) the creation and funding of a charitable foundation for the benefit of
residents of the Gary, Indiana area. Subsequent to those discussions, it was
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 equal to 7.5% of the value
of Trump Indiana, and also asserted that Trump Indiana was required to
contribute an additional 7.5% of its value, represented by shares of its stock,
into the charitable foundation. Trump Indiana and THCR did not agree with the
residents' assertions and so advised them. Such residents then caused a
complaint to be filed in the United States District Court, Southern District of
Indiana, against Trump Indiana, THCR, THCR Holdings, and Donald J. Trump ("the
litigation"). Later, The Trump Organization, Inc. was added as a defendant. The
claims sought (1) compensatory damages to the eight plaintiffs equal to 7.5% of
the value of Trump Indiana, (2) funding of the charitable foundation in an
amount equal to an additional 7.5% of the value of Trump Indiana, (3) transfer
of Trump Indiana stock to the plaintiffs and to the charitable foundation, and
(4) punitive damages in an unspecified amount. Monetary settlements later were
reached between all defendants and six of the plaintiffs. Thereafter, the
remaining two plaintiffs voluntarily dismissed their claims for the transfer of
ownership of stock in Trump Indiana, and proceeded in the litigation only with
their claims for consequential and punitive monetary damages against the
defendants. In February, 1999, these two remaining plaintiffs voluntarily
dismissed all claims against The Trump Organization, Inc., and the court entered
summary judgment against the plaintiffs and in favor of THCR and THCR Holdings
on all claims in the litigation. The case was then tried in United States
District Court, Indianapolis. On March 3, 1999, the jury assessed consequential
damages against Trump Indiana for breach of contract in the total amount of One
Million Three Hundred Thirty-Four Thousand One Hundred Twenty-Four Dollars
($1,334,124.00) and further determined that Trump Indiana had breached a
contract to create and fund a charitable foundation. The jury assessed no
consequential damages against Donald J. Trump personally. Punitive damages were
not awarded against either Trump Indiana or Donald J. Trump. The United States
District Court, sitting in equity, will determine whether, and to what extent,
Trump Indiana will be required to provide additional funding to the charitable
foundation. The court is aware, from evidence presented during trial, that Trump
Indiana has already established and funded, prior to trial, a charitable
foundation for the benefit of residents of the Gary, Indiana, area in accord
with Trump Indiana's commitments to the Indiana Gaming Commission and pursuant
to the Development Agreement between Trump Indiana and the City of Gary,
Indiana. The court is also aware, from evidence presented during trial, that the
foundation has fulfilled, and continues to fulfill, its charitable purposes in
Gary, Indiana. The court heard argument concerning this matter on March 23,
1999. Trump Indiana intends to vigorously contest the claim by the plaintiffs
that additional funding of the charitable foundation is required. Management
believes that further resolution of this issue will not have a material adverse
affect 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
42
<PAGE>
plaintiffs filed their Consolidated Amended Derivative Complaint (the "First
Amended Complaint"), reflecting the consolidation. On or about March 24, 1997,
the plaintiffs filed their Second Consolidated Amended Derivative Complaint (the
"Second Amended Complaint"). In addition to the allegations made in the First
Amended Complaint, the Second Amended Complaint claims that certain of the
defendants breached their fiduciary duties and wasted corporate assets in
connection with a previously contemplated transaction with Colony Capital, Inc.
("Colony Capital"). The Second Amended Complaint also includes claims against
Colony Capital for aiding and abetting certain of those violations. In addition
to the relief sought in the First Amended Complaint, the Second Amended
Complaint sought to enjoin the previously contemplated transaction with Colony
Capital or, if it was effectuated, to rescind it. On March 27, 1997, THCR and
Colony Capital mutually agreed to end negotiations with respect to such
transaction. On June 26, 1997, plaintiffs served their Third Consolidated
Amended Derivative Complaint (the "Third Amended Complaint"), which omitted the
claims against Colony Capital. THCR and the other defendants in the action moved
to dismiss the Third Amended Complaint on August 5, 1997. The plaintiffs opposed
the defendants' motions to dismiss the Third Amended Complaint by response dated
October 24, 1997. The defendants' reply was served December 9, 1997.
Other Litigation. On March 13, 1997, THCR filed a lawsuit in the United
States District Court, District of New Jersey, against Mirage, the State of New
Jersey ("State"), the New Jersey Department of Transportation ("NJDOT"), the
South Jersey Transportation Authority ("SJTA"), the CRDA, the New Jersey
Transportation Trust Fund Authority and others. THCR was seeking declaratory and
injunctive relief to recognize and prevent violations by the defendants of the
casino clause of the New Jersey State Constitution and various federal
securities and environmental laws relating to proposed infrastructure
improvements in the Atlantic City marina area. While this action was pending,
defendants State and CRDA then filed an action in the New Jersey State Court
seeking a declaratory judgment as to the claim relating to the casino clause of
the New Jersey State Constitution. On May 1, 1997, the United States District
Court dismissed the federal claims and ruled that the State constitutional
claims should be pursued in State Court. On April 2, 1998, the United States
Court of Appeals for the Third Circuit affirmed the dismissal and THCR's
petition to the Third Circuit for a rehearing was denied. On May 14, 1997 the
State Court granted judgment in favor of the State and CRDA. On March 20, 1998,
the Appellate Division affirmed. THCR intends to seek review in the State
Supreme Court, which heard argument on January 21, 1999.
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.
43
<PAGE>
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 funds and which would link the Atlantic City
Expressway with the site of Mirage's proposed new casino resort. On November 10,
1997, THCR and Trump moved to dismiss the complaint. On December 18, 1998 the
Court denied the motion to dismiss brought by Trump and THCR.
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 1998.
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.
HIGH LOW
---- ---
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........................... $12 $ 6 3/4
Second quarter.......................... $ 9 7/16 $ 7 1/16
Third quarter........................... $ 8 7/16 $ 2 3/4
Fourth quarter.......................... $ 6 1/8 $ 2 3/4
44
<PAGE>
1999 HIGH LOW
---- ---- ---
First Quarter (through March 24, 1999).. $ 6 $ 3 7/8
As of March 24, 1999 there were approximately 801 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, the Senior Note Indenture, the indenture governing the
Castle PIK Notes, the indenture governing the Castle Mortgage Notes and the
indenture governing the Working Capital Loan 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.
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 was
effective until the end of 1998. As of December 31, 1998, THCR Holdings has
repurchased 2,011,500 shares of THCR Common Stock. THCR Holdings may reinstitute
a buyback program for 1999.
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.
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.
45
<PAGE>
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 the year ended December 31, 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, 1997 and 1998 (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.
All financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated and condensed financial statements and the
related notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
TRUMP AC AND PLAZA
ASSOCIATES THCR
---------------------------- ---------------------------------------------------------
| FROM INCEPTION
| JUNE 12, 1995
YEAR FROM | THROUGH YEAR YEAR YEAR
ENDED JANUARY 1, 1995| DECEMBER 31, ENDED ENDED ENDED
DECEMBER 31, THROUGH | 1995 DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 JUNE 12, 1995 | (NOTE 1) 1996 1997 1998
------------ --------------- --------------- ------------ ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: |
Revenues: |
Gaming .............................. $261,451 $122,865 | $ 175,208 $ 883,441 $ 1,280,245 $ 1,287,925
Other ............................... 66,869 29,523 | 44,659 205,829 298,950 285,277
-------- -------- | ----------- ----------- ----------- -----------
Gross revenues .................... 328,320 152,388 | 219,867 1,089,270 1,579,195 1,573,202
Promotional allowances .............. 33,257 14,540 | 24,394 122,326 179,822 169,581
-------- -------- | ----------- ----------- ----------- -----------
Net revenues ...................... 295,063 137,848 | 195,473 966,944 1,399,373 1,403,621
-------- -------- | ----------- ----------- ----------- -----------
Costs and expenses: |
Gaming .............................. 139,540 69,467 | 95,533 538,398 810,329 806,438
Other ............................... 23,380 9,483 | 12,483 58,971 81,033 82,971
General and administrative .......... 73,075 30,081 | 44,792 192,082 271,110 274,369
Depreciation and amortization ....... 15,653 6,999 | 9,219 69,035 89,094 84,123
Pre-opening ......................... -- -- | -- 13,839 -- 747
Development Costs ................... -- -- | -- -- 4,607 --
-------- -------- | ----------- ----------- ----------- -----------
Total costs and expenses .......... 251,648 116,030 | 162,027 872,325 1,256,173 1,248,648
-------- -------- | ----------- ----------- ----------- -----------
Income from operations ................ 43,415 21,818 | 33,446 94,619 143,200 154,973
|
Interest expense, net ................. (48,219) (22,113) | (31,273) (139,530) (205,008) (213,507)
Other non-operating (expense) income(a) (4,931) (1,649) | (4,094) 14,869 (1,028) (1,093)
Loss in joint venture ................. -- -- | -- (925) (3,478) (2,969)
Extraordinary (loss) gain(b) .......... -- (9,250) | -- (60,732) -- --
Minority interest ..................... -- -- | -- 26,022 24,186 22,878
(Provision) benefit for income taxes .. 865 161 | -- -- -- --
-------- -------- | ----------- ----------- ----------- -----------
Net income (loss) ..................... $ (8,870) $(11,033) | $ (1,921) $ (65,677) $ (42,128) $ (39,718)
======== ======== | =========== =========== =========== -----------
Net loss per common share(c) .......... | $ (.19) $ (3.27) $ (1.85) $ (1.79)
| =========== =========== =========== -----------
Average Shares Outstanding ............ | 10,133,333 20,081,122 22,794,921 22,203,612
| =========== =========== =========== ===========
|
BALANCE SHEET DATA (AT END OF PERIOD): |
Cash and cash equivalents ............. $ 11,144 $ 28,125 | $ 19,208 $ 175,749 $ 140,328 $ 114,757
Property and equipment, net ........... 298,354 301,316 | 408,231 2,009,261 2,004,751 1,977,609
Total assets .......................... 375,643 394,085 | 584,545 2,455,643 2,473,309 2,429,578
Total long-term debt, net of current .. 403,214 331,142 | 494,471 1,713,425 1,817,569 1,838,492
maturities |
Minority interest ..................... -- -- | -- 172,604 148,418 125,540
Total capital (deficit) ............... (63,580) (74,613) | 50,591 388,095 328,885 286,908
</TABLE>
- -----------
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
46
<PAGE>
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 year ended December 31,
1994, for the period January 1, 1995 through June 12, 1995 and
for the period June 12, 1995 through December 31, 1995
includes $4.9 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 $1.0 million of
costs associated with certain litigation.
(b) 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 the 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities are THCR's principal source of
liquidity and increased from $1.1 million in 1997 to $28.5 million in 1998. THCR
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.
47
<PAGE>
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.
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 were $54.8 million and $20.9 million
for the years ended December 31, 1997 and 1998, respectively. Capital
expenditures for improvements to Trump Plaza's existing facilities were $13.3
million and $12.0 million for the years ended December 31, 1997 and 1998,
respectively. In addition, in 1997, Plaza Associates exercised its option to
purchase from Seashore Four Associates, an entity beneficially owned by Donald
J. Trump, one of the parcels of land underlying Trump Plaza's main tower,
pursuant to the terms of a lease, the payments under which were terminated upon
the exercise of such option. The purchase price and associated closing costs
were $10.1 million.
Capital expenditures attributable to the Taj Mahal were $40.8 million
and $8.5 million for the years ended December 31, 1997 and 1998, respectively.
Capital expenditures for improvements to existing facilities were approximately
$7.6 million and $8.5 million for the years ended December 31, 1997 and 1998,
respectively. Capital expenditures attributable to the expansion of the facility
were approximately $33.2 million for the year ended December 31, 1997.
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 and 1997 were approximately $43.5 million and have been
funded principally out of cash from operations.
Castle Associates' capital expenditures for 1997 and 1998 were $1.8
million and $2.8 million, respectively and principally consisted of hotel room
renovations, as well as ongoing casino floor improvements, parking garage
upgrades and Trump 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.
Capital expenditures attributable to Trump Indiana were $5.9 million
and $14.5 million for the years ending December 31, 1997 and 1998, respectively.
Approximately $15.0 million costs of hotel construction and other infrastructure
improvements will be applied towards satisfying the economic development
commitment required in connection with the Indiana licensing process. THCR is
currently negotiating with Majestic Star Casino, L.L.C. ("Barden"), the other
riverboat licensee and joint owner with Trump Indiana of Buffington Harbor
Riverboats, L.L.C. ("BHR") for the development of a 1,500 space parking garage
by BHR which would cost approximately $15 million.
On April 17, 1998 Castle Funding refinanced its Old Castle Senior Notes
and its Term Loan by issuing the New Castle Senior Notes. The proceeds from the
issuance of the New Castle Senior Notes were used to redeem all of the issued
and outstanding Old Castle Senior Notes and 100% of their principal amount and
to repay the Term Loan in full. In conjunction with this refinancing, TCHI, a
New Jersey corporation and the general partner of Castle Associates, obtained a
Working Capital Loan. Both the New Castle Senior Notes and the Working Capital
Loan are guaranteed by Castle Associates.
The New Castle Senior Notes have an outstanding principal amount of
$62,000,000 and bear interest at the rate of 10 1/4% per annum, payable
semi-annually each April and October. The New Castle Senior Notes mature on
April 30, 2003.
48
<PAGE>
The Working Capital Loan has an outstanding principal amount of
$5,000,000 and bears interest at the rate of 10 1/4% per annum, payable
semi-annually each April and October. The entire principal balance of the
Working Capital Loan matures on April 30, 2003.
Castle Associates has the authority to obtain a working capital
facility of up to $10,000,000 (of which approximately $5,440,000 is outstanding)
although there can be no assurance that such financing will be available or on
terms acceptable to Castle Associates.
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.
During the quarter ended September 30, 1998, THCR Holdings advanced a
loan to Trump in the amount of $11,000,000 and prepaid 1999 fees and expenses in
the amount of $1,500,000 to Trump in accordance with the Executive Agreement.
Such loan is secured by a pledge of certain receivables due to Trump. On October
19, 1998, THCR Holdings loaned Trump $13,500,000. Such loan was offset in its
entirety when Trump advanced $13,500,000 to THCR Enterprises, L.L.C. ("THCR
Enterprises"), which then purchased Trump's indebtedness to Donaldson Lufkin &
Jenrette Securities Corporation. In connection with such purchase, THCR
Enterprises was assigned a pledge of Trump's and TCI's equity interests in THCR
and THCR Holdings.
YEAR 2000
THCR has assessed the Year 2000 issue and has begun implementing a plan
to insure its systems are year 2000 compliant. Analysis has been made of THCR's
various customer support and internal administration system with appropriate
modifications having been made or underway. Testing the modifications is
expected to be completed during 1999. THCR is approximately 80% complete in its
modifications.
THCR believes that the issues for concern are predominantly software
related versus hardware related. Further, THCR relies upon third party suppliers
for support of property, plant and equipment, such as communications equipment,
elevators and fire safety systems. Contact has been made with all significant
system suppliers and THCR is at various stages of assessment, negotiation and
implementation. When necessary, contracts have been issued to update these
systems so as to insure year 2000 compliance. The cost of addressing the year
2000 issue is not expected to be material as modifications are being made with
existing systems personnel and no significant expectations for new hardware or
software are expected. Any additional costs will be funded out of operations.
If THCR did not assess the year 2000 issue and provide for its
compliance, it would be forced to convert to manual systems to carry on its
business. Since THCR expects to be fully year 2000 compliant, it does not feel
that a contingency plan is necessary at this time. However, THCR will
continually be assessing the situation and considering whether a contingency
plan is necessary as the millennium approaches.
This Year 2000 disclosure constitutes Year 2000 readiness disclosure
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
IMPACT OF NEW ACCOUNTING STANDARDS
THCR has assessed the impact of newly issued accounting standards
expected to go into effect during
49
<PAGE>
1999 in accordance with Staff Accounting Bulletin No. 74 and, where applicable,
disclosures have been provided in the financial statements. Additionally, THCR
has also reviewed the impact of accounting standards which went into effect
during 1998 and, where applicable, THCR has provided the required disclosures.
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 1996, 1997 or 1998.
50
<PAGE>
The following tables include selected data of Plaza Associates, 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, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1996 1996 1996 1996 1996 1996
PLAZA TAJ TRUMP AC TRUMP TRUMP THCR INC.
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED*
(a) (b) (c)
---------- ---------- ------------- ------- ------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming .................................. $ 368.9 $ 383.3 $ 752.2 $ 80.7 $ 50.5 $ 883.4
Other ................................... 105.7 85.3 191.0 2.3 12.5 205.9
-------- -------- -------- ------- ------- --------
Gross Revenue ......................... 474.6 468.6 943.2 83.0 63.0 1,089.3
Less: Promotional Allowance .................. 65.6 48.1 113.7 0.3 8.2 122.3
-------- ------ -------- ------- ------- --------
Net Revenue ........................... 409.0 420.5 829.5 82.7 54.8 967.0
-------- ------ -------- ------- ------- --------
Costs and Expenses:
Gaming .................................. 223.9 230.0 453.9 50.8 33.7 538.4
Pre Opening ............................. 4.1 -- 4.1 9.7 -- 13.8
General & Administrative ................ 83.3 64.2 147.5 15.7 15.6 192.1
Depreciation & Amortization ............. 23.0 37.8 60.9 2.8 4.8 69.0
Other ................................... 28.4 26.2 54.6 1.4 3.1 59.1
-------- ------ -------- ------- ------- --------
Total Costs and Expenses .............. 362.7 358.2 721.0 80.4 57.2 872.4
-------- ------ -------- ------- ------- --------
Income from Operations ....................... 46.3 62.3 108.5 2.3 (2.4) 94.6
-------- ------ -------- ------- ------- --------
Non-Operating Income (Expense) ............... 4.9 10.7 16.6 0.8 0.2 26.0
Interest Expense ............................. (47.1) (67.4) (114.5) (8.9) (11.6) (150.7)
-------- ------ -------- ------- ------- --------
Total Non-Operating Expense ........... (42.2) (56.7) (97.9) (8.1) (11.4) (124.7)
-------- ------ -------- ------- ------- --------
Loss in Joint Venture ........................ -- -- -- (0.9) -- (0.9)
Extraordinary Loss ........................... (59.1) -- (59.1) -- -- (60.7)
-------- ------ -------- ------- ------- --------
Net Income (Loss) Before Minority
Interest ................................ $ (55.0) $ 5.6 $ (48.5) $ (6.7) $ (13.8) $ (91.7)
======== ====== ======== ======= =======
Minority Interest............................. 26.0
--------
Net Loss...................................... $ (65.7)
========
- ----------------
* 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.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1997 1997 1997 1997 1997 1997
PLAZA TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED*
---------- ---------- ------------- ------- ------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming......................................... $370.7 $518.4 $ 889.1 $129.7 $261.4 $1,280.2
Other.................................... 108.0 123.2 231.2 3.4 64.4 299.0
------ ------ ------- ------ ------ --------
Gross Revenue.............................. 478.7 641.6 1,120.3 133.1 325.8 1,579.2
Less: Promotional Allowance.................... 64.4 73.7 138.1 0.7 41.1 179.8
------ ------ ------- ------ ------ --------
Net Revenue................................ 414.3 567.9 982.2 132.4 284.7 1,399.4
------ ------ ------- ------ ------ --------
Costs and Expenses:
Gaming....................................... 233.8 321.6 555.5 84.2 170.6 810.3
General & Administrative..................... 80.2 88.0 168.1 31.5 62.7 271.1
Depreciation & Amortization.................. 24.4 41.4 66.0 5.9 17.1 89.1
Other........................................ 32.0 33.5 65.5 2.9 12.8 81.1
Development Costs.............................. - - - - - 4.6
------ ------ ------- ------ ------ --------
Total Costs and Expenses................... 370.4 484.5 855.1 124.5 263.2 1,256.2
------ ------ ------- ------ ------ --------
Income from Operations......................... 43.9 83.4 127.1 7.9 21.5 143.2
------ ------ ------- ------ ------ --------
Non-Operating Income........................... 0.6 1.1 2.9 - 0.5 5.5
Interest Expense............................... (48.6) (94.7) (144.1) (10.5) (49.9) (211.5)
------ ------ ------- ------ ------ --------
Total Non-Operating Expense................ (48.0) (93.6) (141.2) (10.5) (49.4) (206.0)
------ ------ ------- ------ ------ --------
Loss in Joint Venture.......................... - - - (3.5) - (3.5)
------ ------ ------- ------ ------ --------
Net Loss Before Minority Interest.............. $ (4.1) $(10.2) $ (14.1) $ (6.1) $(27.9) $ (66.3)
====== ====== ======= ====== ======
Minority Interest.............................. 24.2
--------
Net Loss....................................... $ (42.1)
========
* Intercompany eliminations and expenses of THCR and THCR Holdings are not separately shown.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1998 1998 1998 1998 1998 1998
PLAZA TRUMP TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED*
---------- ---------- ------------- ------- ------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming ................................ $374.5 $514.0 $ 888.5 $137.8 $261.6 $1,287.9
Other ................................. 101.6 119.1 220.7 3.6 61.0 285.3
------ ------ -------- ------ ------ --------
Gross Revenue .......................... 476.1 633.1 1,109.2 141.4 322.6 1,573.2
Less: Promotional Allowance ................ 63.4 66.7 130.1 0.8 38.7 169.6
------ ------ -------- ------ ------ --------
Net Revenue ............................ 412.7 566.4 979.1 140.6 283.9 1,403.6
------ ------ -------- ------ ------ --------
Costs and Expenses:
Gaming ................................... 228.8 316.4 545.2 94.7 166.5 806.4
Pre Opening .............................. - - - 0.8 - 0.8
General & Administrative ................. 79.1 89.2 168.2 33.8 60.1 274.4
Depreciation & Amortization .............. 24.7 36.4 61.5 5.7 16.6 84.1
Other .................................... 32.4 33.8 66.2 3.9 12.9 82.9
------ ------ -------- ------ ------ --------
Total Costs and Expenses ............... 365.0 475.8 841.1 138.9 256.1 1,248.6
------ ------ -------- ------ ------ --------
Income from Operations ..................... 47.7 90.6 138.0 1.7 27.8 155.0
------ ------ -------- ------ ------ --------
Non-Operating Income ....................... 1.4 2.4 5.5 0.1 0.9 8.5
Interest Expense ........................... (47.7) (94.1) (154.6) (9.0) (52.3) (223.1)
------ ------ -------- ------ ------ --------
Total Non-Operating Expense ............ (46.3) (91.7) (149.1) (8.9) (51.4) (214.6)
------ ------ -------- ------ ------ --------
Loss in Joint Venture ...................... - - - (3.0) - (3.0)
------ ------ -------- ------ ------ --------
Net Loss Before Minority Interest .......... $ 1.4 $(1.1) $ (11.1) $(10.2) $(23.6) $ (62.6)
====== ====== ======== ====== ======
Minority Interest .......................... 22.9
--------
Net Loss ................................... $ (39.7)
========
- ----------------
* Intercompany eliminations and expenses of THCR and THCR Holdings are not separately shown.
</TABLE>
53
<PAGE>
<TABLE>
TRUMP HOTELS & CASINO RESORTS, INC.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(in millions, except statistical data)
<CAPTION>
(a) (b) (c)
1996 1996 1996 1996 1996 1996
PLAZA TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED
---------- ---------- ------------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Table Game Revenues................ $ 104.1 $ 161.9 $ 266.0 $ 22.3 $ 14.9 $ 303.2
Table Game Drop.................... $ 686.9 $ 942.5 $ 1,629.4 $ 128.0 $ 103.2 $ 1,860.6
Table Win Percentage............... 15.2% 17.2% 16.3% 17.5% 14.4% 16.3%
Number of Table Games.............. 127 167 294 71 87 452
Slot Revenues...................... $ 264.8 $ 206.2 $ 471.0 $ 58.4 $ 35.6 $ 565.0
Slot Handle........................ $ 3,179.8 $2,510.3 $ 5,690.1 $ 925.6 $ 482.0 $ 7,097.7
Slot Win Percentage................ 8.3% 8.2% 8.3% 6.3% 7.4% 8.0%
Number of Slot Machines............ 3,629 3,799 7,428 1,492 2,339 11,259
Other Gaming Revenues.............. N/A $ 15.2 $ 15.2 N/A N/A $ 15.2
Total Gaming Revenues.............. $ 368.9 $ 383.3 $ 752.2 $ 80.7 $ 50.5 $ 883.4
- ---------------
(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.
<CAPTION>
1997 1997 1997 1997 1997 1997
PLAZA TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED
---------- ---------- ------------ ------- ------ ------------
Table Game Revenues................. $ 96.4 $ 202.7 $ 299.1 $ 38.6 $ 76.1 $ 413.8
Incr (Decr) over prior period.... $ (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.... $(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. 0.6pts. 0.9pts. (0.7)pts.
Number of Table Games............... 117 155 272 67 91 430
Incr (Decr) over prior period.... (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.... $ 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.... $ 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. 0.1pts. (0.1)pts. 0.4pts. 0.7pts. 0.0pts.
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.... 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.... $ 1.8 $ 135.1 $ 136.9 $ 49.0 $ 210.9 $ 396.8
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
1998 1998 1998 1998 1998 1998
PLAZA TAJ TRUMP AC TRUMP TRUMP THCR
ASSOCIATES ASSOCIATES CONSOLIDATED INDIANA MARINA CONSOLIDATED
---------- ---------- ------------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Table Game Revenues................. $ 102.4 $198.6 $ 301.0 $ 34.3 $ 72.9 $ 408.2
Incr (Decr) over prior period.... $ 6.0 $ (4.1) $ 1.9 $ (4.3) $ (3.2) $ (5.6)
Table Game Drop..................... $ 643.0 $1,204.8 $1,847.8 $ 217.5 $ 452.6 $ 2,517.9
Incr (Decr) over prior period.... $ (11.4) $(74.3) $ (85.7) $ 4.3 $ (45.9) $ (127.3)
Table Win Percentage................ 15.9% 16.5% 16.3% 15.8% 16.1% 16.2%
Incr (Decr) over prior period.... 1.2pts. 0.6pts. 0.8pts. (2.3)pts. 0.8pts. 0.6pts.
Number of Table Games............... 110 154 264 58 92 414
Incr (Decr) over prior period.... (7) (1) (8) (9) 1 (16)
Slot Revenues....................... $ 272.1 $295.0 $ 567.1 $ 103.5 $ 186.7 $ 857.3
Incr (Decr) over prior period.... ($2.2) $ (2.4) $ (4.6) $ 12.4 $ 3.5 $ 11.3
Slot Handle......................... $3,366.8 $3,623.7 $6,990.5 $1,630.8 $2,321.9 $10,943.2
Incr (Decr) over prior period.... $ (14.3) $ 40.0 $ 25.7 $ 269.7 $ 54.9 $ 350.3
Slot Win Percentage................. 8.1% 8.1% 8.1% 6.3% 8.0% 7.8%
Incr (Decr) over prior period.... (0.0)pts. (0.2)pts. (0.1)pts. (0.4)pts. (0.1)pts. (0.2)pts.
Number of Slot Machines............. 4,144 4,131 8,275 1,352 2,167 11,794
Incr (Decr) over prior period.... 61 (5) 56 (78) (31) (53)
Other Gaming Revenues............... N/A $ 20.4 $ 20.4 N/A $ 2.0 $ 22.4
Incr (Decr) over prior period.... N/A $ 2.1 $ 2.1 N/A $ (0.1) $ 2.0
Total Gaming Revenues............... $ 374.5 $514.0 $ 888.5 $ 137.8 $ 261.6 $ 1,287.9
Incr (Decr) over prior period.... $ 3.8 $ (4.4) $ (0.6) $ 8.1 $ 0.2 $ 7.7
</TABLE>
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
as opposed to a partial year for the entities 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 $271.9 million or 50.5% from $538.4 million
for the comparable period in 1996. This increase is proportionate to the
increase in gaming revenues from the comparable period in 1996.
General and administrative expenses were $271.l million for the year
ended December 31, 1997, an increase of $79.0 million or 41.1% from general and
administrative expenses of $192.1 million. The acquisition of Trump Marina on
October 7, 1996 accounted for $47.l 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 reevaluated 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 years ended December 31, 1997, the net effect of
applying these new lives was to decrease THCR Holdings' and THCR's net loss by
$10.5 million and $6.6 million, respectively, and decrease basic and diluted
loss per share by $.29.
Developments costs of $4.6 million, relating to Detroit, Niagara Falls
and other jurisdictions, were expensed in 1997.
55
<PAGE>
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' onetime $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.
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.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
Gaming revenues are the primary source of THCR's revenues. Table game
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."
Gaming costs and expenses were $806.4 million for the year ended
December 31, 1998, a decrease of $3.9 million or .5 % from $810.3 million for
the comparable period in 1997. Decreases in marketing and promotional costs at
the Atlantic City casinos were partially offset by increases at Trump Indiana.
General and administrative expenses were $274.4 million for the year
ended December 31, 1998, an increase of $3.3 million or 1.2% from general and
administrative expenses of $271.1 million in 1997.
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 $10.5 million and $6.6 million,
respectively, and decrease basic and diluted loss per share by $.29. For the
year ended December 31, 1998, the net effect of applying these new lives was to
decrease THCR Holdings' and THCR's net loss by $13.4 million and $8.5 million,
respectively, and decrease basic and diluted loss per share by $.38.
Insurance reserves were reduced by $2.8 million as the result of an
internal risk management review at Plaza Associates, Taj Associates and Castle
Associates. During 1998, self insurance reserves decreased due to an internally
focused aggressive policy where potential lawsuits are challenged immediately.
Additionally, a more aggressive litigation policy was pursued to deter present
and future frivolous lawsuits. THCR also retained an outside consultant to
comprehensively review certain claims and to assist THCR in establishing the
estimated revenues at December 31, 1998.
Development costs of $4.6 million, relating to Detroit, Niagara Falls
and other jurisdictions, were expensed in 1997; there was no comparable expense
in 1998.
Interest expense increased due to the additional $100,000,000 of TAC II
Notes and TAC III Notes issued on December 10, 1997 of which $75,000,000 are TAC
II Notes issued by Trump AC together with Funding II and of which $25,000,000
are TAC III Notes issued by Trump AC together with Funding III.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Management has reviewed the disclosure requirements for Item 7A and,
based upon THCR, THCR Holdings and THCR Funding's current capital structure,
scope of operations and financial statement structure, management believes that
such disclosure is not warranted at this time. Since conditions may change,
THCR,
56
<PAGE>
THCR Holdings and THCR Funding will periodically review its compliance with this
disclosure requirement to the extent applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
An index to financial statements and required financial statement
schedules is set forth in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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................................................. Executive Vice President and Corporate Treasurer
Francis X. McCarthy, Jr....................................... Executive 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, 52 years old, has been Chairman of the Board of
THCR and THCR Funding since their formation in 1995. Trump was a 50%
shareholder, Chairman of the Board of Directors, President and Treasurer of
Trump Plaza GP and the managing general partner of Plaza Associates prior to
June 1993. Trump was Chairman of the Executive Committee and President of Plaza
Associates from May 1986 to May 1992 and was a general partner of Plaza
Associates until June 1993. Trump has been a director of Trump AC Holding since
February 1993 and was President of Trump AC Holding from February 1993 until
December 1997. Trump was a partner in Trump AC from February 1993 until June
1995. Trump has been Chairman of the Board of Directors of Trump AC Funding
since its formation in January 1996 and the Chairman of the Board of Directors
of Funding II and Funding III since their formation in November 1997. Trump has
been Chairman of the Board of Directors of THCR Holding Corp. and THCR/LP since
October 1991; President and Treasurer of THCR Holding Corp. since March 4, 1991;
Chairman of the Board of Directors, President and Treasurer of TCI since June
1988; Chairman of the Executive Committee of Taj Associates from June 1988 to
October 1991; and President and sole Director of Realty Corp. since May 1986.
Trump has been the sole director of TACC since March 1991. Trump was President
and Treasurer of TACC from March 1991 until December 1997. Trump has been the
sole director of Trump Indiana since its formation. Trump has been Chairman of
the Board of Partner Representatives of Castle Associates, the partnership that
owns Trump Marina, since May 1992; and was Chairman of the Executive Committee
of Castle Associates from June 1985 to May 1992. Trump is the Chairman of the
Board of Directors of Castle Funding, and served as President and Treasurer of
Castle Funding until April 1998. Trump is the Chairman of the Board and
Treasurer of TCHI. Trump is the President, Treasurer, sole director and sole
shareholder of TCI-II. Trump has been a Director of THCR Enterprises 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, 54 years old, has been President, Chief
Executive Officer and a director of THCR and THCR Funding and Chief Executive
Officer of THCR Holdings since their formation in 1995. Mr. Ribis has been the
Chief Executive Officer of Plaza Associates since February 1991, was President
from April 1994 to February 1995, was a member of the Executive Committee of
Plaza Associates from April 1991 to
58
<PAGE>
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 and President of Castle Associates until April 1998; member of
the Executive Committee of Castle Associates from April 1991 to May 1992; member
of the Board of Partner Representatives of Castle Associates since May 1992; and
has served as the Vice President and Assistant Secretary of TCHI since December
1993 and January 1991, respectively, until April 1998. Mr. Ribis is now a
director of TCHI. Since April 1998, Mr. Ribis has served as President and Chief
Executive Officer of TCHI and Castle Funding. Mr. Ribis has served as Vice
President of TCI-II since December 1993 and had served as Secretary of TCI-II
from November 1991 to May 1992. Mr. Ribis has been Vice President of Trump Corp.
since September 1991. Mr. Ribis has been the President and a director of THCR
Enterprises since January 1997. From January 1993 to January 1995 Mr. Ribis
served as the Chairman of the Casino Association of New Jersey and has been a
member of the Board of Trustees of the CRDA since October 1993. From January
1980 to January 1991, Mr. Ribis was Senior Partner in, and from February 1991 to
December 1995, was Counsel to the law firm of Ribis, Graham & Curtin (now
practicing as Graham, Curtin & Sheridan, A Professional Association), which
serves as New Jersey legal counsel to all of the above-named companies and
certain of their affiliated entities.
Robert M. Pickus--Mr. Pickus, 44 years old, has been Executive Vice
President, General Counsel and Secretary of THCR since its formation in 1995. He
has also been the Executive Vice President of Corporate and Legal Affairs of
Plaza Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates.
Mr. Pickus served as the Assistant Secretary of Trump AC Holding from April 1994
until February 1998. Since February 1998, Mr. Pickus has served as the Secretary
of Trump AC Holding. Mr. Pickus has been Secretary and a director of Trump AC
Funding since its formation in January 1996 and Secretary and a director of
Funding II and Funding III since their formation in November 1997. Mr. Pickus
has been the Executive Vice President and Secretary of Trump Indiana since its
inception. Mr. Pickus has been the Executive Vice President of Corporate and
Legal Affairs of Taj Associates since February 1995, and a Director of THCR
Holding Corp. and THCR/LP since November 1995. He was the Senior Vice President
and Secretary of Castle Funding from June 1988 to December 1993 and General
Counsel of Castle Associates from June 1985 to December 1993. Mr. Pickus has
served as the Secretary of Castle Funding since April 1998. Mr. Pickus served as
the Assistant Secretary of TACC until February 1998. Since February 1998, Mr.
Pickus has served as the Secretary of TACC. Mr. Pickus was also Secretary of
TCHI from October 1991 until December 1993. Mr. Pickus is a director of TCHI,
and has served as the Assistant Secretary of TCHI from February 1998 until April
1998. Since April 1998, Mr. Pickus has served as the Secretary of TCHI. Mr.
Pickus has been the Executive Vice President of Corporate and Legal Affairs of
Castle Associates since February 1995, Secretary of Castle Associates since
February 1996 and a member of the Board of Partner Representatives of Castle
Associates since October 1995. Mr. Pickus is currently the Secretary of THCR
Holding Corp., has been the Vice President, Secretary and Director of THCR
Enterprises since January 1997 and has been Executive Vice President of TCS
since its inception and its President since November 1998. He has been admitted
to practice law in the states of New York and New Jersey since 1980, and in the
Commonwealth of Pennsylvania since 1981.
Francis X. McCarthy, Jr.--Mr. McCarthy, 46 years old, has served as
Executive Vice President of Corporate Finance and Chief Financial Officer of
THCR, THCR Holdings and THCR Funding since September 1998. Mr. McCarthy has been
the Chief Financial Officer of Trump AC, Trump AC Funding, Funding II and
Funding III since September 1998. Mr. McCarthy has been the Executive Vice
President of Finance of TCS since
59
<PAGE>
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.
John P. Burke--Mr. Burke, 51 years old, served as the Senior Vice
President of Corporate Finance of THCR from January 1996 until June 1997. Mr.
Burke served as the Senior Vice President of THCR, THCR Holdings and THCR
Funding from June 1997 to January 1999. Mr. Burke has served as Executive Vice
President of THCR, THCR Holdings and THCR Funding since January 1999. Mr. Burke
has been the Corporate Treasurer of THCR, THCR Holdings and THCR Funding since
their formation in 1995. He has also been Corporate Treasurer of Plaza
Associates and Taj Associates since October 1991. Mr. Burke has been the
Treasurer of Trump Indiana since its formation. Mr. Burke has been Treasurer of
Trump AC Funding since its formation in January 1996 and Treasurer of Funding II
and Funding III since their formation in November 1997. Mr. Burke has been
Treasurer of TACC since February 1998. Mr. Burke was a Director of THCR/LP and
THCR Holding Corp. from October 1991 to April 1996 and was Vice President of
THCR/LP until June 1995. Mr. Burke has served as the Assistant Treasurer of THCR
Holding Corp. and THCR/LP since February 1998. Mr. Burke has been the Corporate
Treasurer of Castle Associates since October 1991, the Vice President of Castle
Associates, Castle Funding, TCI-II and TCHI since December 1993, Assistant
Treasurer of TCHI since April 1998, Treasurer of Castle Funding since April
1998, a member of the Board of Partner Representatives of Castle Associates
since March 1997 and the Vice President-Finance of The Trump Organization since
September 1990. Mr. Burke was an Executive Vice President and Chief
Administrative Officer of Imperial Corporation of America from April 1989
through September 1990. Mr. Burke has been the Vice President and Treasurer of
THCR Enterprises since January 1997.
Joseph A. Fusco--Mr. Fusco, 54 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, 68 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, 68 years old, has been a director of THCR
and THCR Funding since June 1995. Mr. Thomas has been a director of Trump AC
Funding since April 1996 and a director of Funding II and Funding III since
December 1997. He has also been the Senior Vice President of Corporate Affairs
of the Pepsi-Cola Bottling Co. of New York since January 1985. Mr. Thomas was
the acting Chairman, and a Commissioner, of the CRDA from 1985 through 1987, and
a Commissioner of the CCC from 1980 through 1984 during a portion of which time
Mr. Thomas served as acting Chairman of the CCC. Mr. Thomas was a director of
Trump Plaza GP until June 1993 and has been a director of Trump AC Holding since
June 1993. Mr. Thomas is an attorney licensed to practice law in the State of
New York.
Peter M. Ryan--Mr. Ryan, 60 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
60
<PAGE>
President of The Chase Manhattan Bank for more than five years. Mr. Ryan has
been a director of the Children's' 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, 44 years old, had been Chief Operating
Officer of Plaza Associates since September 19, 1994 and President since March
1995. Mr. Cregan's employment was terminated in September 1998. Mr. Cregan was
Vice President of Trump AC Holding from February 1995 through September 1998.
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, 42 years old, has been the General Manager of
Plaza Associates since September, 1998. Mr. Buro served as 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.
Robert Schaffhauser--Mr. Schaffhauser, 52 years old, is a Certified
Public Accountant, and has been Executive Vice President of Finance for Trump
Plaza since September 1998. Mr. Schaffhauser served in a similar capacity at
Trump Marina from January of 1994 through October of 1996. From November of 1996
through August of 1998, Mr. Schaffhauser was associated with THCR as a
consultant. Mr. Schaffhauser also served as the Senior Vice President of Finance
and Administration for Greate Bay Hotel and Casino Corporation from 1989 through
1992.
James A. Rigot--Mr. Rigot, 47 years old, had been Executive Vice
President of Casino Operations of Plaza Associates since November 1994. Mr.
Rigot's employment was terminated in January 1999. 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.
61
<PAGE>
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.
Rodolfo E. Prieto--Mr. Prieto, 55 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, 54 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, 57 years old, has been Senior Vice
President, Food & Beverage 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. Prior to joining Taj Associates Mr. Kohlross was food and beverage
director of Resorts International from 1985 to 1988.
Nicholas J. Niglio--Mr. Niglio, 52 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, 44 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, 39 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,
62
<PAGE>
1995. Elsinore Corporation filed a plan of reorganization on February 28, 1996,
which became effective on February 28, 1997.
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.
Mark A. Brown--Mr. Brown, 38 years old, joined Castle Associates as
Executive Vice President of Operations in July 1995 and, effective November
1997, serves as President and Chief Operating Officer. Mr. Brown also serves as
Vice President of TCHI. Previously, Mr. Brown served as Senior Vice President of
Eastern Operations for Caesar's World Marketing Corporation, National and
International Divisions from 1993 until 1995. Prior to that, Mr. Brown served as
Vice President of Casino Operations at the Taj Mahal from 1989 until 1993. From
1979 until 1989, Mr. Brown worked for Resorts International Hotel Casino
departing as Casino Shift Manager in December 1989.
Lawrence J. Mullin--Mr. Mullin, 36 years old, joined Castle Associates
as Vice President of Slot Operations and Marketing in August 1995, and effective
June 1998, serves as Senior Vice President of Marketing. Previously, Mr. Mullin
served as Vice President of Slot and Casino Marketing from 1992 until 1995 at
the Taj Mahal.
Stephen S. Oskiera--Mr. Oskiera, 40 years old, serves as Vice President
of Finance of Castle Associates, as well as Chief Financial Officer, Chief
Accounting Officer and Assistant Treasurer of Castle Funding and Assistant
Treasurer and Chief Financial Officer of TCHI since October 1998. Mr. Oskiera
served as Executive Director of Finance for both Castle Associates and TCS from
October 1995 to October 1998. Previously, Mr. Oskiera served as Corporate
Controller of American Gaming & Entertainment, Ltd., a casino development
company, from December 1993 to October 1995 and, prior to that, served as
Financial Controller for Greate Bay Hotel & Casino, Inc. d/b/a/ the Sands Hotel
& Casino in Atlantic City, New Jersey from May 1987 to December 1993.
Asher O. Pacholder--Dr. Pacholder, 61 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, 61 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
63
<PAGE>
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, 67 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.
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, 51 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.
Each person listed above is a citizen of the United States.
MANAGEMENT OF TRUMP KANSAS CITY
R. Bruce McKee--Mr. McKee, 53 years old, has served as general manager
of Trump Kansas City LLC since January 1999, served as the Senior Vice President
of Corporate Finance of THCR, Trump AC Funding and TACC from June 1997 until
September 1998. Mr. McKee served as Chief Financial Officer of THCR from June
1997 until September 1998. 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.
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.
Kevin S. Smith--Mr. Smith, 42 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
64
<PAGE>
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 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, 1998.
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.
65
<PAGE>
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>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------- -----------------------------
NAME AND PRINCIPAL YEAR SALARY BONUS OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
POSITION ---- ------ ----- COMPENSATION(1) STOCK UNDERLYING COMPENSATION
-------- --------------- AWARDS($) OPTIONS(#) -------------
----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Trump............. 1998 $1,000,000 500,000 $ 222,474
Chairman of the Board 1997 1,000,000 212,960
1996 1,000,000 $ 5,000,000 1,031,000(2)
Nicholas L. Ribis........... 1998 $1,996,500 183,333 $ 5,000(4)
Chief Executive Officer 1997 1,996,500 $758,326(3) 4,000(4)
1996 1,996,500 $ 2,500,000 2,375(4)
Robert M. Pickus............ 1998 $ 299,428 30,000 $ 4,298(4)
Executive Vice President, 1997 299,160 $ 25,000 4,000(4)
General Counsel and Secretary 1996 290,673 175,000 $ 3,975 4,973(4)
Joseph A. Fusco(6).......... 1998 $ 296,343 20,000 $ 4,800(4)
Executive Vice President of 1997 $ 295,660 $ 25,000 4,000(4)
Government and Regulatory 1996 139,211 80,000 $ 2,665 --
Affairs
R. Bruce McKee(5)........... 1998 $ 353,886 $ 4,800(4)
Senior Vice President of 1997 422,356 $ 50,000 2,969(4)
Corporate Finance 1996 327,566 3,529(4)
Francis X. McCarthy, Jr..... 1998 $ 303,593 10,000 $ 4,621(4)
Executive Vice President of 1997 307,382 3,958(4)
Corporate Finance 1996 273,077 $ 45,000 3,812(4)
</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. From June 1997
to September 1998, 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.
66
<PAGE>
In November 1998, THCR canceled all options previously granted to
certain employees and approved a grant of new options. THCR granted certain
employees and its independent directors approximately 1,166,800 options to
purchase THCR Common Stock at a price of $4.625 per share. One-third of the
options vested on the date of the grant and on each of the first two
anniversaries of the date of the grant. The options expire ten (10) years after
the date of issuance.
The following table sets forth the number of shares covered by options
held by the Board of Directors and Messrs. Trump, Ribis, Pickus, Burke, McCarthy
and Fusco, the only members of the Executive Group who held options in 1998, and
the value of the options as of December 31, 1998.
FY-END OPTION VALUE(1)
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FY-END(#)
NAME EXERCISABLE/UNEXERCISABLE
---- -------------------------
Donald J. Trump ............................ 166,667 333,333
Nicholas L. Ribis .......................... 96,666 86,667
Robert M. Pickus ........................... 10,000 20,000
John P. Burke .............................. 10,000 20,000
Francis X. McCarthy, Jr .................... 3,333 6,667
Joseph A. Fusco ............................ 6,667 13,333
Wallace B. Askins .......................... 833 1,667
Peter M. Ryan .............................. 833 1,667
Don M. Thomas .............................. 833 1,667
- ----------------------
(1) Based on a closing sale price of $3.75 per share of THCR Common Stock on
December 31, 1998, 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
67
<PAGE>
termination without cause" as the termination of Mr. Ribis's employment at his
initiative following the occurrence of certain events, including (i) a reduction
in compensation, (ii) failure to elect Mr. Ribis as Chief Executive Officer of
THCR, (iii) failure to elect Mr. Ribis a director of THCR or (iv) a material
diminution of his duties. The phantom stock units will also automatically vest
upon the death or disability of Mr. Ribis. The Ribis THCR Agreement also
provides for up to an aggregate of $2.0 million of loans to Mr. Ribis to be used
by him to pay his income tax liability in connection with stock options, phantom
stock units and stock bonus awards, which loans will be forgiven, including both
principal and interest, in the event of a "change of control." The Ribis THCR
Agreement defines "change of control" as the occurrence of any of the following
events: (i) any person (other than THCR Holdings, Trump or an affiliate of
either) becomes a beneficial owner of 50% or more of the voting stock of THCR,
(ii) the majority of the Board of Directors of THCR consists of individuals that
were not directors on June 12, 1995 (the "June 12 Directors"), provided,
however, that any person who becomes a director subsequent to June 12, 1995,
shall be considered a June 12 Director if his election or nomination was
supported by three-quarters of the June 12 Directors, (iii) THCR adopts and
implements a plan of liquidation or (iv) all or substantially all of the assets
or business of THCR are disposed of in a sale or business combination in which
shareholders of THCR would not beneficially own the same proportion of voting
stock of the successor entity. The Ribis THCR Agreement also provides certain
demand and piggyback registration rights for THCR Common Stock issued pursuant
to the foregoing. Pursuant to the Ribis THCR Agreement, Mr. Ribis has agreed
that upon termination of his employment other than for "cause" or following a
"change of control," he would not engage in any activity competitive with THCR
for a period of up to one year.
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.
68
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
THCR has an Executive Committee, an Audit Committee, a Special
Committee, a Stock Incentive Plan Committee and a Compensation Committee. The
Executive Committee is composed of Messrs. Trump and Ribis. The Audit Committee
and the Special Committee are composed of Messrs. Askins, Ryan and Thomas, each
of whom is an independent director of THCR. The Stock Incentive Plan Committee
is composed of Messrs. Trump, Askins, Ryan and Thomas. The Compensation
Committee is composed of Messrs. Trump, Ribis, Askins and Thomas. The Special
Committee was established pursuant to 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:
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
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 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
69
<PAGE>
payment of $32,312.50.
During the quarter ended September 30, 1998, THCR Holdings advanced a
loan to Trump in the amount of $11,000,000 and prepaid 1999 fees and expenses in
the amount of $1,500,000 to Trump in accordance with the Executive Agreement.
Such loan is secured by a pledge of certain receivables due to Trump. On October
19, 1998, THCR Holdings loaned Trump $13,500,000. Such loan was offset in its
entirety when Trump advanced $13,500,000 to THCR Enterprises, L.L.C. ("THCR
Enterprises"), which then purchased Trump's indebtedness to Donaldson Lufkin &
Jenrette Securities Corporation. In connection with such purchase, THCR
Enterprises was assigned a pledge of Trump's and TCI's equity interests in THCR
and THCR Holdings.
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 the Taj Services 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.
In consideration for the services to be rendered, Taj Associates paid an annual
fee (the "Annual Fee") equal to 1% of
70
<PAGE>
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 period from January 1, 1996 to April 17, 1996, Trump earned
approximately $0.4 million in respect of the Annual Fee, including amounts paid
to a third party pursuant to an assignment agreement. In addition, during the
period from January 1, 1996 to April 17, 1996, Taj Associates reimbursed Trump
$148,000, 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 years ended 1997 and 1998, 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. This amount will be offset
against future fees. 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 compensation committee,
and (ii) a director of the registrant serves as an executive officer. Messrs.
Ribis, Pickus
71
<PAGE>
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 Tompkins, McGuire,
Wachenfeld & Barry, a New Jersey law firm which provides, from time to time,
legal services to THCR and its subsidiaries.
72
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP
THCR. The following table sets forth, as of March 19, 1999, 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.
BENEFICIAL OWNERSHIP
----------------------------
NAME NUMBER PERCENT
- ---- ------------- ----------
Donald J. Trump.................................. 15,885,640(1) 41.4%
Nicholas L. Ribis................................ 247,667(2) 1.1%
John P. Burke.................................... 11,935(3) *
Francis X. McCarthy, Jr. ........................ 4,091(4) *
Robert M. Pickus ................................ 12,000(5) *
Joseph A. Fusco.................................. 7,667(6) *
Wallace B. Askins ............................... 3,833(7) *
Don M. Thomas.................................... 3,333(7) *
Peter M. Ryan.................................... 10,833(7) *
Oppenheimer Group, Inc........................... 2,468,749(8) 10.9%
Conesco, Inc..................................... 2,010,000(9) 8.9%
Mario J. Gabelli................................. 1,629,000(10) 7.2%
Dimensional Fund Advisors Inc.................... 1,604,500(11) 7.1%
Bay Harbour Management, L.C...................... 1,311,500(12) 5.8%
All officers and directors of THCR (9 persons)... 16,187,000 42.2%
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. The figure stated above Includes options exercisable for
166,667 shares of THCR at $4.625 per share
(2) Includes (i) a fully vested stock bonus award of 133,333 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) 96,666 shares underlying currently
exercisable options to purchase THCR Common Stock at $4.625 per share. Mr.
Ribis also owns 1,848 shares in his 401K Plan.
(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. Mr.
Burke also owns options for 10,000 shares which are exercisable at $4.625
per share and 1,235 shares in his 401K Plan.
(4) Includes options exercisable for 3,333 shares at $4.625 per share and 758
shares in his 401K Plan.
(5) Includes options exercisable for 10,000 shares at $4.625 per share.
(6) Includes options exercisable for 6,667 shares at $4.625 per share.
(7) Includes options exercisable for 833 shares at $4.625 per share.
(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.
(9) 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.
73
<PAGE>
(10) 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.
(11) 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. Dimensional Fund
Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed
to have beneficial ownership of 1,604,500 shares of THCR Common Stock as of
December 31, 1998, 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.
(12) 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 these shares which it holds for the account
of investment funds and managed accounts.
As security for certain indebtedness of Trump and his affiliates (other
than THCR and its subsidiaries) owed to an affiliate, 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.
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 $3.9 million for the year ended December 31, 1998.
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 or 1998.
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.
74
<PAGE>
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.
75
<PAGE>
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, 1998.
(c) Exhibits.
EXHIBIT NO DESCRIPTION OF EXHIBIT
---------- -------------------------------------------------------
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.
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.
76
<PAGE>
EXHIBIT NO DESCRIPTION OF EXHIBIT
---------- -------------------------------------------------------
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.
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.
77
<PAGE>
EXHIBIT NO DESCRIPTION OF EXHIBIT
---------- -------------------------------------------------------
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.
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 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.
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.
78
<PAGE>
EXHIBIT NO DESCRIPTION OF EXHIBIT
---------- -------------------------------------------------------
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.
10.57-10.58 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.
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(19) Employment Agreement, dated May 3, 1996, between
Trump Hotels & Casinos Resorts Holdings, L.P. and
Joseph A. Fusco.
10.71(19) 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., Trump Hotels & Casino Resorts
Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc.
27.1* Financial Data Schedule of Trump Hotels & Casino
Resorts, Inc.
27.2** Financial Data Schedule of Trump Hotels & Casino
Resorts Holdings, L.P.
79
<PAGE>
27.3** Financial Data Schedule of Trump Hotels & Casino
Resorts Funding, Inc.
- ----------
* Filed only with the Annual Report on Form 10-K of THCR for the year
ended December 31, 1998.
** Filed only with the Annual Report on Form 10-K of THCR Holdings and
THCR Funding for the year ended December 31, 1998.
(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.
(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.
80
<PAGE>
(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.
(19) Incorporated herein by reference to the identically numbered Exhibit to
the Annual Report on Form 10-K of Trump Hotels & Casino Resorts, Inc.
for the year ended December 31, 1996.
(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.
81
<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.
82
<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
Date: March 30, 1999
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DONALD J. TRUMP Chairman of the Board of Directors March 30, 1999
- ------------------------------------
Donald J. Trump
/s/ NICHOLAS L. RIBIS President, Chief Executive Officer and March 30, 1999
- ------------------------------------ Director (Principal Executive Officer)
Nicholas L. Ribis
/s/ FRANCIS X. MCCARTHY, JR. Executive Vice President, Corporate Finance March 30, 1999
- ------------------------------------ and Chief Financial Officer (Principal
Francis X. McCarthy, Jr. Accounting and Financial Officer)
/s/ WALLACE B. ASKINS Director March 30, 1999
- ------------------------------------
Wallace B. Askins
/s/ DON M. THOMAS Director March 30, 1999
- ------------------------------------
Don M. Thomas
/s/ PETER M. RYAN Director March 30, 1999
- ------------------------------------
Peter M. Ryan
</TABLE>
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 HOLDINGS, L.P.
By:/s/ NICHOLAS L. RIBIS
-----------------------------------------
Nicholas L. Ribis
Title: President, Chief Executive Officer
Date: March 30, 1999
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DONALD J. TRUMP Chairman of the Board of Directors March 30, 1999
- ---------------------------------
Donald J. Trump
/s/ NICHOLAS L. RIBIS President, Chief Executive Officer and March 30, 1999
- --------------------------------- Director (Principal Executive Officer)
Nicholas L. Ribis
/s/ FRANCIS X. MCCARTHY, JR. Executive Vice President, Corporate Finance March 30, 1999
- --------------------------------- and Chief Financial Officer (Principal
Francis X. McCarthy, Jr. Accounting and Financial Officer)
/s/ WALLACE B. ASKINS Director March 30, 1999
- ---------------------------------
Wallace B. Askins
/s/ DON M. THOMAS Director March 30, 1999
- ---------------------------------
Don M. Thomas
/s/ PETER M. RYAN Director March 30, 1999
- ---------------------------------
Peter M. Ryan
</TABLE>
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 FUNDING, INC.
By:/s/ NICHOLAS L. RIBIS
----------------------------------------
Nicholas L. Ribis
Title: President, Chief Executive Officer
Date: March 30, 1999
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DONALD J. TRUMP Chairman of the Board of Directors March 30, 1999
- ------------------------------------
Donald J. Trump
/s/ NICHOLAS L. RIBIS President, Chief Executive Officer and March 30, 1999
- ------------------------------------ Director (Principal Executive Officer)
Nicholas L. Ribis
/s/ FRANCIS X. MCCARTHY, JR. Executive Vice President, Corporate Finance March 30, 1999
- ------------------------------------ and Chief Financial Officer (Principal
Francis X. McCarthy, Jr. Accounting and Financial Officer)
/s/ WALLACE B. ASKINS Director March 30, 1999
- ------------------------------------
Wallace B. Askins
/s/ DON M. THOMAS Director March 30, 1999
- ------------------------------------
Don M. Thomas
/s/ PETER M. RYAN Director March 30, 1999
- ------------------------------------
Peter M. Ryan
</TABLE>
85
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
Trump Hotels & Casino Resorts, Inc.
<S> <C>
Report of Independent Public Accountants............................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998......................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1997 and 1998........... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and
1998.............................................................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998........... F-6
Trump Hotels & Casino Resorts Holdings, L.P.
Report of Independent Public Accountants............................................................ F-7
Consolidated Balance Sheets as of December 31, 1997 and 1998........................................ F-8
Consolidated Statements of Operations for the years ended December 31, 1996, 1997 and 1998.......... F-9
Consolidated Statements of Partners' Capital for the years ended December 31, 1996, 1997 and 1998... F-10
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998.......... 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 years ended December 31, 1996, 1997 and 1998........... 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, 1997
and 1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. These 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, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 2, 1999 (except with respect to the matter discussed in Note 6 as to
which the date is March 3, 1999)
F-2
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1997 1998
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash & cash equivalents................................................................. $ 140,328 $ 114,757
Trade receivables, net of allowances for doubtful accounts of $18,625 and $27,721,
respectively (Note 3)................................................................ 55,745 58,536
Other accounts receivable (Note 3)...................................................... 12,330 12,415
Inventories............................................................................. 13,011 12,804
Due from Affiliates (Note 8) ........................................................... 14,113 13,888
Prepaid expenses and other current assets............................................... 13,892 18,679
------------ ---------
Total current assets............................................................... 249,419 231,079
------------ ---------
INVESTMENT IN BUFFINGTON HARBOR, L.L.C. (Note 3)............................................. 43,535 40,765
INVESTMENT IN TRUMP'S CASTLE PIK NOTES (Note 4).............................................. 53,381 64,137
PROPERTY AND EQUIPMENT (Notes 2, 3 and 4):
Land and land improvements.............................................................. 262,282 264,637
Buildings and building improvements..................................................... 1,740,287 1,761,016
Riverboat............................................................................... 29,716 32,852
Furniture, fixtures and equipment....................................................... 261,806 280,705
Leasehold improvements.................................................................. 2,428 3,380
Construction in progress................................................................ 5,169 13,621
------------ ---------
2,301,688 2,356,211
Less: accumulated depreciation and amortization......................................... (296,937) (378,602)
------------ ---------
Net property and equipment......................................................... 2,004,751 1,977,609
------------ ---------
CASH RESTRICTED FOR FUTURE CONSTRUCTION...................................................... 13,000 2,523
DEFERRED BOND AND LOAN ISSUANCE COSTS, net of accumulated amortization of $14,561 and
$22,373, respectively (Note 4).......................................................... 45,071 37,978
DUE FROM AFFILIATES (Note 8)................................................................. 3,493 15,766
OTHER ASSETS (Note 6)........................................................................ 60,659 59,721
------------ ---------
Total assets....................................................................... $ 2,473,309 $2,429,578
============ ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 4)........................................... $ 21,890 $ 10,504
Accounts payable........................................................................ 36,293 47,223
Accrued payroll......................................................................... 24,226 24,863
Accrued interest payable ............................................................... 29,038 30,379
Due to affiliates (Note 8).............................................................. 940 1,114
Other accrued expenses.................................................................. 20,498 19,924
Self insurance reserves (Note 6)........................................................ 16,267 12,950
Other current liabilities............................................................... 12,205 13,637
------------ ---------
Total current liabilities.......................................................... 161,357 160,594
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 4)...................................... 1,817,569 1,838,492
Other long-term liabilities ............................................................ 17,080 18,044
------------ ---------
Total liabilities.................................................................. 1,996,006 2,017,130
------------ ---------
MINORITY INTEREST............................................................................ 148,418 125,540
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 1997 and 1998, respectively........................................ -- --
Common Stock, $.01 par value, 75,000,000 shares authorized, 24,206,756
issued; 22,500,256 and 22,195,256 outstanding in 1997 and 1998, respectively.......... 242 242
Class B Common Stock, $.01 par value, 1,000 shares authorized, issued and
outstanding in 1997 and 1998, respectively............................................ -- --
Additional paid-in capital.............................................................. 455,645 455,645
Accumulated deficit..................................................................... (109,726) (149,444)
Less treasury stock, 1,706,500 and 2,011,500 shares of THCR common stock respectively,
at cost (Note 11)..................................................................... (17,276) (19,535)
------------ ---------
Total stockholders' equity......................................................... 328,885 286,908
------------ ---------
Total liabilities & stockholders' equity........................................... $ 2,473,309 $2,429,578
============ ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 and 1998
(in thousands, except share data)
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Gaming (Note 3) .................................................. $ 883,441 $ 1,280,245 $ 1,287,925
Rooms ............................................................ 72,172 100,674 93,549
Food and Beverage ................................................ 106,992 150,668 146,842
Other ............................................................ 26,665 47,608 44,886
----------- ---------- ------------
Gross Revenues ............................................... 1,089,270 1,579,195 1,573,202
Less-Promotional allowances ...................................... 122,326 179,822 169,581
----------- ---------- ------------
Net Revenues ................................................. 966,944 1,399,373 1,403,621
----------- ---------- ------------
COSTS AND EXPENSES:
Gaming .......................................................... 538,398 810,329 806,438
Rooms ........................................................... 23,471 31,062 31,587
Food and Beverage ............................................... 35,500 49,971 51,384
General and Administrative ...................................... 192,082 271,110 274,369
Depreciation and Amortization ................................... 69,035 89,094 84,123
Pre-opening ..................................................... 13,839 -- 747
Development Costs ............................................... -- 4,607 --
----------- ---------- -----------
872,325 1,256,173 1,248,648
----------- ---------- -----------
Income from operations ....................................... 94,619 143,200 154,973
----------- ---------- -----------
NON-OPERATING INCOME (EXPENSE): (Note 5)
Interest income ................................................... 11,186 6,529 9,591
Interest expense .................................................. (150,716) (211,537) (223,098)
Other non-operating income (expense) .............................. 14,869 (1,028) (1,093)
----------- ---------- -----------
(124,661) (206,036) (214,600)
----------- ---------- -----------
Loss before equity in loss from Buffington Harbor, L.L.C., extraordinary
loss and minority interest .......................................... (30,042) (62,836) (59,627)
Equity in loss from Buffington Harbor, L.L.C.(Note 3) .................. (925) (3,478) (2,969)
----------- ---------- -----------
Loss before extraordinary items and minority interest .................. (30,967) (66,314) (62,596)
Extraordinary loss (Note 12) ........................................... (60,732) -- --
Minority Interest ...................................................... 26,022 24,186 22,878
----------- ---------- -----------
Net Loss ............................................................... $ (65,677) $ (42,128) $ (39,718)
=========== =========== ===========
Basic and Diluted Loss Per Share ....................................... $ (3.27) $ (1.85) $ (1.79)
=========== =========== ===========
Average Number of Shares Outstanding ................................... 20,081,122 22,794,921 22,203,612
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(in thousands, except share data)
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, 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
Proceeds from issuance of Common Stock
pursuant to Taj Merger...................... 323,423 3 9,316 9,319
Proceeds from 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)
Issuance of Common Stock for Phantom Stock Units 66,666 1 1
Accretion of Phantom Stock Units................ 193 193
Net Loss........................................ (42,128) (42,128)
---------- ------- -------- ---------- ---------- --------- ----------
Balance, December 31, 1997...................... 24,206,756 1,000 242 455,645 (109,726) (17,276) 328,885
Purchase of treasury stock, 305,000 shares of THCR
Common Stock, at cost........................ (2,259) (2,259)
Net Loss........................................ (39,718) (39,718)
---------- ------- -------- ---------- ---------- ---------- ----------
Balance, December 31, 1998...................... 24,206,756 1,000 $ 242 $ 455,645 $ (149,444) $ (19,535) $ 286,908
========== ======= ======== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 and 1998
(in thousands)
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................................... $ (65,677) $ (42,128) $ (39,718)
Adjustments to reconcile net loss to net cash flows provided by operating
activities:
Non Cash Charges:
Issuance of stock grant awards and accretion of phantom stock units ........... 467 194 --
Issuance of debt in exchange for accrued interest ............................. 4,589 10,156 11,614
Extraordinary loss ............................................................ 60,732 -- --
Depreciation and amortization ................................................. 69,035 89,094 84,123
Minority interest in net loss ................................................. (26,022) (24,186) (22,878)
Accretion of discount on mortgage notes and amortization of loan costs ........ 7,475 11,062 12,331
Provisions for losses on receivables .......................................... 9,140 9,160 15,535
Equity in loss from Buffington Harbor L.L.C ................................... 925 3,478 2,969
Interest income Castle-PIK notes .............................................. (5,491) (9,190) (10,591)
Valuation allowance of CRDA investments and amortization
of Indiana gaming costs ..................................................... 3,371 8,944 7,155
Increase in receivables ....................................................... (19,661) (25,138) (17,550)
Decrease (increase) in inventories ............................................ 175 (2,301) 207
Increase in due from affiliates ............................................... (1,230) (14,769) (11,953)
Decrease (increase) in prepaid expenses and other current assets .............. 1,129 (3,454) (4,101)
Increase in other assets ...................................................... (15,992) (538) (5,507)
Increase (decrease) in accounts payable, other accrued expenses, and other
current liabilities ......................................................... 16,866 (7,110) 8,246
(Decrease) increase in accrued interest payable ............................... (33,499) 645 1,341
Decrease in other long-term liabilities ....................................... (1,872) (2,864) (2,735)
----------- ----------- -----------
Net cash provided by operating activities ................................... 4,460 1,055 28,488
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ............................................ (245,424) (79,246) (38,294)
Restricted cash .................................................................... 52,043 (13,000) 10,477
Purchase of CRDA investments, net .................................................. (7,122) (11,996) (10,845)
Investment in Buffington Harbor, L.L.C ............................................. (24,884) (1,231) (199)
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 used in investing activities ....................................... (199,769) (105,473) (38,861)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock ......................................................... -- (17,276) (2,259)
Issuance of Common Stock, net ...................................................... 386,062 -- --
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) (2,021)
Debt payments - other .............................................................. (39,187) (21,518) (77,918)
Proceeds from borrowings ........................................................... 39,716 16,440 67,000
----------- ----------- -----------
Net cash provided by (used in) financing activities ......................... 351,850 68,997 (15,198)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents .................................. 156,541 (35,421) (25,571)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...................................... 19,208 175,749 140,328
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................................ $ 175,749 $ 140,328 $ 114,757
=========== =========== ===========
</TABLE>
The accompanying notes 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, 1997 and 1998, and the related consolidated
statements of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1998. These 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, 1997 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 2, 1999 (except with respect to the matter discussed in
Note 6 as to which the date is March 3, 1999)
F-7
<PAGE>
<TABLE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS)
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents ........................................................... $ 140,324 $ 114,753
Trade receivables, net of allowances for doubtful accounts of $18,625
and $27,721, respectively (Note 3) ............................................. 55,745 58,536
Other accounts receivable (Note 3) ................................................ 12,330 12,415
Inventories ....................................................................... 13,011 12,804
Due from Affiliates (Note 8) ...................................................... 14,113 13,888
Prepaid expenses and other current assets ......................................... 13,892 18,679
---------- ----------
Total current assets ......................................................... 249,415 231,075
---------- ----------
INVESTMENT IN BUFFINGTON HARBOR, L.L.C. (Note 3) ....................................... 43,535 40,765
INVESTMENT IN TRUMP'S CASTLE PIK NOTES (Note 4) ........................................ 53,381 64,137
PROPERTY AND EQUIPMENT (Notes 2, 3 and 4):
Land and land improvements ........................................................ 262,282 264,637
Buildings and building improvements ............................................... 1,740,287 1,761,016
Riverboat ......................................................................... 29,716 32,852
Furniture, fixtures and equipment ................................................. 261,806 280,705
Leasehold improvements ............................................................ 2,428 3,380
Construction in progress .......................................................... 5,169 13,621
---------- ----------
2,301,688 2,356,211
Less: accumulated depreciation and amortization ................................... (296,937) (378,602)
---------- ----------
Net property and equipment ................................................... 2,004,751 1,977,609
---------- ----------
CASH RESTRICTED FOR FUTURE CONSTRUCTION ................................................ 13,000 2,523
DEFERRED BOND AND LOAN ISSUANCE COSTS, net of accumulated amortization of $14,561 and
$22,373, respectively (Note 4)...................................................... 45,071 37,978
DUE FROM AFFILIATES (Note 8) ........................................................... 3,493 15,766
OTHER ASSETS (Note 6) .................................................................. 60,659 59,721
---------- ----------
Total assets ................................................................. $2,473,305 $2,429,574
========== ==========
LIABILITIES & PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 4) ..................................... $ 21,890 $ 10,504
Accounts payable .................................................................. 36,293 47,223
Accrued payroll ................................................................... 24,226 24,863
Accrued interest payable .......................................................... 29,038 30,379
Due to affiliates (Note 8) ........................................................ 940 1,114
Other accrued expenses ............................................................ 20,498 19,924
Self insurance reserves (Note 6) .................................................. 16,267 12,950
Other current liabilities ......................................................... 12,205 13,637
---------- ----------
Total current liabilities .................................................... 161,357 160,594
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 4) ................................ 1,817,569 1,838,492
Other long-term liabilities ....................................................... 17,080 18,044
---------- ----------
Total liabilities ............................................................ 1,996,006 2,017,130
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 9)
PARTNERS' CAPITAL
Partners' capital ................................................................... 652,503 652,503
Accumulated deficit ............................................................... (157,928) (220,524)
Less stock of THCR .................................................................. (17,276) (19,535)
---------- ----------
Total partners' capital ........................................................... 477,299 412,444
---------- ----------
Total liabilities & partners' capital ............................................. $2,473,305 $2,429,574
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-8
<PAGE>
<TABLE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Gaming (Note 3)............................................ $ 883,441 $1,280,245 $1,287,925
Rooms...................................................... 72,172 100,674 93,549
Food and Beverage.......................................... 106,992 150,668 146,842
Other...................................................... 26,665 47,608 44,886
---------- ---------- ----------
Gross Revenues......................................... $1,089,270 1,579,195 1,573,202
Less--Promotional allowances............................... 122,326 179,822 169,581
---------- ---------- ----------
Net Revenues........................................... 966,944 1,399,373 1,403,621
---------- ---------- ----------
Costs and expenses:
Gaming..................................................... 538,398 810,329 806,438
Rooms...................................................... 23,471 31,062 31,587
Food and Beverage.......................................... 35,500 49,971 51,384
General and Administrative................................. 191,615 270,916 274,369
Depreciation and Amortization.............................. 69,035 89,094 84,123
Pre-opening............................................... 13,839 - 747
Development Costs.......................................... - 4,607 -
---------- ---------- ----------
871,858 1,255,979 1,248,648
---------- ---------- ----------
Income from operations................................. 95,086 143,394 154,973
---------- ---------- ----------
Non-operating income (expense)(Note 5):
Interest income............................................ 11,186 6,529 9,591
Interest expense........................................... (150,716) (211,537) (223,098)
Other non-operating income (expense)....................... 14,869 (1,028) (1,093)
---------- ---------- ----------
(124,661) (206,036) (214,600)
---------- ---------- ----------
Loss before equity in loss from Buffington Harbor, L.L.C........ (29,575) (62,642) (59,627)
and extraordinary items....................................
Equity in loss from Buffington Harbor, L.L.C. (Note 3).......... (925) (3,478) (2,969)
---------- ---------- ----------
Loss before extraordinary loss.................................. (30,500) (66,120) (62,596)
Extraordinary loss (Note 12).................................... (60,732) - -
---------- ---------- ----------
Net loss........................................................ $ (91,232) $ (66,120) $ (62,596)
========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-9
<PAGE>
<TABLE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<CAPTION>
THCR
PARTNERS' ACCUMULATED COMMON
CAPITAL DEFICIT STOCK TOTAL
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
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
Purchase of 305,000 shares of THCR Common Stock....... (2,259) (2,259)
Net Loss.............................................. (62,596) (62,596)
---------- ---------- ---------- ----------
Balance, December 31, 1998............................ $ 652,503 $ (220,524) $ (19,535) $ 412,444
========== ========== ========== ==========
</TABLE>
The accompanying notes 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 YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
----------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................... $ (91,232) $ (66,120) $ (62,596)
Adjustments to reconcile net loss to net cash flows provided by operating
activities:
Non Cash Charges:
Extraordinary loss.................................................... 60,732 - -
Issuance of debt in exchange for accrued interest..................... 4,589 10,156 11,614
Depreciation and amortization......................................... 69,035 89,094 84,123
Accretion of discount on mortgage notes and amortization of loan costs 7,475 11,062 12,331
Provisions for losses on receivables.................................. 9,140 9,160 15,535
Equity in loss from Buffington Harbor, L.L.C.......................... 925 3,478 2,969
Interest income Castle-PIK notes...................................... (5,491) (9,190) (10,591)
Valuation allowance of CRDA investments and amortization of Indiana
gaming costs....................................................... 3,371 8,944 7,155
Increase in receivables............................................... (19,661) (25,138) (17,550)
Decrease (increase) in inventories.................................... 175 (2,301) 207
Increase in due from affiliates....................................... (1,020) (14,769) (11,953)
Decrease (increase) in prepaid expenses and other current assets...... 1,066 (3,454) (4,101)
Increase in other assets.............................................. (15,992) (538) (5,507)
Increase (decrease) in accounts payable, other accrued expenses and
other current liabilities......................................... 16,866 (7,110) 8,246
(Decrease) increase in accrued interest payable....................... (33,499) 645 1,341
Decrease in other long-term liabilities............................... (1,872) (2,864) (2,735)
---------- ---------- ----------
Net cash provided by operating activities........................... 4,607 1,055 28,488
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net.................................... (245,424) (79,246) (38,294)
Restricted cash ........................................................... 52,043 (13,000) 10,477
Purchase of CRDA investments, net.......................................... (7,122) (11,996) (10,845)
Investment in Buffington Harbor, L.L.C..................................... (24,884) (1,231) (199)
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 used in investing activities............................... (199,769) (105,473) (38,861)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of THCR Common Stock - (17,276) (2,259)
Contributed capital 385,920 - -
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) (2,021)
Debt payments-other........................................................ (39,187) (21,518) (77,918)
Proceeds from borrowings................................................... 39,716 16,440 67,000
---------- ---------- ----------
Net cash provided by (used in) financing activities................. 351,708 68,997 (15,198)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents......................... 156,546 (35,421) (25,571)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............................. 19,199 175,745 140,324
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................... $ 175,745 $ 140,324 $ 114,753
========== ========== ==========
</TABLE>
The accompanying notes 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, 1998
(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 38.5% 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:
o 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.
o 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").
o Trump's Castle Associates, L.P. ("Castle Associates"), which was acquired
on October 7, 1996, owns and operates Trump Marina Hotel Casino ("Trump
Marina") located in Atlantic City, New Jersey.
o Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding").
o THCR Enterprises, L.L.C. ("THCR Enterprises").
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, THCR Holdings issued
$155,000,000 15 1/2% Senior Secured Notes ("Senior Notes") (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 approximate 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.
F-12
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
On April 17, 1996, pursuant to the Agreement and Plan of Merger, as amended
(the "Taj Merger"), each outstanding share of Class A Common Stock of Taj Mahal
Holding Corp. 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 connection with the Taj Merger, THCR issued 13,250,000 shares of THCR
Common Stock (the "1996 Stock Offering") for net proceeds of $386,062,000 and
Trump AC and Trump Atlantic City Funding, Inc. ("Trump AC Funding"), issued
$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"). In addition, THCR issued to
Trump 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 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), was allocated to land ($7,979,000) and building ($192,803,000)
based on an appraisal on a pro rata basis.
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 . 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") and
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.
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%.
The Castle Acquisition has been 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.
F-13
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Unaudited pro forma information, assuming that the Taj Merger and the
Castle Acquisition had occurred on January 1, 1996, is as follows:
YEAR ENDED
DECEMBER 31, 1996
-----------------
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 and diluted loss per share.................... $ (4.60)
================
The unaudited 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. 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.
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.
F-14
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Promotional Allowances
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenue and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in gaming costs and expenses as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31,1998
----------------- ----------------- ----------------
<S> <C> <C> <C>
Rooms.............................. $17,340,000 $30,432,000 $30,788,000
Food and beverage.................. 59,915,000 85,756,000 80,848,000
Other.............................. 10,983,000 21,401,000 18,601,000
---------- ----------- -----------
$88,238,000 $137,589,000 $130,237,000
=========== ============ ============
</TABLE>
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
Property and Equipment
Property and equipment is carried at cost and is depreciated on the
straight- line method using rates based on the following estimated useful lives:
Buildings and building improvements...................... 40 years
Riverboat................................................ 30 years
Furniture, fixtures and equipment........................ 3-10 years
Leasehold improvements................................... 4-40 years
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 $459,000, $101,000 and $864,000
was capitalized in 1996, 1997 and 1998, 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 to decrease basic and diluted loss per share by $.29. For the
year ended December 31, 1998, the net effect of applying these new lives was to
decrease THCR Holdings' and THCR's net loss by $13,395,000 and $8,497,000,
respectively, and decrease basic and diluted loss per share by $.38.
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 consolidated
statements of operations.
F-15
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Long-Lived Assets
The provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets" requires, among other
things, that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. Impairment of
long-lived assets exists if, at a minimum, the future expected cash flows
(undiscounted and without interest charges) from an entity's operations are less
than the carrying value of these assets. As a result of its review, 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, 1997 and 1998.
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. As of December 31, 1998, Plaza
Associates, Taj Associates and Castle Associates had net operating loss
carryforward of approximately $115,000,000, $204,000,000 and $137,000,000,
respectively, for New Jersey State Income Tax purposes. A valuation allowance
has been provided for the deferred tax benefits of the operating loss
carry-forwards.
Basic and Diluted Loss Per Share
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.
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, 1998,
development costs of $5,620,000 are included in other current assets.
On April 9, 1998, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position ("SOP") 98-5 "Reporting on
the Costs of Start-Up Activities". The new standard amends previous guidance
from the AICPA that permitted capitalization of start-up costs in certain
industries and requires that all nongovernmental entities expense the costs of
start-up activities as those costs are incurred. Under the SOP, the term
"start-up" has been broadly defined to include pre-operating, pre-opening and
organization activities. Companies must adopt the new standard in fiscal years
beginning after December 15, 1998. At adoption, a company must record a
cumulative effect of a change in accounting principle to write off any
unamortized start-up costs that existed as of the beginning of the fiscal year
in which the SOP is adopted and an operating expense for those costs which were
incurred and capitalized since the beginning of the fiscal year, and adoption of
the SOP.
F-16
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
THCR will adopt the new standard in the first quarter of 1999. Had THCR
adopted the new standard as of December 31, 1998, the net loss of $39,718,000
for the twelve months ended December 31, 1998 would have increased by $1,693,000
for the effect of the write-off of capitalized costs incurred during 1998 and
$1,872,000 for costs incurred through December 31, 1997, to an adjusted net loss
of $43,283,000. [The adjustment in both years gives effect to minority
interest]. The corresponding earnings per share effect would increase the net
loss per share as reported of $1.79 for the twelve months ended December 31,
1998 by $.08 for the write-off of capitalized costs during 1998 and $.08 for
costs incurred through December 31, 1997, to an adjusted loss of $1.95 per
share.
Accounts Receivable
Plaza Associates is appealing a real estate tax assessment by the City
of Atlantic City. Included in other accounts receivable as of December 31, 1997
is $3,696,000 which Plaza Associates believes will be recoverable on the
settlement of the appeal. During 1998, management determined that the amount
would not be settled within the year and reclassed the amount to other assets.
As of December 31, 1998, other assets includes $5,764,000 related to this
appeal.
Reclassifications
Certain reclassifications have been made to prior year financial
statements to conform to the current year presentation.
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>
1996 1997 1998
---- ---- ----
Supplemental Disclosure of Cash Flow Information:
<S> <C> <C> <C>
Cash paid during the year for interest.................. $182,333,000 $190,086,000 $208,793,000
Cash paid during the year for state and Federal taxes... 1,000,000 1,050,000 25,000
Equipment purchased under capital leases................ 12,385,000 3,569,000 7,223,000
</TABLE>
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 valued at $9,319,000.
In addition, the contribution by Trump of his 50% interest in Taj Associates
amounting to $30,500,000, net, was reflected as minority interest. In
conjunction with the acquisition, the accumulated deficit amounting to
$108,574,000 was reflected as an increase to Property & Equipment.
<TABLE>
<CAPTION>
<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 Castle Acquisition. In connection
with the acquisition, the accumulated deficit amounting to $20,714,000 was
recorded as an increase to Property & Equipment.
Fair value of assets acquired.............................. $385,951,000
Cash paid for the THCR Common Stock........................ (1,769,000)
-------------
Liabilities Assumed........................................ $384,182,000
============
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.
F-17
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
A note receivable from Trump in the amount of $3,167,000 was forgiven
in 1996.
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
---- ----
<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 and $2,388,000, respectively (b).... 72,100,000 72,612,000
Trump AC Funding III 11 1/4% First Mortgage Notes due 2006, net of
unamortized discount of $1,427,000 and $1,174,000, respectively (b).... 23,573,000 23,826,000
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 $30,170,000 and $26,807,000, respectively (d).............. 211,971,000 215,334,000
Castle Associates Pay-In-Kind 13 7/8% Notes ("Castle PIK Notes") due
2005, net of unamortized discount of $7,197,000 and $6,806,000, 73,699,000 85,704,000
respectively (e).......................................................
Castle Associates Working Capital Loan (f)................................ -- 5,000,000
Castle Associates Term Loan (g)........................................... 32,933,000 --
Castle Associates Senior Notes (h)........................................ 27,000,000 62,000,000
Trump Indiana Notes (i)................................................... 36,875,000 30,407,000
Other notes payable (j)................................................... 16,308,000 9,113,000
------------- -------------
1,839,459,000 1,848,996,000
Less-current maturities............................................. (21,890,000) (10,504,000)
------------- -------------
$1,817,569,000 $1,838,492,000
============= =============
</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 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 New Jersey Casino Control Commission (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.
F-18
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(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 on December 31, 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.
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) The Working Capital Loan has an outstanding principal amount of $5,000,000,
bears interest at the rate of 10 1/4% per annum, payable semi-annually and
matures on April 30, 2003.
(g) Castle Associates had a term loan with a bank (the "Term Loan") with a
maturity date of May 28, 2000, which bore interest at the prime rate plus
3%. The term loan was repaid on April 17, 1998 with the proceeds from the
Senior Notes described below.
(h) On December 28, 1993, Castle Funding issued $27,000,000 of Old Senior Notes
with interest payable semiannually at the rate of 11 1/2%.
On April 17, 1998, Funding refinanced its old Senior Notes and its term
loan with a bank by issuing the New Senior Notes. The New Senior Notes have
a priority mortgage lien ahead of the Partnership's Mortgage Notes and are
further secured by virtually all of the Partnership's assets. The new
Senior Notes have an outstanding principal amount of $62,000,000 and bear
interest at the rate of 10 1/4% per annum, payable semi-annually each April
and October. The new Senior Notes mature on April 30, 2003.
F-19
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(i) Various notes payable, including:
- $14,569,000 loan payable over 8 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% (9.75% at December 31,
1998). The Note is secured by the Indiana Riverboat.
- $2,838,000 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.
- $13,000,000 note is payable 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, 1998). The note is secured by restricted
cash and the hotel at Trump Indiana.
(j) Mortgage notes payable and capitalized lease obligations with interest
rates ranging from 6.5% to 12.75%. The notes and lease obligations are due
at various dates between 1999 and 2012 and are secured by underlying real
property or equipment.
Future minimum payments under capital leases (principal portion included in
the table below of debt maturities) are as follows:
1999............................................. $5,882,000
2000............................................. 1,812,000
2001............................................. 666,000
2002............................................. 49,000
2003............................................. 44,000
----------
Total Minimum Payments........................... 8,453,000
Less - Amount representing interest.............. 688,000
----------
Present Value of minimum lease payments.......... $7,765,000
==========
The aggregate maturities of debt as of December 31, 1998 are as follows:
1999........................................... $ 10,504,000
2000........................................... 4,071,000
2001........................................... 13,705,000
2002........................................... 1,965,000
2003........................................... 284,495,000
Thereafter..................................... 1,534,256,000
-------------
$1,848,996,000
=============
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.
F-20
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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 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 1996 included $806,000 of costs
associated with Trump Plaza East (see Note 8) and Trump World's Fair, 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, respectively. This amount has been included in other
non-operating income in the accompanying financial statements.
Non-operating income (expense) in 1997 and 1998 includes $1,028,000 and
$725,000, respectively of settlement costs incurred in connection with the
assertion by certain Indiana residents of rights to purchase stock in Trump
Indiana.
(6) COMMITMENTS AND CONTINGENCIES
Leases
Plaza Associates has 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 years ended December 31, 1996, 1997 and
1998 was $8,357,000, $13,206,000 and $13,992,000, respectively, of which
$2,098,000, $118,000 and $221,000 respectively, relates to affiliates.
Future minimum lease payments under the noncancelable commitments as of
December 31, 1998 are as follows:
TOTAL
-----
1999.............................................. $ 7,883,000
2000.............................................. 5,913,000
2001.............................................. 5,317,000
2002.............................................. 3,633,000
2003.............................................. 3,633,000
Thereafter........................................ 112,871,000
------------
$139,250,000
============
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms.
F-21
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Employment Agreements
THCR has entered into employment agreements with certain key employees.
As of December 31, 1998, THCR had approximately $17,990,000 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,
1998, $897,000 was outstanding under the employment agreement.
CAFRA Agreement
Taj Associates received a permit under the Coastal Area Facilities
Review Act ("CAFRA") (which included a condition of Taj Associates' casino
license) that initially required Taj Associates 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 as an amusement park.
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 New Jersey Casino Control Act (the "CCA"), 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
Marina. The CCC renewed each casino license for a period of four years through
1999. In June 1996, the CCC granted TCS an initial casino license which, in July
1997, was renewed through July 1999. Upon revocation, suspension for more than
120 days, or failure to renew a casino license, the CCA 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
any, the amendment of existing rules or the finalization of currently new rules
might have on the operations of Trump Indiana.
F-22
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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 in 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, $3,700,000 and $3,700,000 have been charged to expense
during 1996, 1997, and 1998, respectively. During 1997 and 1998, payments of
approximately $263,000 and $288,000, respectively for the City of Gary projects
have been made. As of December 31, 1998, 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, 1998 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 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 $6,477,000 to the City of Gary, which
amount is included in other assets in the accompanying consolidated balance
sheets and is being amortized over the five-year license period.
In addition, Trump Indiana established the Trump Indiana Foundation
("Foundation"), a private foundation founded for charitable purposes primarily
within the City of Gary and Lake County, Indiana. Trump Indiana initially funded
$1,000,000 to the Foundation and is required to make annual contributions of
$100,000 through 2001.
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 CCA. Plaza Associates, Taj Associates and
Castle Associates believe that the final outcome of these proceedings will not,
either individually or in the aggregate, have a material adverse effect on their
financial condition, results of operations or on their ability to otherwise
retain or renew any casino or other licenses required under the CCA 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. During
1997, Trump Indiana settled with four of the eight plaintiffs for a total of
$1,047,000. The remaining settlement amounts are payable in varying amounts over
the next three years. The present value of the settlement amount is included in
other non-operating expense in the accompanying consolidated statements of
operations. In addition to the cash settlement, Trump Indiana is required to pay
additional periodic payments of up to $400,000 per year if its gross revenues
exceed certain thresholds, as defined. As Trump Indiana does not believe it will
exceed these revenue thresholds, no provision has been made for these payments.
During 1998, Trump Indiana settled with two of the remaining four plaintiffs for
a total of $810,000, of which $290,000 was paid in 1998. The remaining
settlement amounts are payable in equal amounts over the next four years. The
present value of the settlement amount is included in other non-operating
expense in the accompanying consolidated statements of operations.
F-23
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
During 1999, the remaining two plaintiffs commenced litigation. On
March 3, 1999 consequential damages were assessed against Trump Indiana for
breach of contract in the total amount of $1,334,000. In addition, it was
further determined that Trump Indiana had breached a contract to create and fund
a charitable foundation. The United States District Court will determine
whether, and to what extent, Trump Indiana will be required to provide
additional funding to the charitable foundation. As Trump Indiana has previously
established and funded a charitable foundation, Trump Indiana intends to
vigorously contest the claims that additional funding of the charitable
foundation is required.
Self-Insurance Reserves
Self-insurance reserves represent the estimated amounts of uninsured
claims related to employee health medical costs, workmen's compensation and
personal injury claims that have occurred in the normal course of business.
These reserves are established by management based upon specific review of open
claims, with consideration of incurred but not reported claims as of the balance
sheet date. During 1998, self insurance reserves decreased due to an internally
focused aggressive policy where potential lawsuits are challenged immediately.
Additionally, a more aggressive litigation policy was pursued to deter present
and future frivolous lawsuits. THCR also retained an outside consultant to
comprehensively review certain claims and to assist THCR in establishing certain
estimated reserves at December 31, 1998. Actual results may differ from these
reserve amounts.
Federal Income Tax Examination
Plaza Associates, Taj Associates, Castle Associates and Trump Indiana
are currently involved in examinations with the Internal Revenue Service ("IRS")
concerning Plaza Associates' federal partnership income tax returns for the tax
years 1993 through 1996, Taj Associates' federal partnership income tax returns
for the tax years 1994 and 1996, Castle Associates' federal partnership income
tax returns for the tax years 1993 through 1996 and Trump Indiana's federal
partnership income tax returns for the tax years 1993 through 1997. While any
adjustment which results from this examination could affect Plaza Associates',
Taj Associates', Castle Associates' and Trump Indiana's state income tax
returns, Plaza Associates', Taj Associates, Castle Associates and Trump Indiana
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 CCA, Plaza Associates, Taj Associates
and Castle Associates must either obtain investment tax credits (as defined in
the CCA), 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 CCA).
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 years ended December 31, 1996, 1997 and 1998,
THCR Holdings charged to operations $3,577,000, $5,104,000 and $4,874,000,
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, 1998, THCR Holdings had recorded a receivable from
the CRDA of $5,976,000. 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 $5,976,000 in
other current 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, 1997 and 1998, approximately 41% and
46%, respectively, of THCR casino receivables (before allowances) were from
customers whose primary residence is outside the United States, and
approximately 26% and 23%, respectively, represents credit extended to patrons
from the Far East.
F-24
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(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 1996 and
1997, and 50% of the first 6% in 1998. In connection with this Plan, THCR
recorded charges of $2,098,000, $3,927,000 and $4,947,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.
Plaza Associates, Taj Associates and Castle Associates make payments to
various trusteed multiemployer pension plans under industry-wide union
agreements. Under the Employee Retirement Income Security Act, THCR may be
liable for its share of unfunded liabilities, if any, if the plans are
terminated. Pension expense for the years ended December 31, 1996, 1997 and 1998
was $1,186,000, $2,142,000 and $2,280,000, respectively.
THCR provides no other material, post-retirement or post-employment
benefits.
(8) TRANSACTIONS WITH AFFILIATES
Amounts due from (owed to) affiliates at December 31, consists of:
1997 1998
---- ----
ASSETS
Officers(a)................................ $15,648,000 $27,882,000
Trump Management Fee (see below)........... 1,250,000 1,250,000
Trump Organization(b)...................... 708,000 522,000
----------- -----------
Total assets........................... 17,606,000 29,654,000
Less-current portion.................... 14,113,000 13,888,000
----------- -----------
Long term portion....................... $ 3,493,000 $15,766,000
=========== ===========
LIABILITIES
Buffington Harbor, L.L.C. (Note 3)......... (940,000) (1,114,000)
----------- -----------
Total liabilities....................... $ (940,000) $(1,114,000)
=========== ===========
- -----------
(a) During January 1998, $13,000,000 in officer loans outstanding at December
31, 1997 were repaid. During the quarter ended September 30, 1998, THCR
Holdings advanced to Trump $11,000,000 and prepaid 1999 fees and expenses
in the amount of $1,500,000 to Trump in accordance with the Executive
Agreement. On October 19, 1998, THCR Holdings loaned Trump $13,500,000.
Such loan was offset in its entirety when Trump advanced $13,500,000 to
THCR Enterprises, which then purchased Trump's indebtedness to Donaldson,
Lufkin & Jenrette Securities Corporation. In connection with such purchase,
THCR Enterprises was assigned a pledge of Trump's and Trump Casinos, Inc.'s
equity interests in THCR and THCR Holdings.
(b) THCR engages in various transactions with the other entities owned by
Trump.
Plaza Associates previously leased a parcel of land under a long-term
ground lease from Seashore Four Associates, a related entity. In January
1997, Plaza Associates purchased the parcel for $10,144,000.
F-25
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Services Agreements
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 and reimbursed TPM 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 $1,000,000 to expense for the year ended December 31, 1996. The
services agreement was terminated in August 1996.
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 period from January 1, 1996 through April 17, 1996 (date of
termination), Taj Associates incurred $512,000 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
an amount due from affiliate of $1,250,000, which represents the amounts
advanced during the year. This amount will be offset against future management
fees. The services agreement expires on December 31, 2005. No fees and expenses
were incurred during 1997 and 1998.
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, plus
reimbursement for expenses.
Trump Plaza East
Under an agreement with Midlantic National Bank ("Midlantic"), Trump
had (i) an option to acquire Trump Plaza East (the "Trump Plaza East Purchase
Option") 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.
F-26
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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 2,
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 1995 Offerings, Trump incurred $3,000,000
of expenditures for the development of Trump Indiana and other gaming ventures.
Concurrently with the 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 1995 Offerings, the Board of Directors of THCR
(the "Board of Directors") adopted the 1995 Stock Incentive Plan (the "1995
Stock Plan"). Pursuant to the 1995 Stock Plan, directors, employees and
consultants of THCR and certain of its subsidiaries and affiliates who have been
selected as participants are eligible to receive awards of various forms of
equity-based incentive compensation, including stock options, stock appreciation
rights, stock bonuses, restricted stock awards, performance units and phantom
stock, and awards consisting of combinations of such incentives. The 1995 Stock
Plan is administered by a committee appointed by the Board of Directors (the
"Stock Incentive Plan Committee").
Options granted under the 1995 Stock Plan may be incentive stock
options ("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 4,000,000 shares of THCR
Common Stock for issuance under the 1995 Stock Plan.
F-27
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
In connection with the 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. 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 the remaining amounts of
$467,000 and $194,000 were amortized 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 exercise price of $14.00 per
share. As of December 31, 1998, 80,000 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, canceled, or granted during 1997.
In November 1998, THCR canceled the 668,000 options previously granted
to certain employees and approved a grant of new options. THCR granted certain
employees and its independent directors approximately 1,166,800 NQSOs to
purchase THCR Common Stock at a price of $4.625 per share, the fair market value
of THCR's common stock on the date of grant. One-third of the options vested on
the date of the grant and the remaining options vest on each of the next two
anniversary dates. The options expire ten years after the date of issuance.
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 $1,473,000 or $(.07) per share in 1996, $1,605,000 or $(.07) per share in
1997 and $1,599,000 or $(.07) per share in 1998. This pro forma impact only
takes into account options and warrants 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 1996 and 1998 was $6.93 and $2.20, 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 $12.75 in 1996, $4.625 in 1998 and the following weighted
average assumptions: risk- free interest rate of 6.41% for 1996 and 5.21% for
1998, expected life of 7 years, volatility of 35% and dividend yield of 0%.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments approximates
fair value, as follows: (a) cash and cash equivalents, receivables and payables
are based on the short-term nature of these financial instruments and (b) CRDA
bonds and deposits are based on the allowances to give effect to the below
market interest rates.
The estimated fair values of other financial instruments are as
follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
DECEMBER 31, 1998
-----------------
<S> <C> <C>
11 1/4% First Mortgage Notes........................... $1,200,000,000 $1,044,000,000
Trump AC Funding II Mortgage Notes..................... 72,612,000 65,250,000
Trump AC Funding III Mortgage Notes.................... 23,826,000 21,750,000
15 1/2% Senior Secured Notes........................... 145,000,000 145,000,000
11 3/4% Castle Associates Notes........................ 215,334,000 198,556,000
13 7/8% Castle Associates Pay-In-Kind Notes............ 85,704,000 83,259,000
</TABLE>
F-28
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
The fair values of the above instruments are based on quoted market
prices as of December 31, 1998. The fair value of the Trump AC Funding II First
Mortgage Notes and the Trump AC Funding III First Mortgage Notes approximate the
carrying values based upon the short term nature of the period outstanding.
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 was
effective until the end of 1998. As of December 31, 1998, THCR Holdings has
repurchased 2,011,500 shares of THCR Common Stock. THCR Holdings may reinstitute
a buyback program for 1999.
(12) EXTRAORDINARY LOSS
<TABLE>
<CAPTION>
<S> <C>
The extraordinary loss in 1996 consists of the following:
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>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Total Assets (including Mortgage Notes
receivable of $145,000,000 at
December 31, 1997 and 1998)........... $145,936,000 $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 $145,936,000
============ ============ ============
Interest Income from THCR Holdings........ $ 23,797,000 $ 22,475,000 $ 22,475,000
============ ============ ============
Interest Expense.......................... $ 23,797,000 $ 22,475,000 $ 22,475,000
============ ============ ============
Net income................................ $ -- $ -- $ --
</TABLE>
(14) FLAMINGO HILTON RIVERBOAT CASINO, L.P. ("FLAMINGO - KANSAS CITY")
On January 13, 1999, THCR Holdings entered into an agreement with
Hilton Hotels Corporation to acquire the Flamingo-Kansas City, a riverboat
casino facility located in Kansas City, Missouri. The aggregate consideration
payable for the assets of Flamingo-Kansas City is $15,000,000. Consummation of
the acquisition is subject to various conditions, including obtaining certain
approvals and licenses (including gaming licenses) from the Missouri Gaming
Commission and the Port Authority of Kansas City, Missouri.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
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 2, 1999, except with respect to the
matter discussed in Note 6 as to which the date is March 3, 1999. Our audit was
made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The accompanying schedule is the responsibility of
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 2, 1999
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 2, 1999, except with respect to the
matter discussed in Note 6 as to which the date is March 3, 1999. Our audit was
made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The accompanying schedule is the responsibility of
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 2, 1999
S-2
<PAGE>
<TABLE>
<CAPTION>
TRUMP HOTELS & CASINO RESORTS, INC.
AND TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
SCHEDULE II
BALANCE CHARGED BALANCE
AT TO OTHER AT
BEGINNING COSTS AND CHARGES END OF
OF PERIOD EXPENSES (DEDUCTIONS) PERIOD
--------- -------- ------------ ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996.........
Allowances for doubtful accounts....... $ 8,077,000 $ 8,904,000 $ 2,106,000 (a) $19,087,000
Valuation allowance for interest
differential on CRDA bonds.......... $ 1,077,000 $ 3,577,000 $10,311,000 (b) $14,965,000
YEAR ENDED DECEMBER 31, 1997.........
Allowances for doubtful accounts....... $19,087,000 $ 9,160,000 $(9,622,000) (c) $18,625,000
Valuation allowance for interest
differential on CRDA bonds.......... $14,965,000 $ 5,104,000 $ (920,000) (d) $19,149,000
YEAR ENDED DECEMBER 31, 1998.........
Allowances for doubtful accounts....... $18,625,000 $15,535,000 $(6,439,000) (c) $27,721,000
Valuation allowance for interest
differential on CRDA bonds.......... $19,149,000 $ 4,877,000 $(8,670,000) (e) $15,356,000
</TABLE>
- -----------
(a) Includes $(7,497,000) representing the write-off 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.
(b) 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.
(c) Write-off uncollectible accounts.
(d) Adjustment of allowance applicable to CRDA deposits.
(e) Includes the reclassification of approximately $14,330,000 of previous CRDA
deposits, the carrying value of which was $7,165,000 to property and
equipment and $1,505,000 representing the adjustment to the allowance to
give effect to the CRDA deposits to be refunded.
S-3
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
21 List of Subsidiaries of Trump Hotels & Casino Resorts, Inc., Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc.
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.
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)
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)
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)
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000943320
<NAME> TRUMP HOTELS & CASINO RESORTS, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 114,757
<SECURITIES> 0
<RECEIVABLES> 98,672
<ALLOWANCES> 27,721
<INVENTORY> 12,804
<CURRENT-ASSETS> 231,079
<PP&E> 2,356,211
<DEPRECIATION> 378,602
<TOTAL-ASSETS> 2,429,578
<CURRENT-LIABILITIES> 160,594
<BONDS> 1,742,476
242
0
<COMMON> 0
<OTHER-SE> 286,666
<TOTAL-LIABILITY-AND-EQUITY> 2,429,578
<SALES> 1,403,621
<TOTAL-REVENUES> 1,573,202
<CGS> 0
<TOTAL-COSTS> 889,409 <F1>
<OTHER-EXPENSES> 359,239 <F2>
<LOSS-PROVISION> 15,535
<INTEREST-EXPENSE> 223,098
<INCOME-PRETAX> (39,718)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,718)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,718)
<EPS-PRIMARY> (1.79)
<EPS-DILUTED> (1.79)
<FN>
<F1> Includes gaming, lodging, food & beverage and other.
<F2> Includes general & administration and depreciation & amortization.
</FN>
</TABLE>
