AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TRUMP PLAZA HOLDING ASSOCIATES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 7011 22-3213714
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
NICHOLAS L. RIBIS
VICE PRESIDENT
TRUMP PLAZA HOLDING, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
THCR ATLANTIC CITY FUNDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 9999 22-3418939
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
NICHOLAS L. RIBIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THCR ATLANTIC CITY FUNDING, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(continued on next page)
(continued from previous page)
--------------
TRUMP PLAZA ASSOCIATES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 7011 22-3241643
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
NICHOLAS L. RIBIS
CHIEF EXECUTIVE OFFICER
TRUMP PLAZA ASSOCIATES
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
WITH COPIES TO:
DANIEL D. RUBINO, ESQ. ROBERT M. PICKUS, ESQ. NICHOLAS P. SAGGESE, ESQ.
WILLKIE FARR & GALLAGHER EXECUTIVE VICE PRESIDENT SKADDEN, ARPS, SLATE,
ONE CITICORP CENTER TRUMP HOTELS & MEAGHER & FLOM
153 EAST 53RD STREET CASINO RESORTS, INC. 300 SOUTH GRAND AVENUE
NEW YORK, NEW YORK MISSISSIPPI AVENUE AND SUITE 3400
10022 THE BOARDWALK LOS ANGELES, CALIFORNIA
(212) 821-8000 ATLANTIC CITY, NEW JERSEY 90071
08401 (213) 687-5000
(609) 441-6060
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
(continued on next page)
(continued from previous page)
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TITLE OF EACH
CLASS OF PROPOSED PROPOSED
SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE(4) REGISTRATION FEE
- -------------------------------------------------------------------------------------
% First
Mortgage
Notes due
2006(1).... $1,180,000,000 100% $1,180,000,000 $406,897(5)
- -------------------------------------------------------------------------------------
Guarantees of
% First
Mortgage
Notes due
2006(2)(3).. (6) (6) (6) None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Issued by Trump Plaza Holding Associates and THCR Atlantic City Funding,
Inc.
(2) Issued by Trump Plaza Associates.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended (the
"Securities Act"), no registration fee is payable with respect to the
Guarantees. The Guarantees will not be separable from the First Mortgage
Notes. No separate consideration will be received for the Guarantees.
(4) Estimated pursuant to Rule 457 under the Securities Act solely for the
purpose of calculating the amount of registration fee.
(5) $406,897 was wired to the Securities and Exchange Commission's account at
Mellon Bank in payment of the required registration fee due in connection
with this Registration Statement.
(6) Not applicable.
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRUMP PLAZA HOLDING ASSOCIATES
THCR ATLANTIC CITY FUNDING, INC.
TRUMP PLAZA ASSOCIATES
CROSS REFERENCE SHEET
Cross-reference sheet furnished pursuant to Item 501(b) of Regulation S-K
showing location in the Prospectus of information required by Items of Form S-
1.
ITEM IN FORM S-1 LOCATION IN PROSPECTUS
---------------- ----------------------
1. Forepart of the Registration Statement
and Outside Front Cover Page of Facing Page; Cross Reference
Prospectus........................... Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus.................. Cover Pages; Available
Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges... Prospectus Summary; Risk Factors
4. Use of Proceeds....................... Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price....... Not Applicable
6. Dilution.............................. Not Applicable
7. Selling Security Holders.............. Not Applicable
8. Plan of Distribution.................. Outside Front Cover Page;
Underwriting
9. Description of Securities to be Prospectus Summary; Risk Factors;
Registered........................... Description of the First
Mortgage Notes; Certain Federal
Income Tax Considerations
10. Interests of Named Experts and Experts
Counsel..............................
11. Information with Respect to the Prospectus Summary; Risk Factors;
Registrant........................... Use of Proceeds; Capitalization;
Selected Historical Financial
Information; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Unaudited Pro
Forma Financial Information;
Business; Regulatory Matters;
Management; Certain
Transactions; Security Ownership
of Certain Beneficial Owners and
Management; Description of the
AC Holdings Partnership
Agreement; Legal Matters
12. Disclosure of Commission Position on
Indemnification of Securities Act Not Applicable
Liabilities..........................
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 1, 1996
PROSPECTUS
, 1996
[LOGO]
$1,180,000,000
TRUMP PLAZA HOLDING ASSOCIATES
THCR ATLANTIC CITY FUNDING, INC.
% FIRST MORTGAGE NOTES DUE 2006
The % First Mortgage Notes due 2006 (the "First Mortgage Notes") are being
issued (the "First Mortgage Note Offering") by Trump Plaza Holding Associates
("AC Holdings") and its wholly owned subsidiary THCR Atlantic City Funding,
Inc. ("AC Funding" and, together with AC Holdings, the "Issuers"). The First
Mortgage Notes are joint and several obligations of the Issuers.
The First Mortgage Note Offering is part of a comprehensive plan (the "Merger
Transaction") relating to the acquisition by Trump Hotels & Casino Resorts,
Inc. ("THCR") of Trump Taj Mahal Associates ("Taj Associates"), the partnership
that owns and operates the Trump Taj Mahal Casino Resort, and the refinancing
of the debt obligations of Taj Associates and Trump Plaza Associates ("Plaza
Associates"), the partnership that owns and operates Trump Plaza Hotel and
Casino. Upon consummation of the Merger Transaction, Taj Associates and Plaza
Associates will become wholly owned subsidiaries of AC Holdings. AC Holdings is
a wholly owned subsidiary of Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings"), which in turn is a subsidiary of THCR. The Issuers' payment
obligations under the First Mortgage Notes will be fully and unconditionally
guaranteed on a senior secured basis by Plaza Associates, Taj Associates and
all other existing and future Subsidiaries (as defined) of AC Holdings, other
than AC Funding (collectively, the "Guarantors"). THCR is concurrently issuing
up to shares of its common stock (the "Common Stock") in an underwritten
public offering (the "Stock Offering"). Consummation of the First Mortgage Note
Offering is conditioned upon the consummation of the other elements of the
Merger Transaction (including the Stock Offering).
Interest on the First Mortgage Notes is payable in cash, semiannually in
arrears on and of each year, commencing on , 1996. The First Mortgage
Notes will mature on , 2006. The First Mortgage Notes are not redeemable
prior to , 2001, other than pursuant to a Required Regulatory Redemption (as
defined). Thereafter, the First Mortgage Notes may be redeemed at the
redemption prices set forth herein, together with accrued and unpaid interest
to the date of redemption. Upon the occurrence of a Change of Control (as
defined), each holder of the First Mortgage Notes may require the Issuers to
repurchase such holder's First Mortgage Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest to the date of repurchase.
See "Description of the First Mortgage Notes." AC Holdings' consolidated
outstanding indebtedness at December 31, 1995 would have been, on a pro forma
basis after giving effect to the transactions comprising the Merger Transaction
(including the First Mortgage Note Offering and the application of the net
proceeds thereof), $ million.
The Issuers' payment obligations under the First Mortgage Notes, and the
guarantees thereof, will be secured by substantially all of the real and
personal property owned or leased by Plaza Associates and Taj Associates.
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE FIRST
MORTGAGE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION, THE INDIANA GAMING
COMMISSION NOR ANY OTHER REGULATORY AUTHORITY HAS PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
- --------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) ISSUERS(3)
- --------------------------------------------------------------------------------
Per First Mortgage Note..................... % % %
Total....................................... $ $ $
- --------------------------------------------------------------------------------
(1)Plus accrued interest, if any, from the date of issuance.
(2) AC Holdings and its subsidiaries have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Before deducting expenses estimated at $ , payable by AC Holdings.
The First Mortgage Notes are offered by the several Underwriters when, as and
if delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the First Mortgage Notes will be made in New York,
New York on or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE FIRST
MORTGAGE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus and is qualified in its entirety by the more detailed information
and financial statements, and notes thereto, contained elsewhere in this
Prospectus. Unless otherwise indicated, (i) the term "AC Holdings" as used in
this Prospectus includes AC Holdings and its subsidiaries and gives effect to
the Merger Transaction, and (ii) the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option in connection with the
Stock Offering. Certain capitalized terms used herein are defined elsewhere in
this Prospectus. Prospective investors are urged to read this Prospectus
carefully in its entirety.
THE ATLANTIC CITY PROPERTIES
Upon consummation of the Merger Transaction, AC Holdings, an indirect
subsidiary of Trump Hotels and Casino Resorts, Inc., will own and operate two
"Four Star" Atlantic City casino hotels (the "Atlantic City Properties"): the
Trump Taj Mahal Casino Resort (the "Taj Mahal") and Trump Plaza Hotel and
Casino ("Trump Plaza"). The Taj Mahal is currently Atlantic City's largest
casino hotel, and Trump Plaza is expected to be the largest casino hotel in
Atlantic City upon completion of its expansion program scheduled to be
completed early in the second quarter of 1996 (the "Trump Plaza Expansion").
Through its ownership of two successful land-based casino hotels, AC Holdings
will have a strong presence in the growing Atlantic City market, which, in
terms of gaming revenues, has demonstrated a ten-year compound annual growth
rate of 5.8% and a growth rate of 9.5% for calendar year 1995 versus calendar
year 1994. After giving effect to the Merger Transaction and the Trump Plaza
Expansion, AC Holdings will have approximately one-quarter of Atlantic City's
casino square footage, slot machines, table games and hotel room inventory. The
combination of the Taj Mahal with AC Holding's existing operations will also
provide opportunities for operational efficiencies, economies of scale and
other benefits from the talent, expertise and experience of management at the
operating entities. AC Holdings also plans to undertake an expansion program at
the Taj Mahal designed to increase its hotel room inventory and casino floor
space and enlarge its parking facilities.
Management believes AC Holdings will benefit from the following factors:
. THE "TRUMP" NAME. AC Holdings capitalizes on the widespread recognition
of the "Trump" name and its association with high quality amenities and
first class service. To this end, AC Holdings provides a broadly
diversified gaming and entertainment experience consistent with the
"Trump" name and reputation for quality, tailored to the gaming patron in
the Atlantic City market.
. LEADING ATLANTIC CITY FACILITIES. Upon consummation of the Merger
Transaction and the Trump Plaza Expansion, AC Holdings will own and
operate the two largest casino hotel properties in Atlantic City, both of
which are strategically located on The Boardwalk. AC Holdings believes
that the Atlantic City Properties' reputations for high quality amenities
and first class customer service, prime locations and targeted marketing
strategies are ideally suited to capitalize on the expected growth in the
Atlantic City gaming market. Management believes that its leading market
share in Atlantic City following the consummation of the Merger
Transaction, will provide it with a competitive advantage in marketing
the Atlantic City Properties, particularly to large convention groups and
multi-day stay destination resort visitors.
. ATLANTIC CITY PROPERTIES EXPANSION. AC Holdings is in the process of
executing expansion projects at the Atlantic City Properties to increase
gaming space and hotel room capacity, allowing AC Holdings to
3
meet both existing demand and the anticipated demand from the increased
number of available rooms and infrastructure improvements that are
currently under development to enhance further the "vacation destination
appeal" of Atlantic City.
The following table profiles AC Holdings' casino and hotel capacity
following the planned expansion of the Atlantic City Properties:
CURRENT PLANNED
-------------- ------------------------------
TRUMP TAJ TRUMP PLAZA TAJ MAHAL
PLAZA MAHAL EXPANSION(/1/) EXPANSION(/2/) TOTAL
------ ------- -------------- -------------- -------
Casino square footage... 73,000 120,000(/3/) 66,340 60,000 319,340(/3/)
Slot machines........... 2,325 3,550 2,025 2,500 10,400
Table games............. 97 162 46 -- 305
Hotel rooms............. 555 1,250 849(/4/) 1,280 3,934
--------------------
(1) Scheduled to be completed early in the second quarter of 1996.
(2) Plans for the Taj Mahal Expansion, scheduled to be completed in phases
from the first quarter of 1997 through 1999, are preliminary and
subject to modification.
(3) Excludes a 12,000 square foot poker, keno and race simulcasting room
which contains 64 poker tables.
(4) Includes 150 rooms which were opened at Trump Plaza East on October 30,
1995.
. OPERATING SYNERGIES. AC Holdings intends to capitalize on the
opportunities for efficiencies which can be generated by integrating
certain operations of the Atlantic City Properties, which have previously
been operated separately. Management has identified certain potential
cost savings which, by the end of the second year following the Merger
Transaction, are estimated to be approximately $18-20 million on an
annual basis. Management believes that it will be able to consolidate
certain departments at the Atlantic City Properties, reduce general and
administrative expenses through possible personnel reductions and the
consolidation of certain marketing efforts, and reduce operating costs
through efficiencies that are expected to result from the combined
purchasing power of the Atlantic City Properties.
ATLANTIC CITY PROPERTIES
Trump Plaza. Management believes that Trump Plaza's "Four Star" Mobil Travel
Guide rating and "Four Diamond" American Automobile Association rating reflect
the high quality amenities and services that Trump Plaza provides to its casino
patrons and hotel guests. These amenities and services include a broad
selection of dining choices, headline entertainment, deluxe accommodations,
tennis courts and swimming and health spa facilities.
Trump Plaza Expansion. Management is seeking to enhance further Trump Plaza's
position as an industry leader through the Trump Plaza Expansion, scheduled to
be completed in the second quarter of 1996, which involves expanding and
renovating Trump Plaza's gaming space, increasing its hotel capacity, and
constructing retail operations and entertainment venues. As part of the Trump
Plaza Expansion, management will renovate and integrate into Trump Plaza a
hotel located adjacent to Trump Plaza's main tower ("Trump Plaza East") and the
former Trump Regency Hotel ("Trump World's Fair"), located on The Boardwalk
adjacent to the existing Atlantic City Convention Center, which is next to
Trump Plaza.
Upon completion of the Trump Plaza Expansion, Trump Plaza's casino floor
space will be the largest in Atlantic City, increasing from approximately
75,000 square feet to an aggregate of approximately 140,000 square feet,
housing a total of approximately 4,350 slot machines and 143 table games. Trump
Plaza's hotel capacity will increase to a total of 1,404 guest rooms from 555
guest rooms, making Trump Plaza's guest room inventory the largest in Atlantic
City. The Trump Plaza Expansion will better enable AC Holdings to meet demand
and
4
accommodate its casino guests, as well as to host additional and larger
conventions and corporate meetings. The following table details plans for the
Trump Plaza Expansion:
TRUMP
TRUMP PLAZA TRUMP WORLD'S
FACILITY(/1/) PLAZA EAST FAIR TOTAL
------------- ---------- ------- -------
Casino square footage............... 75,000 15,000 49,340 139,340
Slot machines....................... 2,400 400 1,550 4,350
Table games......................... 97 13 33 143
Hotel rooms......................... 555 349(/2/) 500 1,404
- --------------------
(1) Includes the 2,000 square foot area which will connect the existing
facility with Trump Plaza East and the 75 slot machines to be included in
this area.
(2) Includes 150 rooms opened on October 30, 1995.
The Trump Plaza Expansion will increase Trump Plaza's prime central frontage
on The Boardwalk to nearly a quarter of a mile. Furthermore, Trump World's Fair
will add 49,340 square feet of casino floor space directly accessible from The
Boardwalk, and Trump Plaza East will be reconfigured to provide a new
entranceway to Trump Plaza directly off the Atlantic City Expressway.
Management believes that the construction of a new convention center and
"tourist corridor" linking the new convention center with The Boardwalk will
enhance the desirability of Atlantic City generally and, as a result of Trump
Plaza's central location, will benefit Trump Plaza in particular. Trump Plaza's
location on The Boardwalk at the end of the main highway into Atlantic City
makes it highly accessible for both "drive-in" and "walk-in" patrons.
The Taj Mahal. The Taj Mahal is currently the largest casino hotel in
Atlantic City and has ranked first among all Atlantic City casinos in terms of
total gaming revenues, table revenues and slot revenues since it commenced
operations in 1990. The Taj Mahal capitalizes on the widespread recognition and
marquee status of the "Trump" name and its association with high quality
amenities and first class service as evidenced by its "Four Star" Mobil Travel
Guide rating. Management believes that the breadth and diversity of the Taj
Mahal's casino, entertainment and convention facilities and its status as a
"must see" attraction will enable the Taj Mahal to benefit from growth in the
Atlantic City market.
The Taj Mahal Expansion. It is currently expected that the Taj Mahal
Expansion will be funded principally out of the cash from operations of the Taj
Mahal and Trump Plaza and will be completed in phases from the fourth quarter
of 1996 through 1999. The Taj Mahal Expansion, the plans for which are
preliminary and subject to modification, involves the construction of an
approximately 2,200 space expansion of the Taj Mahal's existing self-parking
facilities and a new arena on a surface parking area located adjacent to the
Taj Mahal, each scheduled to be completed in the first quarter of 1997; the
conversion of the current site of the Mark Etess Arena into a new 60,000
square-foot circus-themed casino with 2,500 slot machines, scheduled to be
completed in 1997; and the construction of two new hotel towers adjacent to the
Taj Mahal's existing hotel tower, each containing in excess of 640 rooms, the
first of which is scheduled to be completed in 1997, and the second of which is
scheduled to begin construction following the completion of the first tower and
is scheduled to be completed in 1999.
THE ATLANTIC CITY MARKET. The Atlantic City gaming market has demonstrated
continued growth despite the recent proliferation of new gaming venues across
the country. The 12 casino hotels in Atlantic City generated approximately
$3.75 billion in gaming revenues in 1995, an approximately 9.5% increase over
1994 gaming revenues of approximately $3.42 billion. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994.
5
The approximately $3.75 billion of gaming revenues produced by the 12
Atlantic City casino hotels in 1995 exceeded the approximately $ billion of
gaming revenues produced by the 19 largest casino hotels of the Las Vegas Strip
for the same period, even though the Atlantic City casino hotels have less than
one-quarter the number of hotel rooms of the Las Vegas Strip casino hotels.
Management believes, however, that given current high occupancy levels, future
casino revenue growth in the Atlantic City market will be dependent in part
upon expansion in hotel capacity. Occupancy levels in Atlantic City increased
to historic highs in 1995, reaching %, up from 82.7 in 1990. This increase
reflects an improved economic environment and the fact that, between 1990 and
1995, there were no major additions to hotel capacity in Atlantic City.
Due principally to an improved regulatory environment, the general
improvement of economic conditions in 1993 and 1994 and existing high occupancy
rates, significant investment in the Atlantic City market has been initiated
and/or announced. Management believes that in addition to increases in hotel
capacity, the currently planned major infrastructure improvements will be
instrumental in stimulating future revenue growth in Atlantic City, and that
Trump Plaza and the Taj Mahal are particularly well positioned to benefit from
these infrastructure improvements. For example, Trump Plaza will be located at
the end of the planned "tourist corridor" featuring an entertainment and retail
complex that will link The Boardwalk with downtown Atlantic City. In addition,
The New Jersey Casino Redevelopment Authority ("CRDA") is currently overseeing
the development of the new convention center. When completed, the approximately
$290 million convention center will be the largest exhibition space between New
York City and Washington, D.C. The new convention center, currently scheduled
to open in January 1997, will be located at the base of the Atlantic City
Expressway. Trump Plaza is adjacent to the existing Atlantic City Convention
Center and will also be one of the closest casino hotels to the new convention
center, which as currently planned would hold approximately 500,000 square feet
of exhibit and pre-function space, 45 meeting rooms, various food-service
facilities and a 1,600-car underground parking garage. An additional planned
infrastructure improvement is the State of New Jersey's approximately $125
million capital plan to upgrade and expand the Atlantic City International
Airport. THCR further believes that the Taj Mahal and Trump Plaza's position as
leading Atlantic City attractions will enable them to attract a large portion
of any increase in the number of potential casino hotel patrons.
6
THE FIRST MORTGAGE NOTE OFFERING
ISSUERs..................... AC Holdings and AC Funding as joint and several
obligors.
PRINCIPAL AMOUNT............ $1,180,000,000 aggregate principal amount of %
First Mortgage Notes due 2006.
MATURITY.................... , 2006.
INTEREST.................... % per annum, payable in cash, semi-annually in
arrears, calculated on the basis of a 360 day
year consisting of twelve 30 day months.
INTEREST PAYMENT DATES...... and , commencing , 1996.
GUARANTORS.................. The First Mortgage Notes will be fully and
unconditionally guaranteed on a joint and
several, senior secured basis by Plaza
Associates, Taj Associates, TTMC and each other
present and future Subsidiary of AC Holdings,
other than AC Funding (which is one of the
Issuers).
OPTIONAL REDEMPTION......... The First Mortgage Notes will be redeemable in
cash at the option of the Issuers, in whole or in
part, at any time on or after , 2001 at the
redemption prices set forth herein, together with
accrued and unpaid interest through the
redemption date. In addition, the First Mortgage
Notes are subject at any time to a Required
Regulatory Redemption.
CHANGE OF CONTROL........... Upon the occurrence of a Change in Control, each
holder of First Mortgage Notes may require the
Issuers to repurchase such holder's First
Mortgage Notes at 101% of the principal amount
thereof, together with accrued and unpaid
interest to the date of repurchase.
SINKING FUND................ None.
SECURITY.................... The First Mortgage Notes will be secured by a
mortgage (the "Mortgage") representing a first
lien and security interest (subject to certain
"Superior Mortgages") on the principal assets
comprising Trump Plaza and the Taj Mahal,
including the Specified Parcels and related
facilities. The security interest held by the
Trustee also includes assignments of leases and
rents and operating assets and encumbers
furniture fixtures, machinery and equipment,
subject to certain exceptions. However, THCR
Holdings' direct and indirect interest in AC
Holdings and its subsidiaries will be pledged
exclusively for the benefit of the holders of
Senior Notes.
NON-RECOURSE................ No direct or indirect stockholder, partner
employee, officer or director, as such, past,
present or future of either the Issuers, any
Guarantor or any successor entity shall have any
personal liability in respect of the obligations
of the Issuers or any Guarantor under the First
Mortgage Note Indenture, the First Mortgage Notes
or the guarantees by reason of the status as such
stockholder, partner, employee, officer or
director.
7
CERTAIN COVENANTS........... The Indenture will contain certain covenants
which, among other things, will (i) limit AC
Holdings' and its Subsidiaries' ability to incur
Indebtedness or Disqualified Capital Stock
unless, among other things, AC Holdings'
Consolidated Coverage Ratio for the four fiscal
quarters immediately preceding such event, taken
as one period, would have been at least equal to
the ratios set forth in the Indenture, subject to
certain exceptions; (ii) limit the making of
Restricted Payments by AC Holdings and its
Subsidiaries, provided, that AC Holdings will be
required, under certain circumstances and subject
to certain limitations, to make distributions to
THCR Holdings to enable THCR Holdings to service
the Senior Notes; (iii) limit the lines of
business in which AC Holdings and its
Subsidiaries may engage to those relating to
Trump Plaza and the Trump Taj Mahal; (iv) limit
the existence of Liens on assets of AC Holdings
and its Subsidiaries; (v) restrict Asset Sales
and the use of proceeds therefrom by AC Holdings
and its Subsidiaries; (vi) limit transaction by
AC Holdings and its Subsidiaries with Affiliates
of AC Holdings (other than Wholly-owned
Subsidiaries); (vii) restrict AC Holdings and its
Subsidiaries from engaging in certain leasing
activities; (viii) limit the Issuers' ability to
merge, sell or consolidate; (ix) limit the
obligations of AC Funding to those incident to
its obligations under the Indenture; (x) prohibit
AC Holdings and its Subsidiaries from paying any
Services Fee under the TPM Services Agreement, or
any expenses relating thereto, if a Default or an
Event of Default has occurred and is continuing;
(xi) prohibit AC Holdings and its Subsidiaries
from paying any other amounts pursuant to other
management, services or similar agreements with
Trump; (xii) require the maintenance of
insurance; and (xiii) limit the issuing or
selling of Equity Interests by any of AC
Holdings' Subsidiaries (except to AC Holdings or
a Wholly-owned Subsidiary thereof).
EVENTS OF DEFAULT........... Events of Default will include (i) default in
payment of interest when due for a period of 30
days; (ii) default in payment of principal or
premium, if any, when due; (iii) default in the
performance or breach of certain specified
covenants, including those relating to merger,
consolidation or sale of assets, failure to make
or consummate a Change of Control Offer or an
Asset Sale Offer as required; (iv) default in the
performance or breach of certain other covenants
of the Issuers (other than those specifically
covered elsewhere in the Indenture) for 30 days
after notice; (v) certain events of bankruptcy,
insolvency or reorganization relating to the
Issuers or Significant Subsidiaries, which, if
involuntary, continue for 60 days, (vi)
revocation, suspension or loss of any Permit
resulting in a cessation of a substantial portion
of the operations of Trump Plaza or the Taj Mahal
for more than 90 consecutive days; (vii)
acceleration prior to the maturity of certain
Indebtedness or the default in the payment when
due of certain indebtedness of AC Holdings or its
Subsidiaries; (viii) except as permitted by the
Indenture or the First Mortgage Notes, the
cessation of any guarantee in any material
respect or the finding by any judicial
8
proceeding that the guarantee is unenforceable or
invalid in any material respect or the denial or
disaffirmation by any Guarantor of its
obligations under its guarantee; or (ix) certain
events of default under the Mortgage Documents.
MODIFICATION OF INDENTURE... Amendments to the Indenture will be permitted
with the consent of the holders of not less than
a majority of the principal amount of the
outstanding First Mortgage Notes, but require the
consent of all holders to certain changes,
including those that would change the time of
payment of interest or principal or reduce the
principal amount or interest rate payable on any
First Mortgage Note; reduce the percentage in
principal amount of outstanding First Mortgage
Notes, the consent of whose holders is required
for any such modification or waiver, and at least
two-thirds in aggregate principal amount must
approve any release of any collateral from the
Liens created by the Mortgage Documents other
than in accordance with the terms thereof, or
change the obligations of the Issuers to make a
Change of Control Offer. Certain changes may be
made without the consent of the holders, for
example to cure any ambiguity in the documents
that do not materially adversely affect the
rights of the holders.
9
THE STOCK OFFERING
(Offered by THCR exclusively pursuant to a separate prospectus)
Concurrently with and as a condition to consummation of the Mortgage Note
Offering, AC Holdings' parent, THCR, will issue shares of its Common
Stock in an underwritten public offering (together with up to an additional
shares subject to an over-allotment option) pursuant to the Stock
Offering.
The Stock Offering and the First Mortgage Note Offering (collectively, the
"Offerings") are part of a comprehensive plan relating to the merger (the
"Merger") of a subsidiary of THCR with and into Taj Mahal Holding Corp. ("Taj
Holding"), which currently beneficially owns a 50% equity interest in Taj
Associates; the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its direct and indirect ownership
interests in Taj Associates acquired in the Merger; the contribution by Donald
J. Trump ("Trump") of the remaining 50% equity interest in Taj Associates to AC
Holdings (on behalf, and at the direction, of THCR Holdings; and the
refinancing of substantially all of the outstanding indebtedness of Taj
Associates and Plaza Associates.
RISK FACTORS
Prospective investors should consider, among other risks, (i) the high
leverage and fixed charges of AC Holdings; (ii) AC Holdings' holding company
structure and the need for additional financing; (iii) the restrictions imposed
on certain activities by certain debt instruments; (iv) the recent results of
Trump Plaza and the Taj Mahal; (v) risks associated with the Trump Plaza
Expansion and the Taj Mahal Expansion; (vi) the absence of a public trading
market, and the potential volatility of market prices, for the First Mortgage
Notes; (vii) competition in the gaming industry; (viii) conflicts of interest;
(ix) control by and the involvement of Trump; (x) reliance on certain key
personnel; (xi) the strict regulation by gaming authorities, including the
potential disqualification of holders of First Mortgage Notes; (xii)
limitations on THCR's license of the "Trump" name; and (xiii) fraudulent
transfer considerations.
USE OF PROCEEDS
The net proceeds to AC Holdings from the First Mortgage Note Offering, after
payment of underwriting discounts and expenses of the First Mortgage Note
Offering, are estimated to be $ million. The proceeds from the First
Mortgage Note Offering, together with net proceeds of $ million from the
Stock Offering, which will be paid as Merger consideration or contributed to AC
Holdings (on behalf, and at the direction, of THCR Holdings), and available
cash, will be used as set forth below.
The aggregate proceeds of the Offerings will be used, together with available
cash, to (i) pay cash to those holders of Taj Holding Class A Common Stock
electing to receive cash in the Merger (see note (1) below); (ii) redeem the
outstanding 11.35% Mortgage Bonds, Series A, due 1999 of Taj Funding (the "Taj
Bonds") (the "Taj Bond Redemption"), at a redemption price equal to 100% of the
principal amount thereof, plus accrued interest to the date of redemption;
(iii) redeem the outstanding shares of the Class B Common Stock of Taj Holding
(the "Taj Holding Class B Common Stock"), as required in connection with the
Taj Bond Redemption at the redemption price of $.50 per share; (iv) purchase
and/or defease the outstanding 10 7/8% First Mortgage Notes due 2001 (the
"Plaza Notes") (the "Plaza Note Purchase"); (v) satisfy the indebtedness of Taj
Associates under a loan agreement with National Westminster Bank U.S.A.
("NatWest") (the "NatWest Loan"); (vi) purchase, for $50 million in cash and
500,000 shares of Common Stock, certain real property that is currently leased
by Taj Associates from Trump Taj Mahal Realty Corp. ("Realty Corp."), a
corporation wholly owned by Trump, including land underlying the Taj
Entertainment Complex, land adjacent to the Taj Mahal used by it for surface
parking and bus terminals, the pier located across The Boardwalk from the Taj
Mahal (the "Steel Pier"),
10
and a warehouse complex (collectively, the "Specified Parcels"); (vii) purchase
the real property underlying Trump Plaza East pursuant to the purchase option
(the "Trump Plaza East Purchase Option") held by Plaza Associates; (viii) pay
Bankers Trust Company ("Bankers Trust") $10 million to obtain releases of liens
and guarantees that Bankers Trust has in connection with certain outstanding
indebtedness owed by Trump to certain lenders, including Bankers Trust (the
"Trump Indebtedness"); and (ix) pay related fees and expenses.
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming a March 31, 1996 consummation):
ANTICIPATED SOURCES OF FUNDS ANTICIPATED USES OF FUNDS
(DOLLARS IN
CASH SOURCES THOUSANDS)
- ------------ -----------
Mortgage Note Offering....... $1,180,000
Stock Offering(/1/).......... 140,000
Available Cash............... 46,947
----------
Total Cash Sources.......... 1,366,947
NON-CASH SOURCES
- ----------------
Common Stock to be issued to
Holders of Taj Holding Class
A Common Stock(/1/)......... 40,500
Common Stock Equivalents to be
issued to Trump(/2/).. 40,500
Common Stock to be issued to
First Fidelity(/3/)......... 10,000
----------
Total Non-Cash Sources...... 91,000
----------
TOTAL SOURCES................ $1,457,947
==========
(DOLLARS IN
CASH USES THOUSANDS)
- --------- -----------
Redeem Taj Bonds(/4/)....... $ 793,767
Purchase and defease Plaza
Notes(/5/)................. 377,790
Satisfy NatWest Loan........ 36,500
Exercise Trump Plaza East
Purchase Option............ 28,000
Cash Payment to First
Fidelity................... 50,000
Cash Payment to Bankers
Trust...................... 10,000
Redeem Taj Holding Class B
Common Stock............... 390
Transaction Fees and
Expenses and Working
Capital.................... 70,500
----------
Total Cash Uses............ 1,366,947
NON-CASH USES
- -------------
Acquisition of Taj Holding
Class A Common Stock....... 40,500
Acquisition of Trump's
Direct and Indirect Equity
Interests in Taj
Associates................. 40,500
Common Stock issued to First
Fidelity(/3/).............. 10,000
----------
Total Non-Cash Uses........ 91,000
----------
TOTAL USES.................. $1,457,947
==========
- --------------------
(/1/)Assumes all holders of Taj Holding Class A Common Stock elect Stock
Consideration in connection with the Merger. See "--The Merger
Transaction."
(/2/)Includes the value of the shares of Common Stock into which the limited
partnership interest in THCR Holdings to be issued to Trump and Trump Taj
Mahal, Inc., a corporation wholly owned by Trump ("TTMI"), in connection
with the Merger Transaction will be convertible.
(/3/)Assumes a price of $20.00 per share of Common Stock.
(/4/)Includes the Additional Amount (as defined) through March 31, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(/5/)Assumes that 90% of the Plaza Notes are purchased and the remaining 10% is
defeased.
11
SUMMARY FINANCIAL INFORMATION
SUMMARY FINANCIAL INFORMATION OF AC HOLDINGS
The following tables set forth (a) certain historical consolidated financial
information of AC Holdings and Plaza Associates for each of the five years
ended December 31, 1990 through 1994 and for the nine months ended September
30, 1994 and 1995 and (b) certain unaudited pro forma financial information of
AC Holdings. The unaudited pro forma financial information, which gives effect
to the Merger Transaction (including the Offerings, the Taj Bond Redemption,
the Plaza Note Purchase and the consolidation of Taj Associates in AC Holdings'
financial statements). The historical financial information of AC Holdings and
Plaza Associates as of December 31, 1994 and for the years ended December 31,
1992, 1993 and 1994 as set forth below has been derived from the audited
consolidated financial statements of AC Holdings and Plaza Associates included
elsewhere in this Prospectus. The historical financial information of AC
Holdings and Plaza Associates for the years ended December 31, 1990 and 1991 as
set forth has been derived from the audited consolidated financial statements
of AC Holdings and Plaza Associates not included in this Prospectus. AC Funding
was recently formed and has had no operations to date.
The unaudited financial information as of September 30, 1994 and 1995 and for
the periods then ended has been derived from the unaudited condensed
consolidated financial statements included elsewhere in this Prospectus. The
results of these interim periods are not necessarily indicative of the
operating results for a full year. The pro forma Statement of Operations Data
and Other Data give effect to the Merger Transaction as if it had occurred on
January 1, 1994 and the pro forma Balance Sheet Data gives effect to the same
as if the same had occurred on September 30, 1995. The pro forma financial
information should not be considered indicative of actual results that would
have been achieved had the transactions occurred on the date or for the period
indicated and does not purport to indicate results of operations as of any
future date or for any future period. All financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Financial
Information" and the consolidated and condensed financial statements and the
related notes thereto included elsewhere in this Prospectus.
12
HISTORICAL HISTORICAL
------------------------------------------------ ------------------
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $319,937 $279,684 $313,318 $300,491 $295,063 $222,066 $251,149
Depreciation and amor-
tization.............. 16,725 16,193 15,842 17,554 15,653 11,734 11,792
Income from opera-
tions................. 19,109 16,087 35,003 49,640 43,415 33,952 48,217
Interest expense, net.. 33,128 33,363 31,356 39,889 48,219 36,051 33,730
Extraordinary gain
(loss)................ -- -- (38,205) 4,120 -- -- --
Net income (loss) (a).. (10,591) (29,230) (35,787) 9,338 (8,870) (5,305) 397
OTHER DATA:
EBITDA (b)............. $ 44,016 $ 44,000 $ 60,399 $ 68,241 $ 60,524 $ 46,908 $ 59,664
Capital expenditures
(c)................... 11,002 5,509 8,643 10,052 20,489 14,611 86,612
Ratio of earnings to
fixed charges
(deficiency) (d)...... (11,902) (32,094) 1.1x 1.1x (9,735) (5,828)
Cash flows provided by
(used in)
Operating activities... 7,297 9,514 26,191 21,820 19,950 19,817 32,412
Investing activities... (6,959) (6,175) (10,469) (12,679) (21,691) (14,611) (86,612)
Financing activities... (1,960) (2,870) (7,367) (13,550) (1,508) 2,560 63,135
BALANCE SHEET DATA (AT
END OF PERIODS):
Total assets........... $395,775 $378,398 $370,349 $374,498 $375,643 $386,080 $462,328
Total long-term debt,
net of current
maturities (e)........ 247,048 33,326 249,723 395,948 403,214 398,644 331,655
Total capital (defi-
cit).................. 83,273 54,043 11,362 (54,710) (63,580) (60,068) 83,676
HISTORICAL HISTORICAL
------------------------------------------------------------- -----------------------
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------- -----------------------
1990 1991 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
OPERATING DATA (AT END OF
PERIOD): (F)
Casino square footage... 60,000 60,000 60,000 60,000 73,000(m) 66,299 74,033
Number of hotel rooms... 557 557 557 557 555 557 555
Hotel occupancy rate.... 88.3% 87.1% 86.9% 87.6% 88.6% 89.9% 92.2%
TABLE GAMES:
Total Atlantic City
table drop (g)......... $7,903,248 $7,219,192 $7,055,034 $6,835,572 $6,832,517 $5,131,243 $5,350,188
Atlantic City table drop
growth................. 3.1% (8.7)% (2.3)% (3.1)% 0.0% (1.3)% 4.3%
Trump Plaza table drop
(g).................... $ 848,823 $ 646,480 $ 689,919 $ 626,621 $ 599,881 $ 450,595 $ 473,153
Trump Plaza table games
market share (h)....... 10.7% 9.0% 9.8% 9.2% 8.8% 8.8% 8.8%
Trump Plaza table games
fair share (i)......... 8.9% 8.5% 8.2% 7.8% 8.0% 7.9% 8.6%
Trump Plaza table games
efficiency (j)......... 120.6% 105.1% 118.8% 118.0% 110.6% 110.9% 102.8%
Trump Plaza table
units.................. 117 112 98 87 89 88 97
Trump Plaza table
revenue................ $ 127,993 $ 98,905 $ 95,864 $ 93,392 $ 92,770 $ 69,284 $ 72,293
Trump Plaza table
revenue per unit per
day (actual dollars)... $ 2,997 $ 2,419 $ 2,679 $ 2,940 $ 2,855 $ 2,877 $ 2,740
SLOTS:
Total Atlantic City slot
revenue................ $1,724,309 $1,851,070 $2,113,829 $2,214,638 $2,297,280 $1,738,656 $1,971,442
Atlantic City slot
revenue growth......... 9.3% 7.4% 14.2% 4.8% 3.7% 1.7% 13.4%
Trump Plaza slot revenue
(k).................... $ 150,715 $ 136,128 $ 168,388 $ 173,215 $ 170,316 $ 129,370 $ 154,157
Trump Plaza slot market
share (h).............. 8.7% 7.4% 8.0% 7.8% 7.4% 7.4% 7.8%
Trump Plaza slot fair
share (i).............. 8.2% 7.8% 7.8% 7.6% 8.0% 8.0% 8.3%
Trump Plaza slot
efficiency (j)......... 107.2% 94.5% 102.6% 103.1% 92.5% 92.8% 94.6%
Trump Plaza slot units.. 1,661 1,659 1,727 1,812 2,076 2,047 2,342
Trump Plaza slot revenue
per unit per day
(actual dollars) (k)... $ 248 $ 225 $ 267 $ 262 $ 225 $ 232 $ 241
(footnotes on following page)
13
PRO FORMA (N)
------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1994 SEPTEMBER 30, 1995
----------------- ------------------
STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED)
Net revenues............................. $812,245 $ 668,445
Depreciation and amortization............ 60,285 47,860
Income from operations................... 127,189 126,257
Interest expense, net (l)................ 135,505 (99,458)
Net income (loss)........................ (9,262) 25,292
OTHER DATA:
EBITDA (b)(l)............................ $188,930 $ 173,773
Ratio of earnings to fixed charges
(deficiency) (d)........................ (10,127) 1.24x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................. -- $1,464,726
Total long-term debt, net of current
maturities.............................. -- 1,185,330
Total capital............................ -- 190,113
- --------------------
(a) Net loss for the year ended December 31, 1990, includes income of $2.4
million resulting from the settlement of a lawsuit relating to a boxing
match. Net loss for the year ended December 31, 1991, includes a $10.9
million charge associated with the rejection of the lease of the former
Trump Regency Hotel and $4.0 million of costs associated with certain
litigation. Net income for 1992 includes $1.5 million of costs associated
with certain litigation. Net income for the years ended December 31, 1993
and 1994, and the nine months ended September 30, 1994 and the period from
inception (June 12, 1995) to September 30, 1995, includes $3.9, $4.9, $3.7
and $1.3 million, respectively, of real estate taxes and leasing costs
associated with Trump Plaza East.
(b) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, restructuring costs, and the non-cash write-
down of CRDA investments. EBITDA should not be construed as an alternative
to net income or any other measure of performance determined in accordance
with generally accepted accounting principles or as an indicator of AC
Holdings' operating performance, liquidity or cash flows generated by
operating, investing and financing activities. Management has included
information concerning EBITDA as management understands that it is used by
certain investors as one measure of AC Holdings' historical ability to
service its debt.
(c) Capital expenditures attributable to Trump Plaza East were approximately
$2.8 million and $8.7 million for the years ended December 31, 1993 and
1994, and $6.2 million and $14.3 million for the nine months ended
September 30, 1994 and 1995.
(d) For purposes of computing this ratio, earnings consist of loss before
income taxes, extraordinary items, minority interest and fixed charges,
adjusted to exclude capitalized interest. Fixed charges consist of interest
expense, including amounts capitalized, preferred partnership distribution
requirements and the portion of operating lease rental expense that is
representative of the interest factor (deemed to be one-third of operating
lease rental expense). Earnings were insufficient to cover fixed charges
for the years ended 1990, 1991, 1994, and the nine months ended September
30, 1994 and, on a pro forma basis, for the year ended 1994 and the nine
months ended September 30, 1995.
(e) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
(f) Atlantic City industry data has been compiled from information filed with
and published by the CCC and is unaudited.
(g) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(h) Market share represents the total Trump Plaza gaming revenues expressed as
a percentage of total Atlantic City gaming revenues.
(i) Fair share is the percentage of the total number of gaming units (table
games and slot machines) in Trump Plaza to the total number of gaming units
in casino hotels in Atlantic City.
(j) Efficiency is the ratio of Trump Plaza's market share to its fair share.
(k) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
(l) Does not give effect to any return on investment of the net proceeds of the
June 1995 Offerings.
(m) The expansion of 13,000 square feet was commenced in April 1994 and
completed at the end of that year.
(n) The Pro Forma Statement of Operations Data and Other Data give effect to
the Merger Transaction as if same had occurred on January 1, 1994 and the
Pro Forma Balance Sheet Data gives effect to the Merger Transaction as if
same had occurred on September 30, 1995.
14
SUMMARY FINANCIAL INFORMATION OF TAJ ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1990 through 1994 and for the nine months ended September 30, 1994 and 1995.
The financial information of Taj Associates as of December 31, 1990, 1991,
1992, 1993 and 1994 and for the years then ended set forth below has been
derived from the audited consolidated financial statements of Taj Associates.
The audited financial information as of December 31, 1993 and 1994 and for the
years ended December 31, 1992, 1993 and 1994 are included elsewhere in this
Prospectus. The financial information as of September 30, 1994 and 1995 and for
each of the nine months then ended has been derived from the unaudited
consolidated financial statements of Taj Associates included elsewhere in this
Prospectus and in the opinion of management, includes all adjustments,
consisting of only normal, recurring adjustments, necessary to present fairly
the financial position, results of operations and changes in cash flows for the
periods presented. This information should be read in conjunction with
"Unaudited Pro Forma Financial Information" and the consolidated financial
statements and the related notes thereto included elsewhere in this Prospectus.
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- -----------------------
1990(A) 1991(B) 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
STATEMENTS OF OPERATIONS
DATA:
Net revenues............ $ 356,698 $ 438,313 $ 469,753 $ 498,911 $ 517,182 $ 386,538 $ 417,296
Depreciation and
amortization........... 44,647 36,202 36,388 36,858 39,750 28,944 32,407
Income (loss) from
operations............. (23,289) 31,828 68,027 84,458 76,634 54,190 72,404
Interest expense, net... (82,105) (100,683) (103,126) (106,997) (113,292) (85,512) (86,112)
Extraordinary gain
(loss)................. 0 259,618 0 0 0 0 0
Net income (loss)....... (124,269) 188,513 (35,099) (22,539) (36,658) (31,322) (13,708)
OTHER DATA:
EBITDA(c)............... $ 62,361 $ 96,234 $ 106,978 $ 124,080 $ 120,018 $ 85,282 $ 107,126
Capital expenditures.... 178,060 17,045 12,111 16,752 23,030 15,749 19,477
Ratio of earnings to
fixed charges
(deficiency)(d)........ (143,612) (71,105) (35,099) (22,539) (36,658) (31,322) (13,708)
Cash flows provided by
(used in)
operating activities... 7,798 35,126 31,786 48,634 33,422 40,562 73,310
Investing activities.... (117,965) (18,901) (17,759) (22,160) (27,231) (19,749) (23,751)
Financing activities.... 61,613 (16,170) (2,500) (2,492) (3,039) (2,355) (1,986)
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets............ $ 845,804 $ 814,051 $ 802,556 $ 811,508 $ 807,612 $ 822,914 $ 843,725
Total long-term debt,
net of current
maturities(e).......... 917(f) 573,844 595,682 625,765 656,701 651,626 688,143
Total capital
(deficit).............. (69,420) 167,837 130,913 106,641 67,812 73,609 52,899
OPERATING DATA (AT END OF
PERIOD)(G):
Casino Square Footage... 120,000 120,000 120,000 130,110 132,317 132,317 133,111
Number of Hotel Rooms... 1,250 1,250 1,250 1,250 1,250 1,250 1,250
Hotel Occupancy Rate.... 95.5% 87.3 % 91.3 % 92.3 % 92.4% 93.8 % 92.0%
TABLE GAMES:
Total Atlantic City
table drop(h).......... $7,903,249 $7,219,192 $7,055,034 $6,835,572 $6,832,517 $5,131,243 $5,350,188
Atlantic City table drop
growth................. 3.1% (8.7)% (2.3)% (3.1)% 0.0% (1.3)% 4.3%
Taj Mahal table games
market share(j)........ 12.6% 16.4 % 15.3 % 16.2 % 17.1% 16.4 % 17.7%
Taj Mahal table games
fair share(k).......... 12.3% 12.7 % 13.3 % 14.5 % 14.2% 14.4 % 13.4%
Taj Mahal table games
efficiency(l).......... 102.1% 129.1 % 115.0 % 111.7 % 120.4% 113.9 % 132.1%
Taj Mahal table units... 167 166 159 163 159 161 150
Taj Mahal table
revenue(i)............. $ 154,048 $ 186,644 $ 169,112 $ 173,432 $ 184,774 $ 132,019 $ 148,953
Taj Mahal table revenue
per unit per day
(actual dollars)....... 3,354 3,080 2,913 2,915 3,184 3,004 3,637
15
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1990(A) 1991 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
SLOTS:
Total Atlantic City
slot revenue(l)(m).... $1,724,309 $1,851,070 $2,113,829 $2,214,638 $2,297,280 $1,738,656 $1,971,442
Atlantic City slot rev-
enue growth........... 9.3% 7.4% 14.2% 4.8% 3.7% 1.7% 13.4%
Taj Mahal slot
revenue(i)(m)......... $ 150,842 $ 197,383 $ 246,947 $ 264,504 $ 259,114 $ 200,213 $ 217,475
Taj Mahal slot market
share(j).............. 8.8% 10.7% 11.7% 11.9% 11.3% 11.5% 11.0%
Taj Mahal slot fair
share(k).............. 14.2% 13.0% 12.7% 13.1% 12.6% 12.3% 12.5%
Taj Mahal slot
efficiency(l)......... 62.0% 82.3% 92.1% 90.8% 89.7% 93.5% 88.0%
Taj Mahal slot units... 2,909 2,778 2,840 3,146 3,342 3,241 3,540
Taj Mahal slot revenue
per unit per day (ac-
tual dollars)(i)(m)... $ 189 $ 195 $ 238 $ 230 $ 213 $ 226 $ 225
- --------------------
(a) The Taj Mahal was substantially completed and opened to the public on April
2, 1990.
(b) Taj Associates and Trump Taj Mahal Funding, Inc. ("Taj Funding") completed
the 1991 Taj Restructuring on October 4, 1991, which may affect the
comparability of prior periods.
(c) EBITDA represents income from operations before depreciation, amortization,
restructuring costs, the non-cash write-down of CRDA investments and a
nonrecurring cost of a litigation settlement. EBITDA should not be
construed as an alternative to net income or any other measure of
performance determined in accordance with generally accepted accounting
principles or as an indicator of Taj Associates' operating performance,
liquidity or cash flows generated by operating, investing and financing
activities. Management has included information concerning EBITDA, as
management understands that it is used by certain investors as one measure
of Taj Associates' historical ability to service its debt.
(d) For purposes of computing this ratio, earnings consist of loss before
income taxes and extraordinary items and fixed charges, adjusted to exclude
capitalized interest. Fixed charges consist of interest expense, including
amounts capitalized, partnership distribution requirements and the portion
of operating lease rental expense that is representative of the interest
factor (deemed to be one-third of operating lease rental expense).
(e) The years ended December 31, 1991, 1992, 1993, 1994 and the nine months
ended September 30, 1994 and 1995 include approximately $528,124, $550,140,
$580,464, $611,533, $606,509 and $643,135 of Bonds, net of discount of
approximately $201,334, $188,162, $172,417, $153,597, $158,622 and
$137,108, respectively, which is being accreted as additional interest
expense to maturity and results in an effective interest rate of
approximately 18.0%. See Note 2 of Notes to Consolidated Financial
Statements of Taj Associates.
(f) Long-term debt of $720,715 had been reclassified to current maturities as
of December 31, 1990.
(g) Atlantic City industry data has been compiled from information filed with
and published by the CCC (as defined) and is unaudited.
(h) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(i) Table and slot revenues represent the amount of money that a casino retains
(or wins) out of the total amount wagered at table games and slot machines,
respectively.
(j) Market share represents the total Taj Mahal gaming revenues expressed as a
percentage of total Atlantic City gaming revenues.
(k) Fair share is the percentage of the total number of gaming units (table
games or slot machines) in the Taj Mahal to the total number of gaming
units in casinos in Atlantic City.
(l) Efficiency is the ratio of the Taj Mahal's market share to its fair share.
(m) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
16
THE MERGER TRANSACTION
Upon consummation of the Merger Transaction, THCR Holdings, through AC
Holdings, will own and operate Trump Plaza and the Taj Mahal. Pursuant to the
Agreement and Plan of Merger, dated as of January 8, 1996, as amended on
January 31, 1996, among THCR, Taj Holding and THCR Merger Corp. ("Merger Sub")
(the "Merger Agreement"), each outstanding share of Class A Common Stock of Taj
Holding ("Taj Holding Class A Common Stock") will be converted into the right
to receive, at each holder's election, either (i) $30.00 in cash ("Cash
Consideration") or (ii) that number of shares of THCR's Common Stock as is
determined by dividing $30.00 by the market value of such shares ("Stock
Consideration"). Market Value is defined as the average of the high and low per
share sales price on the NYSE on the fifteen trading days immediately preceding
the effective time of the Merger (the "Effective Time"). In addition to the
Merger, the Merger Transaction includes the transactions discussed below.
Real Property Purchases. The Specified Parcels are currently leased by Taj
Associates from Realty Corp. for approximately $3.3 million per year. See
"Business--Certain Indebtedness--Taj Associates--First Fidelity Loan/Specified
Parcels." Realty Corp. has outstanding indebtedness of approximately $78
million owing to First Fidelity Bank, National Association, New Jersey ("First
Fidelity") (the "First Fidelity Loan") which is due November 15, 1999. The
First Fidelity Loan is currently secured by a mortgage on the Specified
Parcels, and Taj Associates has previously guaranteed the repayment of the
First Fidelity Loan up to a maximum of $30 million. Trump has also previously
personally guaranteed (up to a maximum of approximately $19.2 million), and
pledged his direct and indirect equity interests in Taj Associates as
collateral for, the First Fidelity Loan. As mortgagee, First Fidelity has the
right to terminate the lease on the Specified Parcels under certain
circumstances. See "Business--Certain Indebtedness--Taj Associates--First
Fidelity Loan/Specified Parcels."
In order to secure future use of the Specified Parcels and eliminate all
future lease payments on the Specified Parcels, Taj Associates expects to
satisfy the First Fidelity Loan through the payment of $50 million in cash and
500,000 shares of Common Stock and purchase the Specified Parcels from Realty
Corp. for a nominal amount by exercising a purchase option with respect to the
Specified Parcels. Upon consummation of the purchase of the Specified Parcels,
(i) the lease relating to the Specified Parcels will be terminated, thus
eliminating Taj Associates' rental obligations thereunder; (ii) the $30 million
guaranty by Taj Associates of the First Fidelity Loan will be released; and
(iii) Trump's guaranty of such indebtedness will be released and First Fidelity
will relinquish its lien on Trump's direct and indirect equity interests in Taj
Associates. The Specified Parcels will be part of the collateral securing the
First Mortgage Notes. See "Business--Certain Indebtedness--Taj Associates--
First Fidelity Loan/Specified Parcels."
Pursuant to the Trump Plaza East Purchase Option, Plaza Associates has the
right to purchase Trump Plaza East for a purchase price of $28.0 million
through December 31, 1996, increasing by $1.0 million annually thereafter until
expiration on June 30, 1998. Plaza Associates intends to exercise the Trump
Plaza East Purchase Option in connection with the Merger Transaction and
purchase Trump Plaza East, thereby eliminating approximately $3.1 million of
annual lease payments associated with Trump Plaza East. See "Business--
Properties--Trump Plaza--Trump Plaza East."
Consent and Release Payment. The Trump Indebtedness is currently secured by,
among other things, a promissory note from TTMI to Trump (the "TTMI Note"), as
well as a lien on Trump's direct and indirect equity interests in Taj
Associates and related guarantees. As part of the Merger Transaction, Taj
Associates will pay $10 million to Bankers Trust to obtain the consent of
Bankers Trust to the Merger Transaction and to obtain releases of certain liens
on Trump's direct and indirect equity interests in Taj Associates and related
guarantees, and the pledge of the TTMI Note, all of which secure a portion of
the Trump Indebtedness. See "Business--Certain Indebtedness--Taj Associates--
TTMI Note."
Plaza Note Purchase; Consent Solicitations. As part of the Merger
Transaction, Plaza Associates and Trump Plaza Funding, Inc. ("Plaza Funding")
intend to purchase and (to the extent not purchased) defease the
17
Plaza Notes. Any such purchase of Plaza Notes will be conditioned upon, among
other things, the concurrent consummation of the other transactions
contemplated by the Merger Transaction. Plaza Associates and Plaza Funding also
intend to solicit the consent of holders of a majority in aggregate principal
amount of the Plaza Notes to amend certain provisions in the indenture pursuant
to which the Plaza Notes were issued (the "Plaza Note Indenture"). Under the
terms of the Plaza Note Indenture, Plaza Associates and Plaza Funding have the
right to retire the Plaza Notes through defeasance by depositing in trust a sum
sufficient to provide for the redemption of the Plaza Notes on June 15, 1998 at
105% of their principal amount, plus accrued interest.
To effect the Merger Transaction, THCR Holdings and its subsidiary THCR
Funding, the issuers of 15 1/2% Senior Secured Notes due 2005 (the "Senior
Notes"), will solicit from the holders of the Senior Notes the waiver of, and
consent to modify, certain provisions of the indenture pursuant to which the
Senior Notes were issued (the "Senior Note Indenture") (the "Senior Note
Consent Solicitation"). Consent of holders of a majority in aggregate principal
amount of outstanding Senior Notes is required in connection with the Senior
Note Consent Solicitation.
Trump Contribution and Consideration. In connection with the Merger
Transaction, Trump will contribute or cause to be contributed all of his direct
and indirect equity interests in Taj Associates (representing a 50% economic
interest) to AC Holdings by contributing to THCR Holdings. Trump will
contribute to AC Holdings his shares (consisting of 50% of the outstanding
capital stock) of The Trump Taj Mahal Corporation, the holder of a .01% general
partnership interest in Taj Associates ("TTMC"), and will cause TTMI to
contribute to AC Holdings (on behalf, and at the direction, of THCR Holdings)
TTMI's 49.995% general partnership interest in Taj Associates.
In addition, Trump will contribute to Taj Holding all of his Class C Common
Stock of Taj Holding ("Taj Holding Class C Common Stock") which will be
canceled pursuant to the Merger Agreement. The Taj Holding Class C Common Stock
provides Trump with the ability to elect a majority of the members of the Board
of Directors of, and thereby control, Taj Holding. It also affords Trump
separate class voting rights in certain events, including in connection with
the Merger. The Taj Services Agreement (as defined herein), pursuant to which
Trump has received or will receive approximately $1.7 million, $1.4 million and
$1.6 million (less $575,000 which was paid annually by Trump to First Fidelity
to reduce the amount owed by Taj Associates under the lease for the Specified
Parcels) in respect of the years ended 1995, 1994 and 1993, respectively, as
compensation for services rendered to Taj Associates, will also be terminated
in connection with the Merger Transaction.
In exchange for the contribution by Trump and TTMI AC Holdings (on behalf,
and at the direction, of THCR Holdings), Trump's directly held limited
partnership interest in THCR Holdings will be modified and TTMI will receive a
limited partnership interest in THCR Holdings. As a result of the Merger
Transaction, Trump's aggregate beneficial ownership of limited partnership
interests in THCR Holdings will decrease from approximately 40% to
approximately %, of which an approximately % interest will be held
directly by TTMI (assuming a price of $ per share of Common Stock as the
Market Value in connection with the Merger and as the public offering price in
the Stock Offering).
Trump's current limited partnership interest in THCR Holdings represents his
economic interest in the assets and operations of THCR Holdings and is
convertible, at Trump's option, into 6,666,667 shares of Common Stock
(representing approximately 40% of the outstanding shares of Common Stock after
giving effect to such conversion). Upon consummation of the Merger Transaction
(assuming a price of $ per share of Common Stock as the Market Value in
connection with the Merger and as the public offering price in the Stock
Offering). Trump's and TTMI's limited partnership interests in THCR Holdings
will be convertible into an aggregate of shares of Common Stock,
representing approximately % of the then outstanding shares of Common Stock
(after giving effect to the Merger Transaction and such conversion). At the
time that TTMI becomes a limited partner of THCR Holdings, Trump will
contribute shares of Class B Common Stock of THCR, par value $.01 per share
("Class B Common Stock") to TTMI. THCR's Class B Common Stock has voting power
18
equivalent to the voting power of the Common Stock into which a Class B Common
Stockholder's limited partnership interest in THCR Holdings is convertible. The
Class B Common Stock is not entitled to dividends or distributions. Upon
conversion of all or any portion of a holder's THCR Holdings limited
partnership interest into shares of Common Stock, the corresponding voting
power of the Class B Common Stock (equal in voting power to the number of
shares of Common Stock issued upon such conversion) will be proportionately
diminished.
Concurrent with the consummation of the Merger Transaction, THCR will issue
to Trump a warrant to purchase an aggregate of 1.8 million shares of Common
Stock, (i) 600,000 of such underlying shares of which may be purchased on or
prior to the third anniversary of the issuance of the warrant at $30.00 per
share, (ii) 600,000 of such underlying shares of which may be purchased on or
prior to the fourth anniversary of the issuance of warrant at $35.00 per share
and (iii) 600,000 of such underlying shares of which may be purchased on or
prior to the fifth anniversary of the issuance of the warrant at $40.00 per
share.
Trump, through TTMI, has the right to reduce the equity interest of the Taj
Holding Class A Common Stock in Taj Associates from 50% to 20% by causing Taj
Associates to make a payment to the holders of the Taj Bonds in an amount
calculated to provide them with a cumulative return equal to approximately 14%
per annum (the "14% Payment"). If the 14% Payment is made (which can occur only
if the Taj Bonds are retired, redeemed or paid in full), Trump would
beneficially own 80% of Taj Associates. Moreover, the 14% Payment is permitted
to be financed with Taj Associates' borrowings. In connection with the Merger
Transaction, TTMI will not exercise its right to cause Taj Associates to make
such payment and such right will terminate upon the redemption of the Taj
Bonds.
THCR Contribution and Consideration. In connection with the Merger
Transaction, THCR will cause TM/GP Corporation ("TM/GP"), which will become an
indirect wholly owned subsidiary of THCR after the effective time of the Merger
(the "Effective Time") and which holds a 49.995% general partnership interest
in Taj Associates, to contribute to AC Holdings (on behalf, and at the
direction, of THCR Holdings) its general partnership interest in Taj
Associates, and will cause Taj Holding, which will become a direct wholly owned
subsidiary of THCR after the Effective Time, to contribute to TM/GP and will
then cause TM/GP to contribute to THCR Holdings its shares (consisting of 50%
of the outstanding capital stock) of TTMC (the holder of a .01% general
partnership interest in Taj Associates). As a result of the Merger Transaction,
THCR's beneficial equity interest in THCR Holdings will increase from
approximately 60% to approximately %, including approximately % interest
held directly by TM/GP (assuming a $ price per share of Common Stock as the
Market Value in connection with the Merger and as the public offering price in
the Stock Offering).
Redemption of the Taj Bonds and the Taj Holding Class B Common Stock. The Taj
Holding Class B Common Stock is essentially a nonparticipating stock issued as
part of a Unit in connection with the Taj Bonds that entitles the holders
thereof to elect the Class B Directors, to vote on matters presented to the
stockholders of Taj Holding and to separately approve certain matters. The Taj
Holding Certificate of Incorporation provides that the outstanding shares of
Taj Holding Class B Common Stock must be redeemed at such time as the principal
amount of Taj Bonds are redeemed, defeased or paid, at the redemption price of
$.50 per share. In connection with the Merger Transaction, Taj Funding will
redeem the outstanding Taj Bonds at a redemption price equal to 100% of the
principal amount thereof plus accrued interest to the date of redemption and
Taj Holding will cause each outstanding share of Taj Holding Class B Common
Stock to be redeemed at the redemption price of $.50 per share in accordance
with the provisions of the Taj Holding Certificate of Incorporation.
19
MANAGEMENT AND CORPORATE STRUCTURE
AC Holdings is an indirect subsidiary of THCR. THCR is a holding company with
no independent operations, the principal asset of which is its general
partnership interest in THCR Holdings. THCR Holdings is also a holding company
with no independent operations, the principal assets of which are its ownership
interests in subsidiary corporations and partnerships, including AC Holdings.
AC Holdings holds THCR Holdings' 100% equity interest in Trump Plaza
Associates, the partnership that owns and operates Trump Plaza. Trump is THCR's
Chairman of the Board and Nicholas L. Ribis is THCR's President, Chief
Executive Officer and Chief Financial Officer. The partnership agreement
governing THCR Holdings provides that all business activities of THCR must be
conducted through THCR Holdings or its subsidiary corporations and
partnerships. As the sole general partner of THCR Holdings, THCR generally has
the exclusive rights, responsibilities and discretion in the management and
control of THCR Holdings. Neither THCR nor THCR Holdings will be an obligor or
a guarantor with respect to the First Mortgage Notes.
THCR Holdings' subsidiary corporations and partnerships currently include
Plaza Associates, Plaza Funding, Trump Indiana, Inc. ("Trump Indiana"), AC
Holdings (formerly Trump Plaza Holding Associates ("Plaza Holding")), Trump
Plaza Holding, Inc. ("Plaza Holding Inc."), AC Funding and Trump Hotels &
Casino Resorts Funding, Inc. ("THCR Funding"). THCR Funding, together with THCR
Holdings, are the co-obligors of the Senior Notes. Plaza Associates owns and
operates Trump Plaza and is the guarantor of the Plaza Holding's 10 7/8% First
Mortgage Notes due 2001 (the "Plaza Notes"). Plaza Funding is the issuer of the
Plaza Notes and currently owns a 1% equity interest in Plaza Associates which
will be transferred to TTMC in connection with the Merger Transaction. The
Plaza Notes will be repurchased or defeased in connection with the Merger
Transaction. See "--The Merger Transaction--Plaza Note Purchase." AC Holdings
currently owns a 99% equity interest in Plaza Associates, and Plaza Holding
Inc. owns a 1% equity interest in AC Holdings. Trump Indiana is in the process
of developing a riverboat casino project to be located at Buffington Harbor on
Lake Michigan (the "Indiana Riverboat").
Upon consummation of the Merger Transaction, AC Holdings will indirectly
wholly own each of Plaza Associates and Taj Associates through its ownership of
a 99% equity interest in each of Plaza Associates and Taj Associates, and its
ownership of all of the capital stock of TTMC, which will own a 1% equity
interest in each of Plaza Associates and Taj Associates. In connection with the
Merger Transaction, Plaza Funding will be merged with and into TTMC. AC
Holdings and its subsidiary AC Funding will be the Issuers and co-obligors of
the First Mortgage Notes.
AC Holdings, a New Jersey general partnership, was formed under the name
Trump Plaza Holding Associates on February 17, 1993. AC Funding, a Delaware
corporation, was formed on , 1996 for the purpose of acting as co-issuer
of the First Mortgage Notes. On or before the consummation of the Merger
Transaction, THCR intends to change AC Holdings' name from Trump Plaza Holding
Associates to THCR Atlantic City Holdings. Plaza Associates was organized as a
New Jersey general partnership in June 1992. The principal executive offices of
each of AC Holdings, AC Funding and Plaza Associates are located at Mississippi
Avenue and The Boardwalk, Atlantic City, New Jersey 08401, and their telephone
number is (609) 441-6060. Taj Associates was originally formed as a limited
partnership under the laws of the State of New Jersey on June 23, 1988. On
December 11, 1990, Taj Associates was converted to a general partnership. The
principal executive offices of Taj Associates are located at 1000 The
Boardwalk, Atlantic City, New Jersey 08401, and its telephone number is (609)
449-5540.
20
OWNERSHIP STRUCTURE AFTER THE MERGER TRANSACTION
[INSERT TABLE]
21
RISK FACTORS
Each prospective investor should consider carefully all information
contained in this Prospectus and should give particular consideration to the
following factors before deciding to purchase the First Mortgage Notes offered
hereby.
HIGH LEVERAGE AND FIXED CHARGES
Upon consummation of the Merger Transaction, AC Holdings and its
subsidiaries will have a substantial amount of indebtedness on a consolidated
basis. At December 31, 1995, after giving pro forma effect to the Merger
Transaction, AC Holdings' consolidated indebtedness for borrowed money would
have totaled approximately $1.2 billion, principally representing the First
Mortgage Notes. See "Use of Proceeds" and "Business--Certain Indebtedness."
Assuming that the Merger Transaction had been consummated on January 1, 1995,
AC Holdings' consolidated pro forma earnings would have been insufficient to
cover fixed charges by $ million for the year ended December 31, 1995.
No direct or indirect partner, employee, officer, stockholder or director,
as such, past, present or future, of either AC Holdings or AC Funding or any
successor entity will have any personal liability in respect of the
obligations of AC Holdings and AC Funding under the indenture with respect to
which the First Mortgage Notes will be issued (the "Mortgage Note Indenture")
or the First Mortgage Notes by reason of the status as such partner, employee,
officer, stockholder or director.
Interest on the First Mortgage Notes will be payable semiannually in cash.
The ability of the Issuers to pay cash interest on the First Mortgage Notes
will be dependent upon the ability of Plaza Associates and Taj Associates to
generate enough cash from operations sufficient for such purposes. See "--
Holding Company Structure; Risk in Refinancing and Repayment of Indebtedness;
Need for Additional Financing," "--Recent Results--Trump Plaza," and "--Recent
Results--Taj Mahal." In addition, the terms of the First Mortgage Notes will,
under certain circumstances and subject to certain limitations, require AC
Holdings to make distributions to THCR Holdings to enable THCR Holdings to
make scheduled interest payments on its Senior Notes. See "Description of the
First Mortgage Notes."
Taj Associates has a working capital facility (the "Working Capital
Facility") which matures in 1999 and permits borrowings of up to $25.0
million. During 1994 and 1995, no amounts were borrowed under the Working
Capital Facility. Taj Associates anticipates either modifying the Working
Capital Facility or terminating the Working Capital Facility and replacing it
with a new $25.0 million facility.
The substantial consolidated indebtedness and fixed charges of AC Holdings
may limit its ability to respond to changing business and economic conditions,
to fund capital expenditures for future expansion or otherwise, either through
cash flow or additional indebtedness, to absorb adverse operating results or
to maintain their facilities at an operating level which will continue to
attract patrons. Although management believes that the Merger Transaction will
allow AC Holdings to realize certain cost savings, no assurance can be given
as to the amount that will be realized from these cost savings. Future
operating results are subject to significant business, economic, regulatory
and competitive uncertainties and contingencies, many of which are outside AC
Holdings control. AC Holdings may be required to reduce or delay planned
capital expenditures, sell assets, restructure debt or raise additional equity
to meet principal repayment and other obligations of it and its subsidiaries
in later years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Plaza Associates--Liquidity and Capital
Resources." There is no assurance that any of these alternatives could be
effected on satisfactory terms, if at all. See "--Holding Company Structure;
Need for Additional Financing."
22
Furthermore, such alternatives could impair its competitive position, reduce
cash flow and/or have a material adverse effect on their results of
operations.
HOLDING COMPANY STRUCTURE; RISK IN REFINANCING AND REPAYMENT OF INDEBTEDNESS;
NEED FOR ADDITIONAL FINANCING
AC Funding has no material assets, and AC Holdings is a holding company, the
principal asset of which is its direct and indirect ownership of partnership
interests in Taj Associates and Plaza Associates, and it has no independent
means of generating revenue. As a holding company, AC Holdings depends on
distributions and other permitted payments from Taj Associates and Plaza
Associates to meet its cash needs. The ability of the Issuers to pay their
indebtedness when due will depend upon the ability of Plaza Associates and Taj
Associates to generate cash from operations sufficient for such purpose or to
refinance such indebtedness on or before the date on which it becomes due.
Management does not currently anticipate being able to generate sufficient
cash flow from operations to repay a substantial portion of the principal
amount of the First Mortgage Notes. Thus, the repayment of the principal
amount of the First Mortgage Notes will likely depend primarily upon the
ability to refinance the First Mortgage Notes when due. The future operating
performance and the ability to refinance the First Mortgage Notes will be
subject to the then prevailing economic conditions, industry conditions and
numerous other financial, business and other factors, many of which are beyond
the control of AC Holdings. There can be no assurance that the future
operating performance of AC Holdings and its subsidiaries will be sufficient
to meet these repayment obligations or that the general state of the economy,
the status of the capital markets generally or the receptiveness of the
capital markets to the gaming industry and to AC Holdings will be conducive to
refinancing the First Mortgage Notes or other attempts to raise capital. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Plaza Associates--Liquidity and Capital Resources."
Management contemplates obtaining an aggregate of approximately $17.5
million of equipment financing in connection with the acquisition of slot
machines and related gaming equipment for Trump Plaza's existing facilities,
Trump World's Fair and Trump Plaza East. Plaza Associates is seeking
commitments for this financing, a portion of which is currently in place. The
failure of management to obtain all or a significant portion of the financings
discussed above may have a material adverse effect on AC Holdings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Plaza Associates--Liquidity and Capital Resources."
RESTRICTIONS ON CERTAIN ACTIVITIES
The First Mortgage Note Indenture will impose restrictions on AC Holdings
and its subsidiaries. Generally, the restrictions contained in these
instruments relate to the incurrence of additional indebtedness, the
distribution of cash and/or property to partners, the repayment or repurchase
of pari passu or junior securities, the maintenance of required net worth,
investments, mergers and sales of assets and the creation of liens. These
restrictions could limit the ability of AC Holdings (including Plaza
Associates and Taj Associates) to respond to changing business and economic
conditions. A failure to comply with any of these obligations could also
result in an event of default under the First Mortgage Note Indenture, which
could permit acceleration of the First Mortgage Notes and acceleration of
certain other indebtedness of THCR and its subsidiaries under other
instruments that may contain cross-acceleration or cross-default provisions.
The activities of Trump are restricted by certain debt agreements under
which he is personally obligated. These agreements impose restrictions on
Trump and certain of his affiliates, relating to, among other things,
incurrence of additional indebtedness, the creation of liens, mergers and
sales of assets, investments, leases, issuance of equity interests, affiliate
transactions and capital expenditures. As a result, certain transactions in
which Trump may wish to engage involving his ownership interest in THCR or its
affiliates, including AC Holdings, may require the prior consent of such
lenders. See "--Control and Involvement of Trump."
23
RECENT RESULTS
Trump Plaza. Plaza Associates had net losses of $5.3 million, $29.2 million,
$35.8 million (including an extraordinary loss of $38.2 million) and $8.9
million for the nine months ended September 30, 1994 and the years ended
December 31, 1991, 1992, and 1994, respectively, and net income of $0.4
million (including an extraordinary loss of $9.3 million) for the nine months
ended September 30, 1995 and $9.3 million for the year ended December 31, 1993
(including an extraordinary gain of $4.1 million). In 1991, Plaza Associates
began to experience liquidity problems, principally due to amortization
requirements of its long-term debt. On May 29, 1992, Plaza Associates and
Plaza Funding completed a restructuring (the "1992 Plaza Restructuring"), the
purpose of which was to improve the amortization schedule and extend the
maturity of Plaza Associates' indebtedness. In June 1993, Plaza Associates,
Plaza Funding and AC Holdings completed a refinancing, the purpose of which
was to enhance Plaza Associates' liquidity and to position Plaza Associates
for a subsequent deleveraging transaction. See "Business--Restructurings--The
1992 Plaza Restructuring." Management believes that the deterioration in
results experienced in 1990 and 1991 was attributable primarily to a recession
in the Northeast and increased industry competition, primarily due to the
opening of the Taj Mahal in April 1990, which had a disproportionate impact on
Trump Plaza as compared to certain other Atlantic City casinos due in part to
the common use of the "Trump" name.
Taj Mahal. Taj Associates had net losses of $31.3 million, $13.7 million,
$35.1 million, $22.5 million and $36.7 million for the nine months ended
September 30, 1994 and 1995 and the years ended December 31, 1992, 1993 and
1994, respectively. From the opening of the Taj Mahal in April 1990 through
the Spring of 1991, cash generated from Taj Associates' operations was
insufficient to cover its fixed charges. As a result, Taj Associates failed to
provide Taj Funding with sufficient funds to meet its debt servicing needs.
During 1991, Taj Funding, Taj Associates and Taj Associates' then existing
general partners (TTMI and TTMC) restructured their existing indebtedness (the
"1991 Taj Restructuring"). Pursuant to the terms of the 1991 Taj
Restructuring, Taj Funding's 14% First Mortgage Bonds, Series A, due 1998 (the
"Old Taj Bonds") were exchanged for the Taj Bonds and certain modifications
were made to the terms of bank borrowings and amounts owed to both Trump and
his affiliates. In addition, approximately 50% of the ownership interest in
Taj Associates was transferred indirectly to the holders of the Old Taj Bonds.
See "Business--Restructurings--The 1991 Taj Restructuring."
ATLANTIC CITY PROPERTIES EXPANSION
Construction and Regulatory Approvals. The Trump Plaza Expansion is expected
to be completed early in the second quarter of 1996, and the Taj Mahal
Expansion, the plans for which are preliminary and subject to modification, is
expected to be completed in phases from the first quarter of 1997 through
1999. Construction projects, however, such as those contemplated by the Trump
Plaza Expansion and the Taj Mahal Expansion, can entail significant
development and construction risks including, but not limited to, labor
disputes, shortages of material and skilled labor, weather interference,
unforeseen engineering problems, environmental problems, geological problems,
construction, demolition, excavation, zoning or equipment problems and
unanticipated cost increases, any of which could give rise to delays or cost
overruns. There can be no assurance that Plaza Associates and Taj Associates
will receive the licenses and regulatory approvals necessary to undertake, in
the case of the Taj Mahal Expansion, and to complete, in the case of each of
the Trump Plaza Expansion and the Taj Mahal Expansion, their respective
expansion plans, or that such licenses and regulatory approvals will be
obtained within the anticipated time frames.
The Trump Plaza Expansion and the Taj Mahal Expansion will each require
various licenses and regulatory approvals, including the approval of the New
Jersey Casino Control Commission (the "CCC"). Furthermore, the New Jersey
Casino Control Act (the "Casino Control Act") requires that additional guest
rooms be put in service within a specified time period after any such casino
expansion. If Plaza Associates or Taj Associates completed any casino
expansion and subsequently did not complete the requisite number of additional
guest rooms within the specified time period, such party might have to close
all or a portion of the expanded casino in order to comply with regulatory
requirements, which could have a material adverse effect on the results of
operations and financial condition of Plaza Associates or Taj Associates, as
applicable. In addition, in order to
24
operate the additional casino space contemplated by the Taj Mahal Expansion,
Taj Associates must obtain, among other regulatory approvals, the approval of
the CCC and determinations by the CCC that the Taj Mahal's additional casino
space, together with its current casino space, is a "single room" under the
Casino Control Act and that the operation of this additional casino space by
Taj Associates will not constitute undue economic concentration of Atlantic
City casino operations. Taj Associates will file a petition with the CCC
seeking such declaratory rulings. See "Regulatory Matters--New Jersey Gaming
Regulations--Casino Licensee" and "Regulatory Matters--New Jersey Gaming
Regulations--Approved Hotel Facilities."
Trump Plaza East. Plaza Associates has already begun development of Trump
Plaza East. If Plaza Associates is unable to finance the purchase price of
Trump Plaza East pursuant to the Trump Plaza East Purchase Option and its
leasehold interest therein is terminated, any amounts expended with respect to
Trump Plaza East, including payments under the Trump Plaza East Purchase
Option and the lease pursuant to which Plaza Associates leases Trump Plaza
East, and any improvements thereon, would inure to the benefit of the
unaffiliated third party that owns Trump Plaza East and not to Plaza
Associates and would increase the cost of demolition of any improvements for
which Plaza Associates would be liable. As of December 31, 1995, Plaza
Associates had capitalized approximately $ million in construction costs
related to Trump Plaza East. If the development of Trump Plaza East is not
successful, Plaza Associates would be required to write off the capitalized
construction costs associated with the project. Plaza Associates intends to
exercise the Trump Plaza East Purchase Option in connection with the Merger
Transaction. See "Certain Transactions"
On October 30, 1995, Plaza Associates opened 150 of the rooms and suites at
Trump Plaza East. Plaza Associates intends to open the remainder of the rooms
and suites and the casino at Trump Plaza East in the first quarter of 1996,
although there can be no assurance that such openings will occur by such time.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into a sublease (the "Time
Warner Sublease") with Time Warner pursuant to which Time Warner subleased the
entire first floor of retail space at Trump Plaza East for a Warner Brothers
Studio Store which opened in July 1994. Rent under the Time Warner Sublease is
currently accruing and will not become due and payable to Plaza Associates
until the satisfaction of certain conditions designed to protect Time Warner
from the termination of the Time Warner Sublease by reason of the termination
of Plaza Associates' leasehold estate in Trump Plaza East or the foreclosure
of a certain mortgage and until Time Warner's unamortized construction costs
are less than accrued rent. No assurances can be made that such conditions
will be satisfied. In addition, Time Warner may terminate the Time Warner
Sublease at any time beginning two years after the commencement date in the
event that gross sales for the store do not meet certain threshold amounts or
at any time if Plaza Associates fails to operate a first class hotel on Trump
Plaza East. No assurances can be made that Trump Plaza East will continually
be operated as a first class hotel or that sales for the Warner Brothers
Studio Store will exceed the threshold amounts. See "Certain Transactions--
Plaza Associates--Trump Plaza East."
Trump World's Fair. The ongoing renovation of Trump World's Fair is
currently expected to be completed early in the second quarter of 1996,
although there can be no assurance that the project will be completed by such
time. Upon the completion of such renovation, management intends to operate
Trump World's Fair as a casino hotel. In order to operate the casino space in
Trump World's Fair, Plaza Associates must obtain all necessary regulatory
approvals, including approval of the CCC, which approval cannot be assured.
Plaza Associates has applied for a separate casino license with respect to
Trump World's Fair. The CCC was required to determine that the operation of
the casino by Plaza Associates will not result in undue economic concentration
in Atlantic City. On May 18, 1995, the CCC ruled that the operation of Trump
World's Fair by Plaza Associates will not result in undue economic
concentration. Although this determination is a required condition precedent
to the CCC's ultimate issuance of a casino license for Trump World's Fair, and
management believes that a casino license will ultimately be issued for Trump
World's Fair, there can be no assurance that the CCC will issue this casino
license or what conditions may be imposed, if any, with respect thereto. See
"Regulatory Matters--New Jersey Gaming Regulations--Casino Licensee" and
"Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities." Although construction at Trump World's Fair has commenced, if the
costs of developing, constructing, equipping and opening Trump World's Fair
exceed the
25
proceeds allocated from the June 1995 Offerings for such expenditures, Plaza
Associates may be forced to rely on alternative methods of financing, which
could impair the competitive position of Trump Plaza and reduce Plaza
Associates' cash flow. See "--High Leverage and Fixed Charges," "--Holding
Company Structure; Need for Additional Financing" and "--Restrictions on
Certain Activities."
The Taj Mahal. It is expected that the Taj Mahal Expansion, the plans for
which are preliminary and subject to modification, will be principally funded
out of the cash from operations of the Taj Mahal and Trump Plaza. If the
operations of the Taj Mahal and Trump Plaza do not generate the anticipated
cash flow to fund the Taj Mahal Expansion, the ability to complete such
expansion will depend on the ability to obtain financing for such purposes in
addition to that currently contemplated. There can be no assurance that Taj
Associates and Plaza Associates will be able to generate sufficient cash flow
from operations or to obtain financing on terms satisfactory to AC Holdings,
if at all. In addition, any indebtedness incurred in connection with the Taj
Mahal Expansion would be subject to the limitations set forth in the Senior
Note Indenture and the Indenture. See "--High Leverage and Fixed Charges," "--
Holding Company Structure; Need for Additional Financing," "--Restrictions on
Certain Activities" and "Business--Business Strategy--Taj Mahal."
ABSENCE OF PUBLIC MARKET; POTENTIAL VOLATILITY OF MARKET PRICES
The Issuers do not intend to list the First Mortgage Notes on a national
securities exchange or to seek the admission thereof for trading in the
National Association of Securities Dealers Automated Quotation System. The
Underwriters have advised the Issuers that they currently intend to make a
market in the First Mortgage Notes, but are not obligated to do so and may
discontinue any such market making at any time without notice. Further, there
can be no assurance as to the liquidity of, or that an active trading market
will develop for, the First Mortgage Notes.
In addition, factors such as quarterly fluctuations in Taj Associates' and
Plaza Associates' financial and operating results, announcements by the
Issuers or others and developments affecting Taj Associates and Plaza
Associates, their customers or the gaming industry generally could cause the
market price of the First Mortgage Notes to fluctuate substantially.
COMPETITION
Competition in the Atlantic City casino hotel market is intense. Trump Plaza
and the Taj Mahal compete with each other and with the other casino hotels
located in Atlantic City, including the other casino hotel owned by Trump,
Trump's Castle Casino Resort ("Trump's Castle"). See "--Conflicts of
Interest." Trump Plaza and the Taj Mahal are located on The Boardwalk,
approximately 1.2 miles apart from each other. At present, there are 12 casino
hotels located in Atlantic City, including the Taj Mahal and Trump Plaza, all
of which compete for patrons. In addition, there are several sites on The
Boardwalk and in the Atlantic City Marina area on which casino hotels could be
built in the future and various applications for casino licenses have been
filed and announcements with respect thereto made from time to time (including
a proposal by Mirage Resorts, Inc.), although management is not aware of any
current construction of such sites by third parties. No new casino hotels have
commenced operations in Atlantic City since 1990, although several existing
casino hotels have recently expanded or are in the process of expanding their
operations. While management believes that the addition of hotel capacity
would be beneficial to the Atlantic City market generally, there can be no
assurance that such expansion would not be materially disadvantageous to
either Trump Plaza or the Taj Mahal. There also can be no assurance that the
Atlantic City development projects which are planned or underway will be
completed.
Total Atlantic City gaming revenues have increased over the past four years,
although at varying rates. Although all 12 Atlantic City casinos reported
increases in gaming revenues in 1992 as compared to 1991, management believes
that this was due, in part, to the depressed industry conditions in 1991. In
1993, nine casinos experienced increased gaming revenues compared to 1992
(including the Taj Mahal), while three casinos (including Trump Plaza)
experienced decreased revenues. In 1994, ten casinos experienced increased
gaming
26
revenues compared to 1993 (including the Taj Mahal), while two casinos
(including Trump Plaza) experienced decreased revenues. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994.
In 1990, the Atlantic City casino industry experienced a significant
increase in room capacity and in available casino floor space, including the
rooms and floor space made available by the opening of the Taj Mahal. The
effects of such expansion were to increase competition and to contribute to a
decline in 1990 in gaming revenues per square foot of casino floor space. In
1990, the Atlantic City casino industry experienced a decline in gaming
revenues per square foot of 5.0%, which trend continued in 1991, although at
the reduced rate of 2.9%. In 1992, however, the Atlantic City casino industry
experienced an increase of 6.9% in gaming revenues per square foot from 1991.
Gaming revenues per square foot increased by 1.4% for 1993 (excluding poker
and race simulcast rooms, which were introduced for the first time in such
year), compared to 1992. In 1994, gaming revenues per square foot decreased
2.5% (or 4.5%, including square footage devoted to poker, keno and race
simulcasting). The 1994 decline was due, in part, to the increase in casino
floor space in Atlantic City as a result of expansion of a number of casinos
and to the severe weather conditions which affected the Northeast during the
winter of 1994. Between April 30, 1993 and September 30, 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 183,000 square feet
(23.6%) of which approximately 73,000 square feet is currently devoted to
poker, keno and race simulcasting. During this same period, 176 poker tables
and 5,967 slot machines were added. See "Business--Atlantic City Market."
Trump Plaza and the Taj Mahal also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, Trump Plaza and the Taj Mahal face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in
its surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in 1,800 bars, restaurants and bowling
alleys across the state. In addition to competing with other casino hotels in
Atlantic City and elsewhere, by virtue of their proximity to each other and
the common aspects of certain of their respective marketing efforts, including
the common use of the "Trump" name, Trump Plaza and the Taj Mahal compete
directly with each other for gaming patrons. Although management does not
intend to operate Trump Plaza and the Taj Mahal to the competitive detriment
of each other, the effect may be that Trump Plaza and the Taj Mahal will
operate to the competitive detriment of each other.
In addition, Trump Plaza and the Taj Mahal face competition from casino
facilities in a number of states operated by federally recognized Native
American tribes. Pursuant to the Indian Gaming Regulatory Act ("IGRA"), which
was passed by Congress in 1988, any state which permits casino style gaming
(even if only for limited charity purposes) is required to negotiate gaming
compacts with federally recognized Native American tribes. Under IGRA, Native
American tribes enjoy comparative freedom from regulation and taxation of
gaming operations, which provides them with an advantage over their
competitors, including Trump Plaza and the Taj Mahal. See "Business--
Competition."
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans
to begin operating slot machines at race tracks in the State of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved large scale land-
based casinos. Additionally, Las Vegas experienced significant expansion in
1993 and 1994, with additional capacity planned and currently under
construction. The operations
27
of Trump Plaza and the Taj Mahal could be adversely affected by such
competition, particularly if casino gaming were permitted in jurisdictions
near or elsewhere in New Jersey or in other states in the Northeast. In
December 1993, the Rhode Island Lottery Commission approved the addition of
slot machine games on video terminals at Lincoln Greyhound Park and Newport
Jai Alai, where poker and blackjack have been offered for over two years.
Currently, casino gaming, other than Native American gaming, is not allowed in
other areas of New Jersey or in Connecticut, New York or Pennsylvania. On
November 17, 1995, a proposal to allow casino gaming in Bridgeport,
Connecticut, was voted down by that state's senate. A New York State Assembly
plan has the potential of legalizing non-Native American gaming in portions of
upstate New York. Essential to this plan is a proposed New York State
constitutional amendment that would legalize gambling. To amend the New York
Constitution, the next elected New York State Legislature must repass a
proposal legalizing gaming and a statewide referendum, held no sooner than
November 1997, must approve the constitutional amendment. To the extent that
legalized gaming becomes more prevalent in New Jersey or other jurisdictions
near Atlantic City, competition would intensify. In particular, in the past,
proposals have been introduced to legalize gaming in other locations,
including Philadelphia.
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. To date, no such
legislation has been enacted. Management is unable to predict whether any such
legislation, in New Jersey or elsewhere, will be enacted or whether, if
passed, it would have a material adverse impact on their respective results of
operations or financial condition.
Management believes that competition in the gaming industry, is based on the
quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Management expects competition
in the casino gaming industry to be intense as more casinos are opened and new
entrants into the gaming industry become operational. Furthermore, new or
expanded operations by other persons can be expected to increase competition
for existing and future operations and could result in a saturation of the
Atlantic City gaming market.
CONFLICTS OF INTEREST
Trump is currently the beneficial owner of 100% of Trump's Castle, which
competes directly with the Taj Mahal and Trump Plaza, and Trump could, under
certain circumstances, have an incentive to operate Trump's Castle to the
competitive detriment of the Taj Mahal and Trump Plaza. Trump and TC/GP, Inc.
("TC/GP"), a corporation beneficially owned by Trump, have entered into a
services agreement (the "Trump's Castle Services Agreement") with Trump's
Castle Associates ("TCA"), the partnership that owns and operates Trump's
Castle, pursuant to which TC/GP has agreed to provide marketing, advertising
and promotional and other similar and related services to Trump's Castle.
Pursuant to the Trump's Castle Services Agreement, in respect of any matter or
matters involving employees, contractors, entertainers, celebrities, vendors,
patrons, marketing programs, promotions, special events, or otherwise, Trump
will, and will cause his affiliates to the best of his ability and consistent
with his fiduciary obligations to TCA, Trump Plaza and the Taj Mahal to act
fairly and in a commercially reasonable manner so that on an annual overall
basis (x) neither Trump Plaza nor the Taj Mahal shall realize a competitive
advantage over Trump's Castle, by reason of any activity, transaction or
action engaged in by Trump or his affiliates and (y) Trump's Castle shall not
be discriminated against.
Trump is subject to certain loan agreements which contain covenants that
relate to his equity interests in THCR and Taj Associates. See "--Control and
Involvement of Trump." In connection with the Merger Transaction, Trump is
seeking to obtain from his personal creditors, among other things, releases of
liens on his equity interests in Taj Associates, which releases are required
to consummate the Merger Transaction. See "The Merger Transaction" and
"Business--Certain Indebtedness--Taj Associates." Bankers Trust, an affiliate
of BT Securities Corporation, which has rendered financial advisory services
to THCR, AC Holdings and Taj Associates in the past, is a significant creditor
of Trump, acted as a co-manager in the June 1995 Offerings, is expected to
serve as an underwriter in the Stock Offering, and will be receiving a payment
of $10 million in
28
connection with the Merger Transaction in order to release certain liens and
guarantees. See "Business--Certain Indebtedness--Taj Associates--TTMI Note."
In connection with the Merger Transaction, Plaza Associates intends to
purchase Trump Plaza East from Missouri Boardwalk, Inc. ("Boardwalk"), a
wholly owned subsidiary of Midlantic National Bank ("Midlantic"). As a result
of such purchase, Trump will obtain a release of certain debt owed by him to
Midlantic, which debt was associated with Trump's original purchase of the
real property underlying Trump Plaza East.
Nicholas L. Ribis, the Chief Executive Officer of THCR, Plaza Associates and
Taj Associates, is also the Chief Executive Officer of TCA, the partnership
that owns and operates Trump's Castle. Messrs. Robert M. Pickus and John P.
Burke, officers of THCR and Plaza Associates, are each executive officers of
TCA, and Mr. Pickus is an officer of Taj Associates. Mr. Burke is an officer
of TM/GP. In addition, Messrs. Trump, Ribis and Burke serve on one or more of
the governing bodies of THCR, Plaza Associates, Taj Holding, TCA and their
affiliated entities. Mr. Pickus serves on one or more of the governing bodies
of Taj Holding and TCA. As a result of Trump's interests in three competing
Atlantic City casino hotels, the common chief executive officer and other
common officers, a conflict of interest may be deemed to exist, including by
reason of such persons' access to information and business opportunities
possibly useful to any or all of such casino hotels. Furthermore, Trump has
agreed that he will pursue, develop, control and conduct all new gaming
activities through THCR. Although no specific procedures have been devised for
resolving conflicts of interest confronting, or which may confront, Trump,
such persons and all the casinos affiliated with Trump, Messrs. Trump, Ribis,
Pickus and Burke have informed THCR that they will not engage in any activity
which they reasonably expect will harm THCR or its affiliates (including AC
Holdings) or is otherwise inconsistent with their obligations as officers and
directors of THCR, or its affiliates. See "Certain Transactions."
CONTROL AND INVOLVEMENT OF TRUMP
Upon consummation of the Merger Transaction, through his beneficial
ownership of the Class B Common Stock, Trump will control approximately % of
the total voting power of THCR (assuming a price of $ per share of Common
Stock as market value in connection with the Merger and as the public offering
price in the Stock Offering). Management believes that the involvement of
Trump in the affairs of THCR is an important factor that will affect the
prospects of AC Holdings. Following the Merger Transaction, Trump will
continue to pursue, develop, control and conduct all of his gaming business
(except for Trump's Castle) through THCR. See "--Conflicts of Interest."
Although Trump has no obligation to contribute funds to THCR or AC Holdings
and is not providing any personal guarantees in connection with the Merger
Transaction, management believes that Trump's financial condition and general
business success together with the public's perception of such success may be
relevant to the success of AC Holdings due, in part, to the marquee value of
the "Trump" name. Trump is engaged, through various enterprises, in a wide
range of business activities. During 1989 through 1992, certain of Trump's
businesses, including businesses for which Trump supplied personal guarantees,
experienced financial difficulties that necessitated a comprehensive financial
restructuring of certain of his properties and holdings, including Trump's
interest in Trump Plaza, Trump's Castle and the Taj Mahal, and his personal
indebtedness. See "Management." Since 1990, Trump has engaged in a series of
transactions designed to reduce his personal indebtedness. However, Trump will
continue to have a substantial amount of personal indebtedness following the
Merger Transaction, most of which has a scheduled maturity in 1998.
Trump will have ongoing requirements to make payments of principal and
interest on his outstanding indebtedness following the consummation of the
Merger Transaction. In addition, the agreements with respect to Trump's
indebtedness generally contain comprehensive covenants and events of default
which relate to the operations of certain of his affiliates. If such covenants
are breached or if events of default otherwise occur, either of which could
occur at any time, such indebtedness could be subject to acceleration by the
applicable lenders. Any such acceleration could have a material adverse effect
on Trump. Furthermore, a substantial portion of Trump's assets consist of real
property or interests in regulated enterprises, which may affect the liquidity
of such assets. Trump has advised AC Holdings that he is actively pursuing all
reasonable means of providing for
29
the repayment or rescheduling of such indebtedness. There can be no assurance
that Trump will be successful in repaying or rescheduling his indebtedness or
that his assets will appreciate sufficiently to provide a source of repayment
for such indebtedness. Trump's ability to repay his indebtedness is subject to
significant business, economic, regulatory and competitive uncertainties, many
of which are beyond his control. Any failure by Trump to repay or reschedule
his indebtedness or to otherwise maintain financial stability may have a
material adverse effect on AC Holdings. Moreover, if the CCC at any time finds
Trump to be financially unstable under the Casino Control Act, the CCC is
authorized to take any necessary public action to protect the public interest,
including the suspension or revocation of the casino licenses of Plaza
Associates and/or Taj Associates. See "--Strict Regulation by Gaming
Authorities" and "Regulatory Matters."
In order to consummate the Merger Transaction, Trump will need to obtain
certain consents and waivers from his personal creditors in addition to
Bankers Trust, which creditors have a security interest in his equity
interests in Taj Associates. The prior consent of such creditors is a
condition to consummation of the Merger Transaction.
The Amended and Restated Certificate of Incorporation of THCR (the
"Certificate of Incorporation") and the Amended and Restated By-Laws of THCR
(the "By-Laws") contain provisions which may have the effect of delaying,
deferring or preventing a change in control of THCR. In addition, the First
Mortgage Note Indenture will contain provisions relating to certain changes of
control of THCR, THCR Holdings, AC Holdings, Plaza Associates and Taj
Associates. Upon the occurrence of such a change of control, the respective
issuer would be obligated to make an offer to purchase all of the respective
First Mortgage Notes then outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest. There can be no
assurance that funds necessary to effect such a purchase would be available if
such an event were to occur. See "Description of the First Mortgage Notes."
Because of the control of Trump as described above, the value of the First
Mortgage Notes may be less than it would otherwise be absent such control.
RELIANCE ON KEY PERSONNEL
The ability of AC Holdings to operate successfully is dependent, in part,
upon the continued services of certain of its employees, including Nicholas L.
Ribis, the President and Chief Executive Officer of THCR, the Chief Executive
Officer of THCR Holdings, the Chief Executive Officer of Plaza Associates and
the Chief Executive Officer of Taj Associates. Mr. Ribis' employment
agreements with THCR and THCR Holdings on the one hand and Taj Associates on
the other will expire on June 7, 2000 and September 25, 1996, respectively
(subject to earlier termination upon the occurrence of certain events). There
can be no assurance that a suitable replacement for Mr. Ribis could be found
in the event of a termination of his employment. A shortage of skilled
management-level employees currently exists in the gaming industry which may
make it difficult and expensive to attract and retain qualified employees. In
addition, Mr. Ribis and certain other executives of THCR and Taj Associates
currently allocate their time among THCR's and Taj Associates' various
operations as well as certain other enterprises owned by Trump. Following the
consummation of the Merger Transaction, Mr. Ribis will devote approximately
75% of his professional time to the affairs of THCR and its subsidiaries. See
"Management."
STRICT REGULATION BY GAMING AUTHORITIES
The ownership and operation of the gaming related businesses of Plaza
Associates and Taj Associates are subject to strict state regulation under the
Casino Control Act. Plaza Associates and Taj Associates and their various
officers and other qualifiers have received the licenses, permits and
authorizations required to operate Trump Plaza and the Taj Mahal,
respectively. Failure to maintain or obtain the requisite casino licenses
would have a material adverse effect on AC Holdings. On June 22, 1995, the CCC
renewed Taj Associates' casino license through March 31, 1999 and renewed
Plaza Associates' casino license through June 30, 1999. No assurance can be
given as to the term for which the CCC will renew these licenses or as to what
license conditions, if any, may be imposed by the CCC in connection with any
future renewals. The Merger Transaction is subject to approval by the CCC. See
"Regulatory Matters--New Jersey Gaming Regulation."
30
The Casino Control Act imposes substantial restrictions on the ownership of
securities of the Company. A shareholder may be required to meet the
qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. Each institutional investor (as defined in
the Casino Control Act) seeking a waiver of qualification must execute a
certification that it has no intention of influencing or affecting the affairs
of the issuer, the casino licensee or its holding or intermediary companies
(except for voting at shareholder meetings), which certification will be
provided to the New Jersey Division of Gaming Enforcement and the CCC.
Pursuant to the provisions of the Casino Control Act, the Certificate of
Incorporation provides that all securities of the Company are held subject to
the condition that, if a holder thereof is found to be disqualified by the CCC
pursuant to the provisions of the Casino Control Act, such holder shall (a)
dispose of his interest in the Company; (b) not receive any dividends or
interest upon any such securities; (c) not exercise, directly or through any
trustee or nominee, any right conferred by such securities; and (d) not
receive any remuneration in any form from the casino licensee for services
rendered or otherwise. See "Regulatory Matters--New Jersey Gaming
Regulations."
LIMITATIONS ON LICENSE OF THE TRUMP NAME
Subject to certain restrictions, THCR has the exclusive right (except with
respect to the Taj Mahal (during the period prior to the consummation of the
Merger Transaction) and Trump's Castle) to use the "Trump" name and likeness
in connection with gaming and related activities pursuant to a trademark
license agreement between Trump and THCR (the "License Agreement"). See
"Business--Trademark/Licensing." THCR's rights under the License Agreement are
secured by a security interest in the names "Trump," "Donald Trump" and
"Donald J. Trump" (including variations thereon, the "Trump Names") and
related intellectual property rights (collectively, the "Marks") for use in
connection with casino services, pursuant to a security agreement (the
"Trademark Security Agreement"). If there were a default under the License
Agreement or the Trademark Security Agreement, THCR would have rights, subject
to the requirements of applicable state law, to enforce the rights and
remedies contained in the Trademark Security Agreement. In the event of a
foreclosure sale of the Marks, the net amount realized in such sale by THCR
might not yield the full amount of damages that THCR could sustain as a result
of the default. In addition, the existence of rights of others to the use of
the Trump Names, including pursuant to the existing security interests with
respect to trademarks associated with Trump's Castle as well as to any other
security interests in trademarks for non-gaming hotels, could adversely affect
the ability of THCR to realize the benefits of the Trademark Security
Agreement. THCR's right to repossess and dispose of the Marks upon a breach of
the License Agreement may be significantly impaired if the owner of the Marks
were to become the subject of a case under the United States Bankruptcy Code
(the "Bankruptcy Code") prior to THCR's having repossessed and disposed of the
Marks. Under the Bankruptcy Code, secured creditors, such as THCR, are
automatically stayed from repossessing or disposing of their collateral
without bankruptcy court approval. Moreover, the Bankruptcy Code permits a
defaulting debtor to retain and continue to use the collateral if the secured
creditor is given "adequate protection" of its interest in the collateral.
Such adequate protection under the Bankruptcy Code may take various forms,
including the granting of a replacement lien or other relief that will enable
the secured creditor to realize the "indubitable equivalent" of its interest
in the collateral. Accordingly, it is impossible to predict whether or when
THCR would repossess or dispose of the Marks, or whether or to what extent
THCR would then be compensated for any delay in payment or loss of value of
the Marks through the requirement of "adequate protection" if the owner of the
Marks were to become the subject of a bankruptcy or reorganization case.
Furthermore, the License Agreement could be rejected in connection with a
bankruptcy of the licensor if, in the business judgment of a trustee or the
licensor, as debtor-in-possession, rejection of the contract would benefit the
licensor's estate. In the event of such rejection, THCR could assert a claim
for damages, secured by THCR's lien on the Marks.
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of AC Holdings under the First Mortgage Notes, may be
subject to review under state or federal fraudulent transfer laws in the event
of the bankruptcy or other financial difficulty of AC Holdings. Under those
laws, if a court in a lawsuit by an unpaid creditor or representative of
creditors of AC Holdings, such as a trustee in bankruptcy, or AC Holdings as
debtor in possession, were to find that at the time AC Holdings incurred its
obligations under the First Mortgage Notes, it (a) did so with actual intent
to hinder, delay or defraud its
31
creditors, or (b) did not receive reasonably equivalent value or fair
consideration therefor, and either (i) was insolvent, (ii) was rendered
insolvent, (iii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital, or (iv)
intended to incur or believed that it would incur debts beyond its ability to
pay as such debts matured, such court could avoid AC Holdings obligations
under the First Mortgage Notes and direct the return of any amounts paid
thereunder to AC Holdings or to a fund for the benefit of its creditors.
Similarly, the obligations of Taj Associates or Plaza Associates (or any
other Guarantor) under its guarantee of the First Mortgage Notes, as well as
the security interest granted by such Guarantor in its assets to secure the
First Mortgage Notes and such guarantee, may be subject to review under such
laws in the event of the bankruptcy or other financial difficulty of such
Guarantor. In that event, if a court were to find that at the time such
Guarantor incurred such obligations or granted such security interest the
factors set forth in either clause (a) or (b) in the foregoing paragraph
applied to such Guarantor, such court could avoid such Guarantor's obligations
under its guarantee, as well as the security interests securing such
guarantee, and direct the return of any amounts paid under such guarantee to
such Guarantor or to a fund for the benefit of its creditors.
Among other things, a court might conclude that a Guarantor did not receive
reasonably equivalent value or fair consideration for its guarantee to the
extent that the economic benefits realized by it in the Merger Transaction
(including the payment of its outstanding obligations) was less than the
aggregate amount of its liability under its guarantee.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured.
32
USE OF PROCEEDS
The net proceeds to THCR from the First Mortgage Note Offering, after
payment of underwriting discounts and expenses, are estimated to be $
million. In connection with the Merger Transaction, the net proceeds from the
First Mortgage Note Offering, together with the net proceeds from the Stock
Offering (estimated to be $ million) and available cash, will be used as set
forth below.
THE ANTICIPATED SOURCES AND USES SET FORTH HEREIN NECESSARILY ARE BASED UPON
A NUMBER OF ESTIMATES AND ASSUMPTIONS THAT, WHILE PRESENTED WITH NUMERICAL
SPECIFICITY AND CONSIDERED REASONABLE BY THCR, ARE INHERENTLY SUBJECT TO
SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THCR, AND UPON
ASSUMPTIONS WITH RESPECT TO FUTURE BUSINESS DECISIONS WHICH ARE SUBJECT TO
CHANGE.
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming a March 31, 1996 consummation):
ANTICIPATED SOURCES OF FUNDS ANTICIPATED USES OF FUNDS
(DOLLARS IN
CASH SOURCES THOUSANDS)
- ------------ -----------
Mortgage Note Offering....... $1,180,000
Stock Offering(/1/).......... 140,000
Available Cash............... 46,947
----------
Total Cash Sources.......... 1,366,947
NON-CASH SOURCES
- ----------------
Common Stock to be issued to
Holders of Taj Holding Class
A Common Stock(/1/)......... 40,500
Common Stock Equivalents to be
issued to Trump(/2/).. 40,500
Common Stock to be issued to
First Fidelity(/3/)......... 10,000
----------
Total Non-Cash Sources...... 91,000
----------
TOTAL SOURCES................ $1,457,947
==========
(DOLLARS IN
CASH USES THOUSANDS)
- --------- -----------
Redeem Taj Bonds(/4/)....... $ 793,767
Purchase and defease Plaza
Notes(/5/)................. 377,790
Satisfy NatWest Loan........ 32,000
Exercise Trump Plaza East
Purchase Option............ 28,000
Cash Payment to First
Fidelity................... 50,000
Cash Payment to Bankers
Trust and Working Capital.. 10,000
Redeem Taj Holding Class B
Common Stock............... 390
Transaction Fees and
Expenses................... 70,500
----------
Total Cash Uses............ 1,366,947
NON-CASH USES
- -------------
Acquisition of Taj Holding
Class A Common Stock....... 40,500
Acquisition of Trump's
Direct and Indirect Equity
Interests in Taj
Associates(/1/)............ 40,500
Common Stock issued to First
Fidelity(/3/).............. 10,000
----------
Total Non-Cash Uses........ 91,000
---------
TOTAL USES.................. $1,457,947
==========
- ---------------------
(/1/)Assumes all holders of Taj Holding Class A Common Stock elect Stock
Consideration in connection with the Merger. See "--The Merger
Transaction."
(/2/)Includes the value of the shares of Common Stock into which the limited
partnership interest in THCR Holdings to be issued to Trump and TTMI in
connection with the Merger Transaction will be convertible.
(/3/)Assumes a price of $20.00 per share of Common Stock.
(/4/)Includes the additional Amount (as defined) through March 31, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(/5/)Assumesthat 90% of the Plaza Notes are purchased and the remaining 10%
defeased.
33
CAPITALIZATION
The following table sets forth the capitalization of AC Holdings as of
December 31, 1995, as adjusted to give effect to the Merger Transaction. This
table should be read in conjunction with AC Holdings's consolidated financial
statements and notes thereto included elsewhere in this Prospectus.
AS OF DECEMBER 31, 1995
-----------------------------------------
ACTUAL
-------------------------------
TAJ ASSOCIATES PLAZA ASSOCIATES PRO FORMA
-------------- ---------------- ---------
(DOLLARS IN THOUSANDS)
Cash:
Debt:
First Mortgage Notes
Plaza Notes, net of discount
Taj Bonds
Other Debt
Total Debt
Partners' Capital:
Contributed Capital
Accumulated Deficit
Total Partners Capital
34
SELECTED HISTORICAL
COMBINED FINANCIAL INFORMATION
AC HOLDINGS
The following table sets forth certain historical consolidated financial
information of Plaza Associates and AC Holdings for each of the five years
ended December 31, 1990 through 1994 and for the nine-month period ended
September 30, 1994 and September 30, 1995 (unaudited). The historical
financial information of AC Holdings and Plaza Associates as of December 31,
1993 and 1994 and for the years ended December 31, 1992, 1993 and 1994 as set
forth below has been derived from the audited consolidated financial
statements of AC Holdings and Plaza Associates included elsewhere in this
Prospectus. The historical financial information of AC Holdings and Plaza
Associates as of December 31, 1990, 1991 and 1992 and for the years ended
December 31, 1990 and 1991 as set forth below has been derived from the
audited consolidated financial statements of AC Holdings and Plaza Associates
not included in this Prospectus. AC Funding was recently formed and has had no
operations to date.
The unaudited financial information as of September 30, 1994 and 1995 and
the periods then ended has been derived from the unaudited condensed
consolidated financial statements included elsewhere in this Prospectus and in
the opinion of management, includes all adjustments, consisting of only
normal, recurring adjustments, necessary to present fairly the financial
position, results of operations and changes in cash flows for the periods
presented. The results of these interim periods are not necessarily indicative
of the operating results for a full year. All financial information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Financial
Information" and the consolidated and condensed financial statements and the
related notes thereto included elsewhere in this Prospectus.
NINE MONTHS NINE MONTHS
ENDED ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------------------------------------------ ------------- -------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming................. $276,932 $233,265 $265,448 $264,081 $261,451 $197,068 $101,634
Other.................. 87,286 66,411 73,270 69,203 66,869 50,128 25,738
Trump World's Fair..... -- 11,547 9,465 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Gross revenues........ 364,218 311,223 348,183 333,284 328,320 247,196 127,372
Promotional
allowances............ 44,281 31,539 34,865 32,793 33,257 25,130 14,071
-------- -------- -------- -------- -------- -------- --------
Net revenues.......... 319,937 279,684 313,318 300,491 295,063 222,066 113,301
Costs and expenses:
Gaming................. 178,356 133,547 146,328 136,895 139,540 104,100 52,681
Other.................. 26,331 23,404 23,670 24,778 23,380 17,352 8,596
General and
administrative........ 76,057 69,631 75,459 71,624 73,075 53,933 23,799
Depreciation and
amortization.......... 16,725 16,193 15,842 17,554 15,653 11,734 5,091
Restructuring charges.. -- 943 5,177 -- -- -- --
Trump World's Fair..... 3,359 19,879 11,839 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses............. 300,828 263,597 278,315 250,851 251,648 187,119 90,167
-------- -------- -------- -------- -------- -------- --------
Income from
operations............ 19,109 16,087 35,003 49,640 43,415 34,947 23,134
-------- -------- -------- -------- -------- -------- --------
Interest expense, net.. 33,128 33,363 31,356 39,889 48,219 36,051 16,816
Other non-operating
(income) expense(a)... (2,400) 14,818 1,462 3,873 4,931 4,724 2,198
Extraordinary (loss)
gain.................. -- -- (38,205) 4,120 -- -- --
Provision (benefit) for
income taxes.......... (1,028) (2,864) (233) 660 (865) (523) 1,153
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $(10,591) $(29,230) $(35,787) $ 9,338 $ (8,870) $ (5,305) $ 1,299
======== ======== ======== ======== ======== ======== ========
Net income per common
share(b).............. $.13
====
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents........... $ 10,005 $ 10,474 $ 18,802 $ 14,393 $ 11,144 $ 22,159 $ 23,357
Property and equipment,
net................... 316,595 306,834 300,266 293,141 298,354 296,300 399,922
Total assets........... 395,775 378,398 370,349 374,498 375,643 386,080 599,415
Total long-term debt,
net of current
maturities(c)......... 247,048 33,326 249,723 395,948 403,214 398,644 486,655
Preferred partnership
interest.............. -- -- 58,092 -- -- -- --
Total capital
(deficit)............. 83,273 54,043 11,362 (54,710) (63,580) (60,068) 53,727
- -------
(a) Other non-operating (income) expense for the year ended December 31, 1990
includes income of $2.4 million resulting from the settlement of a lawsuit
relating to a boxing match. Other non-operating (income) expense for the
year ended December 31, 1991 includes a $10.9 million charge associated
with the rejection of the lease associated with the former Trump Regency
Hotel and $4.0 million of costs associated with certain litigation. Other
non-operating (income) expense for 1992 includes $1.5 million of costs
associated with certain litigation. Other non-operating (income) expense
for the years ended December 31, 1993 and 1994 and for the nine months
ended September 30, 1994 and 1995 includes $3.9, $4.9, 3.7 and 1.3
million, respectively, of real estate taxes and leasing costs associated
with Trump Plaza East.
(b) Earnings per share is based on the weighted average number of shares of
Common Stock and common stock equivalents including shares awarded to the
Chief Executive Officer under a phantom stock unit award. The shares of
Class B Common Stock owned by Trump have no economic interest and,
therefore, are not considered.
(c) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
35
TAJ ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1990 through 1994 and for the nine-month periods ended September 30, 1994 and
1995 (unaudited). The historical financial information of Taj Associates as of
December 31, 1993 and 1994, and for the years ended December 31, 1992, 1993
and 1994 as set forth below has been derived from the audited consolidated
financial statements of Taj Associates included elsewhere in this Prospectus.
The historical financial information of Taj Associates as of December 31,
1990, 1991 and 1992, and for the years ended December 31, 1990 and 1991 as set
forth below has been derived from the audited consolidated financial
statements of Taj Associates not included in this Prospectus.
The unaudited financial information as of September 30, 1994 and 1995, and
the nine months then ended has been derived from the unaudited condensed
consolidated financial statements included elsewhere in this Prospectus and in
the opinion of management, includes all adjustments, consisting of only
normal, recurring adjustments, necessary to present fairly the financial
position, results of operations and changes in cash flows for the periods
presented. The results of these interim periods are not necessarily indicative
of the operating results for a full year. All financial information should be
read in conjunction with "Unaudited Pro Forma Financial Information" and the
consolidated and condensed financial statements and related notes thereto
included elsewhere in this Prospectus.
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------- ------------------
1990(A) 1991 1992 1993 1994 1994 1995
--------- --------- --------- -------------- --------- -------- --------
(IN THOUSANDS) (UNAUDITED)
STATEMENT OF OPERATIONS
DATA:
REVENUES:
Gaming................. $ 300,902 $ 380,997 $ 414,045 $ 442,064 $ 461,622 $345,329 $377,368
Other.................. 107,239 111,251 116,958 113,291 117,738 90,011 87,447
--------- --------- --------- --------- --------- -------- --------
Gross Revenues........ 408,141 492,248 531,003 555,355 579,360 435,340 464,815
Promotional
allowances............ 51,443 53,935 61,250 56,444 62,178 48,802 47,519
--------- --------- --------- --------- --------- -------- --------
Net Revenues.......... 356,698 438,313 469,753 498,911 517,182 386,538 417,296
COSTS AND EXPENSES:
Gaming................. 164,838 204,513 227,394 237,566 260,472 196,412 208,671
Other.................. 36,613 39,181 39,125 40,605 40,697 29,633 30,097
General and
Administrative........ 92,886 100,191 98,819 99,424 99,629 77,359 73,717
Depreciation and
Amortization.......... 44,647 36,202 36,388 36,858 39,750 28,944 32,407
Restructuring costs.... 41,003 26,398 -- -- -- -- --
--------- --------- --------- --------- --------- -------- --------
Income (loss) from
Operations............ (23,289) 31,828 68,027 84,458 76,634 54,190 72,404
--------- --------- --------- --------- --------- -------- --------
Net interest expense... (82,105) (100,683) (103,126) (106,997) (113,292) (85,512) (86,112)
Extraordinary gain(b).. -- 259,618 -- -- -- -- --
Net Income (loss)...... $(124,269) $ 188,513 $ (35,099) $ (22,539) $ (36,658) $(31,322) $(13,708)
========= ========= ========= ========= ========= ======== ========
BALANCE SHEET DATA:
(AT END OF PERIOD)
Cash and cash
equivalents........... $ 22,480 $ 22,535 $ 34,062 $ 58,044 $ 61,196 $ 76,502 $108,769
Property and equipment-
net................... 797,821 766,135 742,129 722,834 706,785 710,007 694,602
Total assets........... 845,804 814,051 802,556 811,508 807,612 822,914 843,725
Total long-term
debt(c)............... 917 573,844 595,682 625,765 656,701 651,626 688,143
Total capital
(deficit)............. (69,420) 167,837 130,913 106,641 67,812 73,609 52,899
- --------
(a) Operations commenced on April 2, 1990. Results of operations for 1990 are
not necessarily indicative of the operating results for a full year.
(b) The extraordinary gain of $259,618 for the year ended December 31, 1991
reflects a $204,276 accounting adjustment to carry the Old Taj Bonds at
fair market value based on current interest rates at the date of issuance
(effective rate of approximately 18%), and $20,000 related to settlement
of the subcontractors' note payable, with the balance representing a
discharge of accrued interest on indebtedness.
(c) Long-term debt of $720,175 as of December 31, 1990 had been classified as
a current liability.
36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Set forth below is a discussion and analysis of the financial condition and
results of operations of Plaza Associates. Neither AC Holdings nor any of its
subsidiaries has any significant operating history, other than Plaza
Associates. Also set forth below is a discussion and analysis of the financial
condition and results of operations of Taj Associates.
PLAZA ASSOCIATES
RESULTS OF OPERATIONS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND
1994
Gaming revenues were $224,499,000 for the nine months ended September 30,
1995, an increase of $27,431,000 or 13.9% from gaming revenues of $197,068,000
for the comparable period in 1994. This increase in gaming revenues consisted
of an increase in both table games and slot revenues. While the first nine
months of 1994 were adversely affected by unfavorable winter weather,
construction and management turnover, management believes that the increase in
gaming revenues in 1995 is also due to an increased level of demand evident in
the Atlantic City market generally, as well as management's marketing and
other initiatives, the introduction of new slot machines and table games, the
addition of bill acceptors on slot machines, and an increase in casino floor
square footage.
Slot revenues were $152,318,000 for the nine months ended September 30,
1995, an increase of $24,534,000 or 19.2% from slot revenues of $127,784,000
for the comparable period in 1994. This increase was primarily due to an
increase in casino floor square footage and the introduction of new slot
machines, as well as management's marketing and other initiatives.
Table games revenues were $72,181,000 for the nine months ended September
30, 1995, an increase of $2,897,000 or 4.2% from table games revenues of
$69,284,000 for the comparable period in 1994. Table games drop (i.e., the
dollar value of chips purchased) increased by 5.0% for the nine months ended
September 30, 1995 from 1994.
Other revenues were $55,261,000 for the nine months ended September 30,
1995, an increase of $5,133,000 or 10.2% from other revenues of $50,128,000
for the comparable period in 1994. Other revenues include revenues from rooms,
food, beverage and miscellaneous items. The increase primarily reflects
increases in food and beverage revenues attendant to increased levels of
gaming activity and increased promotional expenses.
Promotional allowances were $28,611,000 for the nine months ended September
30, 1995, an increase of $3,481,000 or 13.9% from promotional allowances of
$25,130,000 for the comparable period in 1994. This increase is primarily
attributable to an increase in gaming activity during the nine months ended
September 30, 1995.
Gaming costs and expenses were $121,987,000 for the nine months ended
September 30, 1995, an increase of $17,887,000 or 17.2% from gaming costs and
expenses of $104,100,000 for the comparable period in 1994. This increase was
primarily due to increased promotional and operating expense and taxes
associated with increased levels of gaming revenues during the nine months
ended September 30, 1995.
General and administrative expenses were $51,073,000 for the nine months
ended September 30, 1995, a decrease of $3,855,000 or 7.0% from general and
administrative expenses of $54,928,000 for the comparable period in 1994. This
decrease is primarily the result of cost containment measures.
Income from operations was $48,217,000 for the nine months ended September
30, 1995, an increase of $14,265,000 or 42.0% from income from operations of
$33,952,000 for the comparable period in 1994.
37
Other non-operating expense was $3,847,000 for the nine months ended
September 30, 1995, an increase of $118,000 from other non-operating expense
of $3,729,000 for the comparable period in 1994. This increase is attributable
to costs associated with Trump Plaza East.
The extraordinary loss of $9,250,000 for the nine months ended September 30,
1995 relates to the redemption and write-off of unamortized deferred financing
costs relating to the repurchase and redemption on June 12, 1995 of all of the
12 1/2% Pay-in-Kind Notes due 2003 of Plaza Holding (the "PIK Notes") and
related warrants to acquire PIK Notes (the "PIK Note Warrants").
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Gaming revenues were $261.5 million for the year ended December 31, 1994, a
decrease of $2.6 million or 1.0% from gaming revenues of $264.1 million in
1993, although gaming revenues increased for the industry generally in
Atlantic City for the year ended December 31, 1994 compared to the year ended
December 31, 1993. This decrease in gaming revenues consisted of a reduction
in both table games and slot revenues. These results were impacted by a number
of major ice and snow storms throughout the northeastern United States, during
the three months ended March 31, 1994 which severely restricted travel in the
region. Bad weather also impacted the Atlantic City market's results for the
three months ended March 31, 1993; however, the weather during the comparable
period in 1994 was much more severe. The decrease in gaming revenues was also
due in part to disruptions caused by an expansion of the casino floor which
created operating inefficiencies by temporarily disrupting the normal flow of
patrons upon entrance to the casino, as well as detracting from the overall
appearance of the casino floor. Also, in 1994 Trump Plaza experienced turnover
of certain key management positions which had a negative impact on operations.
This negative impact was mitigated by the end of 1994 as new management was
hired and began implementing new policies and marketing programs. See
"Business--Business Strategy--Trump Plaza" and "Management--Employment
Agreements."
Slot revenues were $168.7 million for the year ended December 31, 1994, a
decrease of $1.8 million or 1.1% from slot revenues of $170.5 million in 1993.
This decrease was due in part to the sensitivity of slot revenues to certain
of the factors specified in the foregoing paragraph. Plaza Associates elected
to discontinue certain progressive slot programs, thereby reversing certain
accruals into revenue which had the effect of improving slot revenue by $0.6
million for the year ended December 31, 1994.
Table games revenues were $92.8 million for the year ended December 31,
1994, a decrease of $0.8 million or 0.9% from table games revenues of $93.6
million in 1993. This decrease was primarily due to a reduction in table games
drop by $26.7 million or 4.3% for the year ended December 31, 1994 from 1993,
offset by an increase in the table game hold percentage (the percentage of
table drop retained by Plaza Associates) to 15.5% for the year ended December
31, 1994 from 14.9% in 1993.
During the year ended December 31, 1994, gaming credit extended to customers
was approximately 17% of overall table play, a decrease of 1% from 1993. At
December 31, 1994, gaming receivables amounted to approximately $13.7 million,
a decrease of approximately $2.3 million from 1993, with allowances for
doubtful gaming receivables of approximately $8.5 million, a decrease of
approximately $1.9 million from 1993.
Other revenues were $66.9 million for the year ended December 31, 1994, a
decrease of $2.3 million or 3.3% from other revenues of $69.2 million in 1993.
This decrease in other revenues primarily reflects decreases in food and
beverage revenue resulting from changes in bus couponing.
Promotional allowances were $33.3 million for the year ended December 31,
1994, an increase of $0.5 million or 1.5% from $32.8 million in 1993. This
increase is attributable to increased marketing and promotional activities.
Gaming costs and expenses were $139.5 million for the year ended December
31, 1994, an increase of $2.6 million or 1.9% from gaming costs and expenses
of $136.9 million in 1993. This increase was primarily due to
38
increased marketing costs instituted toward the end of 1994. These marketing
programs consisted of increased bus programs and direct marketing activities.
The increase in marketing costs was offset by decreased gaming taxes
associated with the decreased levels of gaming activity and revenues from
1993.
General and administrative expenses were $73.1 million for the year ended
December 31, 1994, an increase of $1.5 million or 2.1% from general and
administrative expenses of $71.6 million in 1993. This increase resulted
primarily from $1.1 million in cash associated with donations to the CRDA for
the year ended December 31, 1994.
Income from operations was $43.4 million for the year ended December 31,
1994, a decrease of $6.2 million or 12.5% from income from operations of $49.6
million for 1993.
Net interest expense was $48.2 million for the year ended December 31, 1994,
an increase of $8.3 million or 20.8% from net interest expense of $39.9
million in 1993. This increase is primarily attributable to increased interest
expenses associated with the Plaza Notes and the PIK Notes which were
outstanding for all of 1994.
Other non-operating expense was $4.9 million (including $3.1 million of
leasing costs) for the year ended December 31, 1994, an increase of $1.0
million or 25.6% from other non-operating expense of $3.9 million in 1993.
This increase is directly attributable to twelve months of costs associated
with Trump Plaza East. See Note 6 to the accompanying Financial Statements of
AC Holdings and Plaza Associates.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Gaming revenues were $264.1 million for the year ended December 31, 1993, a
decrease of $1.3 million or 0.5% from gaming revenues of $265.4 million for
1992. This decrease in gaming revenues consisted of a reduction in table games
revenues, which was partially offset by an increase in slot revenues. These
results were impacted by major snow storms during February and March, which
severely restricted travel in the region. The decrease in revenues was also
attributable, in part, to the revenues derived from "high roller" patrons from
the Far East during 1992, which did not recur in 1993, due in part to the
decision to de-emphasize marketing efforts directed at "high roller" patrons
from the Far East and also to the effects of the adverse economic conditions
in that region.
Slot revenues were $170.5 million for the year ended December 31, 1993, an
increase of $1.0 million or 0.6% from slot revenues of $169.5 million in 1992.
Plaza Associates elected to discontinue certain progressive slot jackpot
programs thereby reversing certain accruals into revenues which had the effect
of improving slot revenue by $4.1 million for the year ended December 31,
1992. Excluding the aforementioned adjustment, slot revenues would have
resulted in a $5.0 million or 3.0% improvement over 1992. Plaza Associates
believes that its improvement in slot revenues reflects its intensified slot
marketing efforts directed towards patrons who tend to wager more per slot
play and general growth in the industry. See "Business--Business Strategy."
Table games revenues were $93.6 million for the year ended December 31,
1993, a decrease of $2.3 million or 2.4% from table games revenues of $95.9
million in 1992. This decrease was primarily due to a reduction in table game
drop by 9.2% for the year ended December 31, 1993 from 1992, offset by an
increase in the table games hold percentage to 14.9% for the year ended
December 31, 1993 from 13.9% in 1992. The reduction in table game drop was due
to the large dollar amounts wagered during 1992 by certain foreign customers.
During the year ended December 31, 1993, gaming credit extended to customers
was approximately 18.0% of overall table play, a decrease of 9.6% from 1992.
At December 31, 1993, gaming receivables amounted to approximately $16.0
million, a decrease of approximately $4.5 million from 1992, with allowances
for doubtful gaming receivables of approximately $10.4 million, a decrease of
approximately $3.6 million from 1992.
39
Other revenues were $69.2 million for the year ended December 31, 1993, a
decrease of $4.1 million or 5.6% from other revenues (excluding revenues from
the former Trump Regency Hotel, now known as Trump World's Fair, at such time
operated by Plaza Associates) of $73.3 million in 1992. The decrease in other
revenues primarily reflects a $2.1 million adjustment to the outstanding
gaming chip liability in 1992 (this amount had been offset in gaming cost and
expenses with a specific reserve provision for casino uncollectible accounts
receivable), as well as decreases in food and beverage revenues attendant to
reduced levels of gaming activity, and reduced promotional allowances.
Promotional allowances were $32.8 million for the year ended December 31,
1993, a decrease of $2.1 million or 5.9% from promotional allowances of $34.9
million in 1992. This decrease is primarily attributable to a reduction in
table gaming activity as well as Plaza Associates' focusing its marketing
efforts during the period towards patrons who tend to wager more frequently
and in larger denominations.
Gaming costs and expenses were $136.9 million for the year ended December
31, 1993, a decrease of $9.4 million, or 6.4% from gaming costs and expenses
of $146.3 million in 1992. This decrease was primarily due to a $4.8 million
decrease in gaming bad debt expense as well as decreased promotional and
operating expenses and taxes associated with decreased levels of gaming
activity and revenues.
Other costs and expenses were $24.8 million for the year ended December 31,
1993, an increase of $1.1 million or 4.7% from other costs and expenses of
$23.7 million in 1992.
General and administrative expenses were $71.6 million for the year ended
December 31, 1993, a decrease of $3.8 million or 5.1% from general and
administrative expenses of $75.5 million in 1992. This decrease resulted
primarily from a $2.4 million real estate tax charge resulting from a
reassessment by local authorities of prior years' property values incurred
during 1992 and overall cost reductions related to cost containment efforts.
Income from operations was $49.6 million for the year ended December 31,
1993, an increase of $7.0 million or 16.4% from income from operations
(excluding the operations of the former Trump Regency Hotel and before
restructuring costs) of $42.6 million for 1992. In addition to the items
described above, 1993 costs and expenses were lower as a result of the absence
of the costs and expenses associated with the 1992 Plaza Restructuring and the
former Trump Regency Hotel which were incurred in 1992.
Net interest expense was $39.9 million for the year ended December 31, 1993,
an increase of $8.5 million or 27.2% from net interest expense of $31.4
million in 1992. This is attributable to the interest expense associated with
the 1993 refinancing.
Other non-operating expenses were $3.9 million for the year ended December
31, 1993, an increase of $2.4 million or 164.9% from non-operating expense of
$1.5 million in 1992. This increase is directly attributable to costs
associated with Trump Plaza East. See Note 6 to the accompanying Financial
Statements of Plaza Holding and Plaza Associates.
In August 1990, Plaza Associates entered into a triple net lease with an
affiliate pursuant to which Plaza Associates began operating the former Trump
Regency Hotel as a non-casino hotel. During such period of operation, losses
attributable to the former Trump Regency Hotel aggregating approximately $14.1
million adversely affected the results of operations of Plaza Associates.
Pursuant to the 1992 Plaza Restructuring, Plaza Associates ceased operating
the former Trump Regency Hotel as of September 30, 1992. The offerings of the
Plaza Mortgage Notes, PIK Notes and PIK Note Warrants in connection with the
1993 refinancing resulted in an extraordinary gain of $4.1 million for the
year ended December 31, 1993, which reflects the excess of carrying value of
the former Trump Regency Hotel obligation over the amount of the settlement
payment, net of related prepaid expenses. The 1992 Plaza Restructuring
resulted in an extraordinary loss of $38.2 million for the year ended December
31, 1992, which reflects a $32.8 million accounting adjustment to carry the
bonds and preferred stock issued in the 1992 Plaza Restructuring on Plaza
Associates' balance sheet at fair market value based upon then current rates
of interest. Plaza Associates also wrote off certain deferred financing
charges and costs of $5.4 million.
40
LIQUIDITY AND CAPITAL RESOURCES
General. On June 12, 1995, THCR consummated the initial public by THCR of
10,000,000 shares of Common Stock at an offering price of $14.00 per share
(the "June 1995 Stock Offering"), resulting in aggregate gross proceeds to
THCR of $140,000,000, and THCR Holdings and THCR Funding consummated the
public offering by THCR and THCR Holding of $155,000,000 Senior Notes (the
"June 1995 Note Offering"). The proceeds to THCR from the June 1995 Stock
Offering were contributed by THCR to THCR Holdings in return for an
approximately 60% general partnership interest in THCR Holdings. THCR
Holdings, in turn, has used net proceeds from the June 1995 Offerings for the
following Plaza Associates related purposes through September 30, 1995: (a)
repurchase and redemption of the PIK Notes and PIK Note Warrants (including
accrued interest payable) for $86,209,000, (b) exercise of the option to
acquire Trump World's Fair (the "Trump World's Fair Purchase Option") for
$58,150,000 and (c) construction costs at Trump Plaza East for $2,500,000. A
portion of the balance of the proceeds will be used for the completion of the
construction at Trump Plaza, Trump Plaza East, Trump World's Fair as well as
for general corporate purposes.
Cash flow from operating activities is Plaza Associates' principal source of
liquidity. For the year ended December 31, 1994, and the nine-month period
ended September 30, 1995 net cash from operating activities was $20.0 million
and $32.4 million, respectively.
Capital expenditures of $86.6 million for the nine-month period ended
September 30, 1995 increased approximately $72.0 million from the comparable
period in 1994 and was primarily attributable to the purchase of Trump World's
Fair for $60.0 million and $2.2 million of related renovation expenditures.
Also, expenditures for renovation costs associated with Trump Plaza East were
$14.2 million for the nine months ended September 30, 1995 versus $5.9 million
for the comparable period in 1994. These expenditures were funded from cash
flows from operating activities. Capital expenditures of $20.5 million for the
year ended December 31, 1994 increased approximately $10.4 million from 1993
and were primarily attributable to the casino expansion, purchase of
additional slot machines, construction of the new baccarat pit for Trump Plaza
and refurbishing costs associated with Trump Plaza East. These expenditures
were financed from funds generated from operations. Capital expenditures for
1993 and 1992 were $10.1 million and $8.6 million, respectively. Previously,
Plaza Associates provided for significant capital expenditures which
concentrated on the renovation of the casino floor and certain restaurants,
hotel rooms and the hotel lobby. See "Business--Facilities and Amenities--
Trump Plaza."
Plaza Associates has approximately $2.1 million of indebtedness maturing
through September 30, 1996. Management expects that this debt will be repaid
with cash from operating activities.
At September 30, 1995, AC Holdings had combined working capital of $16.6
million, which included a receivable from the CRDA for $4.2 million for
reimbursable improvements made to the Trump Plaza East. At December 31, 1994,
Plaza Associates had a combined working capital deficit totaling $7.1 million,
compared to a combined working capital deficit of $1.5 million at December 31,
1993. At September 30, 1995, Plaza Associates had a combined working capital
deficit totaling approximately $1.7 million, compared to a combined working
capital deficit of $7.1 million at December 31, 1994.
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. As part of the Trump Plaza Expansion, management has commenced the
expansion and renovation of rooms at Trump Plaza East and on October 30, 1995,
opened 150 rooms and suites at Trump Plaza East. This opening of rooms and
suites was ahead of schedule and under the budget set for this part of the
expansion. Management intends to open the remainder of the rooms and suites
and the casino at Trump Plaza East in the first quarter of 1996. There can be
no assurances that such openings will occur and, if so, that the completion of
such construction will be either under budget or ahead of schedule. Trump
World's Fair renovations are scheduled for completion at the end of the first
quarter or early in the second quarter of 1996. See "Risk Factors--High
Leverage and Fixed Charges," and "--Trump Plaza Expansion and the Taj Mahal
Expansion."
As a result of the Trump Plaza Expansion, Plaza Associates will be
permitted, subject to certain conditions, to increase, and is in the process
of increasing, Trump Plaza's casino floor space to 90,000 square feet. Plaza
41
Associates petitioned the CCC to permit it to increase such space to 100,000
square feet pursuant to a statutory amendment which became effective January
25, 1995. In its May 18, 1995 declaratory rulings with respect to this
petition, the CCC determined, among other things, that the approved hotel
comprised of Trump Plaza's main tower and Trump Plaza East is permitted to
contain a maximum of 100,000 square feet of casino space. Plaza Associates
added to Trump Plaza approximately 9,000 square feet in April 1994, 1,000
square feet in July 1994, 3,000 square feet in December 1994 and 25,000 square
feet in June 1995. At September 30, 1995, the total casino square footage was
approximately 73,000 square feet.
Pursuant to the Trump Plaza East Purchase Option, which expires on June 30,
1998, Plaza Associates may purchase both the fee and leasehold interests
comprising Trump Plaza East. See "Certain Transactions--Plaza Associates--
Trump Plaza East." Until such time as the Trump Plaza East Purchase Option is
exercised or expires, Plaza Associates is obligated to pay the net expenses
associated with Trump Plaza East, including, without limitation, current real
estate taxes (approximately $1.2 million per year based upon current assessed
valuation) and annual lease payments of $3.1 million per year. Under the Trump
Plaza East Purchase Option, Plaza Associates has the right to acquire Trump
Plaza East for a purchase price of $28.0 million through December 31, 1996,
increasing by $1.0 million annually thereafter until expiration on June 30,
1998. In addition, Plaza Associates has the right of first offer upon any
proposed sale of all or any portion of the fee interest in Trump Plaza East
during the term of the Trump Plaza East Purchase Option (the "Right of First
Offer") . Under the terms of the Trump Plaza East Purchase Option, if Plaza
Associates defaults in making payments due under the Trump Plaza East Purchase
Option, Plaza Associates would be liable to the grantor of the Trump Plaza
East Purchase Option for the sum of (a) the present value of all remaining
payments to be made by Plaza Associates pursuant to the Trump Plaza East
Purchase Option during the term thereof and (b) the cost of demolition of all
improvements then located at Trump Plaza East, unless such improvements had
been accepted in writing by the grantor. Plaza Associates currently intends to
exercise the the Trump Plaza East Purchase Option. See "Business--Properties--
Trump Plaza--Trump Plaza East."
Management believes that Plaza Associates' share of the net proceeds of the
June 1995 Offerings and equipment financings allocated to Trump Plaza East and
cash flow from operations should be sufficient to complete the planned
renovations of Trump Plaza and Trump Plaza East at a remaining cost of
approximately $ million. Management anticipates incurring equipment
financing for a portion of the gaming equipment at Trump Plaza East.
Commitments are currently in place with respect to some of such financing, and
management believes that it will be able to obtain the remainder of such
financing on customary terms acceptable to AC Holdings, although there can be
no assurance given to that effect. Pursuant to the Right of First Offer, Plaza
Associates has ten days after receiving written notice from the grantor of the
proposed sale to commit to exercise the right to acquire Trump Plaza East at
the lesser of the proposed sale price and the applicable exercise price under
the Trump Plaza East Purchase Option. If Plaza Associates commits to exercise
the Right of First Offer, it has ten days from the date of the commitment to
deposit $3,000,000 with the grantor, to be credited towards the purchase price
or to be retained by the grantor if the closing, through no fault of the
grantor, does not occur within ninety days (or, subject to certain conditions,
120 days) of the date of the commitment. There can be no assurance that Plaza
Associates would have the liquidity necessary to exercise its Right of First
Offer on a timely basis should it be required.
Pursuant to the terms of an agreement dated January 24, 1993 by and between
Plaza Associates and TPM, (the "TPM Services Agreement"), in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of $1.0
million in equal monthly installments and reimburses TPM on a monthly basis
for all reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under the TPM Services Agreement, up to certain amounts.
Approximately $1.3 million and $1.2 million of payments under the TPM Services
Agreement were charged to expense for the years ended December 31, 1994 and
1993, respectively, and approximately $1,012,000 and $961,000 were charged to
the nine-month periods ended September 30, 1995 and 1994, respectively.
Payments received under the TPM Services Agreement are currently pledged by
TPM to secure lease payments for a helicopter that TPM makes available to
Plaza Associates. Pending approval by the lessor of the helicopter, it is
currently contemplated that the stock of TPM will be transferred by Trump to
THCR
42
Holdings, which will in turn assume the lease and related obligations, as well
as become entitled to all amounts payable under the TPM Services Agreement.
See "Certain Transactions."
Approximately $58 million of the net proceeds of the June 1995 Offerings was
used to exercise the Trump World's Fair Purchase Option. Management believes
that Plaza Associates' share of the net proceeds of the June 1995 Offerings,
together with additional equipment financing, will be sufficient to fund the
additional approximately $51.6 million required to complete renovation of and
open Trump World's Fair early in the second quarter of 1996, although there
can be no assurance given to that effect. Associated with the openings of
Trump World's Fair and Trump Plaza East, management anticipates incurring
approximately $ of pre-opening costs, which will be expensed at the time of
such openings.
In addition, Plaza Associates may be obligated to comply with certain
proposed regulations of the Occupational Safety and Health Administration
("OSHA"), if adopted. AC Holdings is unable to estimate the cost, if any, to
Plaza Associates of such compliance. See "Regulatory Matters--Other Laws and
Regulations."
Giving pro forma effect to the consolidation of Taj Associates and the other
elements of the Merger Transaction, AC Holdings will have approximately $1.2
billion of indebtedness for borrowed money on a consolidated basis,
principally representing the First Mortgage Notes, and may also have access to
up to $25.0 million of borrowings under the Working Capital Facility or a
replacement thereof. See "Capitalization" and "Unaudited Pro Forma Financial
Information." Assuming that the Merger Transaction had been consummated on
January 1, 1995, AC Holdings' consolidated pro forma earnings would have been
insufficient to cover fixed charges by $ million for the year ended
December 31, 1995. See "Risk Factors--High Leverage and Fixed Charges."
Following the consummation of the Merger Transaction, management plans to
undertake an expansion plan at the Taj Mahal, which plans are preliminary and
subject to modification. It is currently expected that the expansion will be
principally funded out of cash from operations of the Atlantic City Properties
and is scheduled to be completed in phases by the end of the second quarter of
1999. The Taj Mahal Expansion involves the construction of two new hotel
towers adjacent to the Taj Mahal's existing hotel tower, each containing at
least 640 rooms, an approximately 2,200 space expansion of the Taj Mahal's
existing self-parking facilities, conversion of the Mark Etess Arena into a
new 60,000 square foot circus-themed casino with 2,500 slot machines, and
construction of a new arena on a surface parking area located adjacent to the
Taj Mahal.
In addition, the Taj Mahal is contemplating adding several new nationally
recognized themed restaurants, including the Rainforest Cafe and the All-Star
Cafe. Construction costs for each of the themed restaurants will be the
obligation of the lessees. The lease for the Rainforest Cafe will require Taj
Associates to contribute $2.5 million towards construction after the project
is completed and the restaurant opens for business.
Capital expenditures for the Taj Mahal during the nine months ended
September 30, 1995 totaled approximately $19.5 million compared to $15.7
million for the comparable period in 1994. Capital expenditures totaled
approximately $12.1 million, $16.8 million and $23.0 million for the years
ended 1992, 1993 and 1994, respectively. Major capital expenditures for 1992
included an on-site food storeroom, restaurant and room renovations, casino
floor reconfiguration and continuing construction of the Taj Entertainment
Complex. Major capital expenditures for 1993 included parking garage upgrades,
restaurant and room renovations, carpet replacement, and ongoing casino floor
reconfiguration, including additional slot machines, completion of the Taj
Entertainment Complex and modification of existing space to accommodate the
new games of race simulcasting and poker. Major capital expenditures for 1994
included the expansion of the poker room, the addition of the game of keno to
the casino floor, relocation of the lobby cocktail lounge, construction of a
new slot players' club, continued casino floor reconfiguration, purchase of
new slot machines and hotel room renovations.
Taj Associates' capital budget for fiscal 1995 totaled approximately $26.0
million which was financed by cash flow from operations and includes provision
for hotel tower and room renovations, carpet replacement, ongoing casino floor
reconfiguration including 1,300 replacement slot machines, new telephone
reservation
43
equipment and limousines. Taj Associates may be obligated to expend up to $30
million in improvements to the Steel Pier in order to maintain its Coastal
Area Facilities Review Act ("CAFRA") Permit, which is a condition to its
casino license. In March 1993, Taj Associates obtained a modification of its
CAFRA Permit providing for the extension of the required commencement and
completion dates of these improvements for one year based upon an interim use
of the Steel Pier for an amusement park. Taj Associates received an additional
one-year extension, in March 1995, of the required commencement and completion
dates of the improvements based upon the same interim use of the Steel Pier
for an amusement park pursuant to a sublease with an amusement park operator.
Taj Associates is currently seeking further modification of its obligations
under the CAFRA Permit. See "Business--Properties--Steel Pier." In addition,
Taj Associates may be obligated to comply with certain proposed regulations of
the OSHA, if adopted. Taj Associates is unable to estimate the cost, if any,
to Taj Associates of such compliance. See "Regulatory Matters--Other Laws and
Regulations."
Taj Associates' capital expenditures historically included a component to
expand the facility as well as maintain its first class operation.
Historically, amounts necessary to maintain the first class nature of the
facility were approximately $9.7 million, $6.4 million and $19.2 million for
the years ended 1992, 1993 and 1994, respectively. The capital budget for 1995
included approximately $24.0 million to maintain Taj Associates' facilities.
Management believes that following the Merger Transaction, cash from the
Atlantic City Properties' operations, together with equipment financings,
should be sufficient to meet anticipated capital and debt service requirements
through 1999. Commitments are currently in place for only a portion of such
equipment financings, although management believes that it will be able to
obtain the remainder of such financings on customary terms acceptable to AC
Holdings. However, particularly in the case of the Taj Mahal Expansion, the
plans for which are preliminary and subject to modification, there can be no
assurance that the Atlantic City Properties will be able to generate
sufficient cash from operations or to obtain financing for such purposes on
acceptable terms. See "Risk Factors--Holding Company Structure; Need for
Additional Financing" and "--Trump Plaza Expansion and the Taj Mahal
Expansion."
TAJ ASSOCIATES
RESULTS OF OPERATIONS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND
1994
Net revenues were approximately $417.3 million for the nine months ended
September 30, 1995, an increase of $30.8 million or 8.0% from net revenues of
$386.5 million for the comparable period in 1994. This increase was primarily
due to an increase in gaming revenues.
Gaming revenues comprise the major component of net revenues and consist of
win from table games, poker, slot machines, horserace simulcasting and keno.
Total gaming revenues were $377.4 million for the nine months ended September
30, 1995, an increase of $32.1 million or 9.3% from total gaming revenues of
$345.3 million for the comparable period in 1994. These revenues represent a
market share of 13.4% of the Atlantic City gaming market in each of the nine
months ended September 30, 1995 and 1994, based on figures filed with the CCC.
Table game win was approximately $148.8 million for the nine months ended
September 30, 1995, an increase of $16.8 million or 12.7% from table game win
of $132.0 million for the comparable period in 1994.
Dollars wagered at table games was $866.6 million for the nine months ended
September 30, 1995, an increase of $30.3 million or 3.6% from dollars wagered
at table games from $836.3 million for the comparable period in 1994. Table
win percentage was 17.2% for the nine months ended September 30, 1995, an
increase from 15.8% in 1994. Table win percentage, which represents the
percentage of dollars wagered retained by Taj Associates, tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers." The win percentage for the nine months
ended September 30, 1995 is significantly above Taj Associates' and the
industry's historical win percentage, and it is likely that Taj Associates'
win percentage will decrease in the future. During the twelve months ending
December 31, 1994 and 1993, Taj Associates' win
44
percentage was approximately 16.4% and 16.3% respectively, while the Atlantic
City average was approximately 15.8% and 15.6% respectively.
Slot win was $212.9 million for the nine months ended September 30, 1995, an
increase of $13.8 million or 6.9% from slot win of $199.1 million for the
comparable period in 1994. Dollars wagered in slot machines was $2.55 billion
for the nine months ended September 30, 1995, an increase of $286.3 million or
12.6% from dollars wagered in slot machines of $2.26 billion for the
comparable period in 1994. This increase was offset by a decrease in slot win
percentage to 8.3% for the nine months ended September 30, 1995, from 8.8% for
the comparable period in 1994. The increase in slot machine wagering and the
reduced slot win percentage is consistent with the industry trend in Atlantic
City in recent years.
In addition to table game and slot revenues, Taj Associates'
keno/poker/simulcasting operations generated approximately $13.3 million in
poker revenues, $1.0 million of simulcasting revenue and $1.3 million of keno
revenue for the nine months ended September 30, 1995, compared to $12.3
million of poker revenue, $1.1 million of simulcasting revenue and $0.9
million of keno revenue for the corresponding period in 1994. Keno operations
commenced June 15, 1994.
Increases in gaming revenues during the first three quarters of 1995 over
the comparable period of 1994 were attributable primarily to (i) the increase
in dollars wagered on slots relative to the depressed 1994 levels caused by
severe winter weather during the first three months of the year, (ii) the
increase in dollars wagered on table games and the improved win percentage,
both of which were substantially attributable to international high level
players and (iii) the general growth of the Atlantic City market.
Nongaming revenues consist primarily of room, food, beverage and
entertainment. For the nine months ended September 30, 1995 and 1994, these
revenues totaled $87.4 million and $90.0 million, respectively. Room revenue
of approximately $33.0 million in 1995 was the result of an occupancy rate of
92.0% and an average room rate of $105.28. In 1994, room revenue of $32.2
million was the result of an occupancy rate of 93.9% and an average room rate
of $100.45.
In the food and beverage outlets, Taj Associates generated revenues of
approximately $42.9 million and $44.1 million during the first nine months of
1995 and 1994, respectively. The approximately $1.2 million decrease is
primarily attributable to a 1.0% decrease in the number of persons served and
a decrease in the average food check to $11.56 in 1995 from $11.62 in 1994.
The decrease in food and beverage revenue reflects both fewer complimentaries
offered to patrons (which are recorded both as revenue and as a promotional
allowance) and reduced food prices designed to stimulate cash sales.
The decrease in other revenue of approximately $2.3 million was primarily
attributable to a decrease in entertainment revenue of approximately $1.8
million resulting from fewer events and an increased emphasis on promoter
sponsored entertainment events in 1995 versus events sponsored by Taj
Associates in 1994.
Promotional allowances were $47.5 million for the nine months ended
September 30, 1995, a decrease of $1.3 million from promotional allowances of
$48.8 million for the comparable period in 1994. Promotional allowances were
10.2% of gross revenues in 1995 compared to 11.2% in 1994, reflecting Taj
Associates' efforts to increase control over complimentaries while increasing
gaming revenues.
Gaming expenses increased approximately $12.3 million or 6.2% for the nine
months ended September 30, 1995 from the comparable period in 1994, primarily
due to increased marketing/promotional costs associated
45
with increased gaming revenues. Both room and food and beverage expenses
remained generally constant. General and administrative expenses decreased
primarily due to the nonrecurrence of costs for settlement of litigation which
were incurred during 1994. Costs for settlement of litigation from nine months
ended September 30, 1995 decreased by approximately $3.7 million or 100% to $0
from the comparable period of 1994. Depreciation expense increased in 1995
compared to 1994 due to increased capital expenditures on replacement
furniture, fixtures and equipment and the shorter lives associated therewith.
Total operating expenses as a percentage of net revenue decreased to 82.6%
for the nine months ended September 30, 1995 compared to 86.0% for the
comparable period in 1994.
The $2.0 million or 2.3% increase in interest expense is attributable to (i)
the increased amount of principal outstanding resulting from the issuance of
Taj Bonds to satisfy the Additional Amount (as defined in the Taj Bond
Indenture) and (ii) the increased accretion of the discount on the Taj Bonds
as they approach maturity. These amounts were partially offset by a decrease
in costs incurred for uncompleted refinancing efforts during the period.
As a result of the foregoing factors, income from operations was $72.4
million for the nine months ended September 30, 1995, an increase of $18.2
million or 33.6% from income from operations of $54.2 million for the
comparable period of 1994.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Net revenues were $517.2 million for the year ended December 31, 1994, an
increase of $18.3 million or 3.7% from net revenues of $498.9 million for the
year ended December 31, 1993.
Gaming revenues, which comprise the major component of total revenues and
consist of win from table games, poker, slot machines, horserace simulcasting
and keno, were approximately $461.6 million in 1994, an increase of $19.5
million or 4.4% from gaming revenues of $442.1 million in 1993. The increase
in gaming revenues occurred while the overall Atlantic City gaming industry
experienced an increase in gaming revenue of 3.9%. These revenues represent a
market share of the Atlantic City market of approximately 13.5% in each of
1994 and 1993, based on figures filed with the CCC.
Table game win was approximately $184.7 million for the year ended December
31, 1994, an increase of $11.3 million or 6.5% from table game win of $173.4
million in 1993. Dollars wagered at table games was $1,125.0 million in 1994,
an increase of $63.0 million or 5.9% from dollars wagered at table games of
$1,062.0 million in 1993. Table win percentage (i.e., percentage of dollars
wagered that were retained by Taj Associates) increased to 16.4% in 1994 from
16.3% in 1993.
For the year ended December 31, 1994, slot win was approximately $257.9
million, a decrease of $2.4 million or 0.9% from slot win of $260.3 million in
1993. The decrease was largely due to a decrease in the slot win percentage.
Slot win percentages were 8.8% in 1994 and 9.3% in 1993. Dollars wagered at
slot machines were $2,940.1 million in 1994, an increase of $82.2 million or
2.9% from the dollars wagered at slot machines of $2,857.9 million in 1993.
The decrease in slot win percentage and the increase in slot machine wagering
is consistent with the industry trend in Atlantic City in recent years.
In addition to table game and slot revenues, Taj Associates' newly opened
Keno room and expanded poker/simulcasting operations generated approximately
$16.3 million of revenues from poker, $1.4 million of revenues from
simulcasting and $1.3 million of revenues from keno in 1994 compared to
approximately $7.5 million in poker revenue and $0.8 million in simulcasting
revenue for the year ended December 31, 1993. Poker/Simulcasting operations
commenced in June 1993 while keno operations commenced on June 15, 1994.
Nongaming revenues consist primarily of room, food, beverage and
entertainment revenues. Nongaming revenues were $117.7 million for the year
ended December 31, 1994, an increase of $4.4 million or 3.9% from nongaming
revenues of $113.3 million in 1993. This increase was attributable primarily
to an increase in food and beverage revenue of approximately $2.1 million or
3.8%, and an increase in room revenue of approximately
46
$1.2 million or 2.9%. Food and beverage revenue and room revenue was $58.0
million and $41.8 million, respectively, for the fiscal year ended December
31, 1994, an increase from food and beverage revenue and room revenue of $56.0
million and $40.7 million, respectively, in 1993. The increase in food and
beverage revenue was partially attributable to the increase of the average
food check to $11.68 in 1994 from $10.82 in 1993 and the increased banquet
functions associated with gaming promotions. Room occupancy was 92.4% and
92.5% and the average room rate was $99.19 and $96.38 for the years ended
December 31, 1994 and 1993, respectively.
Promotional allowances were $62.2 million in 1994, an increase of $5.8
million from promotional allowances of $56.4 million in 1993. Promotional
allowances were 10.7% of gross revenues in 1994 compared to 10.2% of gross
revenues in 1993, reflecting the more aggressive marketing posture necessary
in order to maintain or achieve increases in gaming revenues comparable to
1993.
Gaming expenses were $260.5 million in 1994, an increase of $22.9 million or
9.6% from gaming expenses of $237.6 million in 1993, primarily due to
increased marketing promotional costs directed at slot machine and table game
play and operating expenses associated with the new or expanded games of
poker, simulcasting and keno.
During the year ended December 31, 1994, room expenses increased slightly
and food and beverage expenses decreased slightly over the comparable period
in 1993, reflecting continuing cost controls in this area. General and
administrative expenses increased slightly, primarily due to costs associated
with a settlement of outstanding litigation, offset by decreases in real
property taxes resulting from settlement of appeals. Costs for settlement of
litigation were approximately $3.7 million in 1994, an increase of $3.7
million or 100% from 1993. Real property taxes were $12.2 million in 1994, a
decrease of approximately $4.9 million or 28.7% from real property taxes of
$17.1 million for 1993. Were it not for these items, costs in this category
would have increased approximately $2.0 million over the comparable period of
1993. Depreciation expense increased in 1994 compared to 1993 due to increased
capital expenditures on replacement furniture, fixtures and equipment and the
shorter lives associated therewith.
Total operating expenses as a percentage of net revenue increased to 85.2%
in 1994 from 83.1% in 1993.
Interest expense was $115.3 million in 1994, an increase of $6.9 million
from interest expense of $108.4 million in 1993. The increase is attributable
to the increased amount of principal outstanding resulting from the issuance
of the Taj Bonds to satisfy the Additional Amount (as defined), the increased
accretion of discount on the Taj Bonds as they approach maturity and
professional fees incurred during the first six months of 1994 related to a
proposed recapitalization, which was not consummated.
As a result of the foregoing factors, income from operations was $76.6
million in 1994, a decrease of $7.9 million or 9.3% from income from
operations of $84.5 million in 1993.
Taj Associates experienced a net loss of $36.7 million for 1994 as compared
to a net loss of $22.5 million for 1993.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Net revenues for the year ended December 31, 1993 totaled $498.9 million, an
increase of $29.1 million or 6.2% from net revenues of $469.8 million in 1993.
Gaming revenues, which comprise the major component of total revenues and
consist of win from table games, poker, slot machines and horserace
simulcasting were approximately $442.1 million in 1993, an increase of $28.1
million or 6.8% from gaming revenues of $414.0 million in 1992. These revenues
represented a market share in the Atlantic City gaming market of 13.5% in 1993
and 12.9% in 1992, based on figures filed with the CCC. The increase in Taj
Associates' gaming revenues and market share occurred while the overall
Atlantic City gaming industry experienced an increase in gaming revenue of
only 2.9%. Management believes the increase in gaming revenues was
attributable primarily to Taj Associates' expanded slot marketing efforts,
increased table game win percentage (i.e., percentage of dollars wagered that
were retained by Taj Associates) and the addition of poker and horserace
simulcasting operations.
47
Table game win was approximately $173.4 million in 1993, an increase of $4.3
million or 2.6% from table game win of $169.1 million in 1992. Although
dollars wagered at table games decreased by $5.6 million or 0.5% in 1993, to
$1,062.0 million in 1993 from $1,067.6 million in 1992, the decrease was
offset by an increase in table win percentage (i.e., percentage of dollars
wagered that were retained by Taj Associates) of 16.3% in 1993 from 15.8% in
1992.
Slot win was approximately $260.3 million for the year ended December 31,
1993, an increase of $15.4 million or 6.3% from slot win of $244.9 million in
1992. The increase was largely due to an increase in dollars wagered. Slot win
percentages were 9.3% in 1993 and 9.8% in 1992. The decrease in table wagering
compared to the increase in slot machine wagering and the reduced slot win
percentage is consistent with industry activity in 1993 and with the industry
trend in recent years.
In addition to table game and slot revenues, Taj Associates' poker and
horserace simulcasting operations, which opened June 29, 1993, generated $7.5
million of revenues from poker and $0.8 million of revenues from simulcasting
for the year ended December 31, 1993.
Nongaming revenues were approximately $113.3 million for the year ended
December 31, 1993, a decrease of $3.7 million or 3.2% from nongaming revenues
of $117.0 million in 1992. This decrease in revenue was attributable primarily
to a decrease in food and beverage revenue of approximately $3.5 million or
5.9%, and a slight decrease in room revenue of $0.3 million or 0.7%.
Food and beverage revenue was $56.0 million for the year ended December 31,
1993, a decrease of $3.5 million from food and beverage revenue of $59.5
million in 1992. The decline in the food and beverage revenue was primarily
attributable to management's decision to reduce the use of promotional coupons
in certain food outlets to increase profitability. Accordingly, the number of
persons served decreased approximately 10.4% in 1993 while the average food
check increased to $10.82 in 1993 from $10.60 in 1992.
Room revenue, room occupancy and average room rate were approximately $40.7
million, 92.5% and $96.38, respectively, compared to $41.0 million, 91.2% and
$98.32, respectively in 1992. The reduced room rate in 1993 was part of the
continuation of various marketing plans initially implemented in 1992 to
increase occupancy and enhance gaming activity.
Promotional allowances were $56.4 million in 1993, compared to $61.3 million
in 1992. Promotional allowances were 10.2% of gross revenues in 1993 compared
to 11.5% of gross revenues in 1992, reflecting the reduction in promotional
food coupons discussed above.
Gaming expenses were $237.6 million in 1993, an increase of approximately
$10.2 million or 4.5% from gaming expenses of $227.4 million in 1992,
primarily due to increased marketing promotional costs directed at slot
machine play and operating expenses associated with the addition of poker and
simulcasting. During the year ended 1993, room expenses increased slightly
over the comparable period in 1992. The decrease in food and beverage expenses
were volume related, but did not decrease proportionately to the decrease in
sales because of the continued increase in the cost of labor, food and
beverage expenses which were not fully passed on to patrons through increased
prices. General and administrative expenses increased slightly, by
approximately $0.6 million or 0.6%, primarily due to increased costs required
to support the expanded operations.
Total operating expenses as a percentage of net revenue declined to 83.1% in
1993 compared to 85.5% in 1992.
Interest expense was $108.4 million in 1993, an increase of $4.4 million
from interest expense of $104.0 million in 1992. The increase was primarily
attributable to the increased accretion of discount on the Taj Bonds, and the
portion of interest on the Taj Bonds payable in the form of additional
principal amounts of the Taj Bonds.
Income from operations was $84.5 million for 1993, an increase of $16.5
million or 24.1% from income from operations of $68.0 million in 1992,
primarily as a result of continuing efforts to maintain cost controls.
48
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza and the Taj Mahal occurring during the period from May through
September. Consequently, AC Holdings' operating results during the two quarters
ending in March and December would not likely be as profitable as the two
quarters ending in June and September.
INFLATION
There was no significant impact on Plaza Associates' or Taj Associates'
respective operations as a result of inflation during the first nine months of
1995, and during 1994, 1993 or 1992.
49
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP PLAZA HOLDING ASSOCIATES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet of AC Holdings as of
September 30, 1995 and the Unaudited Pro Forma Consolidated Statements of
Operations for the year ended December 31, 1994 and for the nine months ended
September 30, 1995 (collectively the "Unaudited Pro Forma Consolidated
Financial Statements") are set forth below.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared
assuming the Merger Transaction had occurred on September 30, 1995. The
Unaudited Pro Forma Consolidated Statements of Operations have been prepared
assuming that the Merger Transaction had occurred on January 1, 1994.
The Unaudited Pro Forma Financial Statements are presented for informational
purposes only and do not purport to present what the Balance Sheet would have
been had the Merger Transaction, in fact, occurred on September 30, 1995 or
what the respective results of operations for the year ended December 31, 1994
and the nine months ended September 30, 1995 would have been had the Merger
Transaction, in fact, occurred on January 1, 1994, or to project the
respective results of operations for any future period.
The Unaudited Pro Forma Financial Statements of AC Holdings give effect to
(a) consolidation of Taj Associates, which will be an indirect wholly owned
subsidiary of AC Holdings after the Merger Transaction, (b) the redemption of
the Taj Bonds and the Taj Holding Class B Common Stock and the retirement of
the Plaza Notes, (c) the First Mortgage Note Offering, (d) the contribution by
THCR of a portion of the net proceeds of the Stock Offering to AC Holdings,
(e) the "push down" by THCR of the purchase accounting adjustments associated
with the Merger with Taj Associates, (f) the termination of the Taj Services
Agreement, (g) the cancellation of payments to Realty Corp. and First Fidelity
in connection with the acquisition of the Specified Parcels and (h) the
payment to Bankers Trust to obtain releases of the liens and guarantees that
Bankers Trust has with respect to the Trump Indebtedness. See "Summary--The
Merger Transaction."
The Merger is expected to be accounted for as a "purchase" for accounting
and reporting purposes.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the Financial Statements and related notes thereto included elsewhere in
this Prospectus and the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
50
UNAUDITED PRO FORMA FINANCIAL INFORMATION
AC HOLDINGS
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(IN THOUSANDS)
MORTGAGE THCR OTHER AC
AC TAJ NOTE STOCK MERGER HOLDINGS
HOLDINGS ASSOCIATES OFFERING OFFERING TRANSACTIONS PRO FORMA
------------ ------------ ---------- -------- ------------ ----------
(HISTORICAL) (HISTORICAL)
Current Assets:
Cash and cash
equivalents........... $ 20,079 $108,769 $1,180,000 (a) $87,000(j) $(10,000)(k) $ 20,249
(780,243)(b) (50,000)(l)
(390)(c) (9,000)(g)
(377,790)(d)
(28,000)(e)
(33,209)(f)
(40,000)(g)
(36,500)(h)
(10,467)(i)
Investment in THCR
Common Stock........... 10,000(j) (10,000)(l)
Accounts receivable,
net.................... 12,321 15,759 28,080
Inventories............. 2,598 6,950 9,548
Prepaid expenses and
other current assets... 403 5,175 5,578
Other current assets.... 4,765 4,765
-------- -------- ----------
Total current assets... 40,166 136,653 68,220
Property and Equipment,
net.................... 376,116 694,602 28,000 (e) 9,000 (g) 1,308,306
43,475 (l)
40,500 (m)
40,500 (m)
76,113 (n)
Land rights............. 29,412 29,412
Deferred loan costs..... 10,316 40,000 (g) 40,000
(10,316)(d)
Other assets............ 6,318 12,470 18,788
-------- -------- ----------
Total assets........... $462,328 $843,725 $1,464,726
======== ======== ==========
Current Liabilities:
Current maturities of
long-term debt........ $ 2,100 $ 868 (196)(h) $ 2,772
Accounts payable and
accrued expenses...... 29,255 5,880 35,135
Accrued interest
payable............... 10,469 27,441 (27,430)(f) 13
(10,467)(i)
Due to affiliates,
net................... 547 547
Other current
liabilities........... 38,303 38,303
-------- -------- ----------
Total current liabili-
ties.................. 41,824 73,039 76,770
Other long-term
liabilities............ 29,644 (5,779)(f) (16,525)(l) 7,340
Taj Bonds, net of
discount............... 643,135 (643,135)(b)
Plaza Notes, net of
discount............... 326,543 (326,543)(d)
First Mortgage Notes.... 1,180,000 (a) 1,180,000
Other long term debt.... 5,112 45,008 (44,790)(h) 5,330
Distribution payable to
Plaza Funding.......... 3,822 3,822
Deferred state income
taxes.................. 1,351 1,351
-------- -------- ----------
Total liabilities...... 378,652 790,826 1,274,613
Partners' Capital:
Contributed capital.... 68,087 123,765 97,000(j) (10,000)(k) 236,087
40,500 (m)
40,500 (m)
(123,765)(o)
Retained Earnings
(Deficit)............. 15,589 (70,866) (137,108)(b) 76,113 (n) (45,974)
(390)(c) 123,765 (o)
(61,563)(d)
8,486 (h)
-------- -------- ----------
Total Partners' capi-
tal................... 83,676 52,899 190,113
-------- -------- ----------
Total Liabilities and
Capital.............. $462,328 $843,725 $1,464,726
======== ======== ==========
See Notes to Unaudited Pro Forma Financial Information.
51
UNAUDITED PRO FORMA FINANCIAL INFORMATION
AC HOLDINGS
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
TAJ PRO FORMA AC HOLDINGS
AC HOLDINGS ASSOCIATES ADJUSTMENTS PRO FORMA
------------ ------------ ----------- -----------
(HISTORICAL) (HISTORICAL)
Revenues:
Gaming.................. $261,451 $461,622 $723,073
Rooms................... 18,312 41,815 60,127
Food and Beverage....... 40,149 58,029 98,178
Other................... 8,408 17,894 26,302
-------- -------- --------
Gross Revenues......... 328,320 579,360 907,680
Less--Promotional
Allowances............. 33,257 62,178 95,435
-------- -------- --------
Net Revenues........... 295,063 517,182 812,245
-------- -------- --------
Cost and Expenses:
Gaming.................. 139,540 260,472 400,012
Rooms................... 2,715 15,662 18,377
Food and Beverage....... 17,050 25,035 42,085
General and
Administrative......... 73,075 99,629 $(2,725)(l) 160,682
(1,353)(r)
(7,944)(s)
Depreciation and
Amortization........... 15,653 39,750 373 (l) 60,285
4,509 (t)
Other................... 3,615 3,615
-------- -------- --------
251,648 440,548 685,056
-------- -------- --------
Income from Operations.... 43,415 76,634 127,189
Interest Income........... 842 2,019 2,861
Interest Expense.......... (49,061) (115,311) 16,229 (p) (138,366)
9,777 (q)
Other non-operating
expense.................. (4,931) 3,120 (e) (1,811)
-------- -------- --------
Loss before Extraordinary
Loss and state income
taxes.................... (9,735) (36,658) (10,127)
Benefit from state income
taxes.................... (865) 0 (865)
-------- -------- --------
Loss before Extraordinary
Loss..................... $ (8,870) $(36,658) $ (9,262)
======== ======== ========
See Notes to Unaudited Pro Forma Financial Information.
52
UNAUDITED PRO FORMA FINANCIAL INFORMATION
AC HOLDINGS
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS)
TAJ PRO FORMA
AC HOLDINGS ASSOCIATES ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------
(HISTORICAL) (HISTORICAL)
Revenues:
Gaming.................... $224,499 $377,368 $601,867
Rooms..................... 14,671 33,035 47,706
Food and Beverage......... 33,403 42,933 76,336
Other..................... 7,187 11,479 18,666
-------- -------- --------
Gross Revenues.......... 279,760 464,815 744,575
Less-Promotional Allow-
ances.................... 28,611 47,519 76,130
-------- -------- --------
Net Revenues............ 251,149 417,296 668,445
-------- -------- --------
Cost and Expenses:
Gaming.................... 121,987 208,671 330,658
Rooms..................... 1,741 11,500 13,241
Food and Beverage......... 13,783 18,597 32,380
General and Administra-
tive..................... 51,073 73,717 $(2,044)(l) 115,492
(1,296)(r)
(5,958)(s)
Depreciation and Amortiza-
tion..................... 11,792 32,407 280 (l) 47,861
3,382 (t)
Other..................... 2,556 2,556
-------- -------- --------
202,932 344,892 542,188
-------- -------- --------
Income from Operations...... 48,217 72,404 126,257
Interest Income............. 689 2,752 3,441
Interest Expense............ (34,419) (88,864) 15,506 (p) (102,899)
4,878 (q)
Other non-operating ex-
pense...................... (3,847) 2,340 (e) (1,507)
-------- -------- --------
Income (Loss) before
Extraordinary Loss and
state income taxes......... 10,640 (13,708) 25,292
Provision for state income
taxes...................... 993 (993) (u) 0
-------- -------- --------
Income (Loss) before Ex-
traordinary Loss........... $ 9,647 $(13,708) $ 25,292
======== ======== ========
See Notes to Unaudited Pro Forma Financial Information.
53
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION(IN THOUSANDS, EXCEPT SHARE
INFORMATION)
PRO FORMA ADJUSTMENTS:
(a) To record the issuance of $1,180,000 aggregate principal amount of
First Mortgage Notes issued by AC Holdings and AC Funding. The market
value of the First Mortgage Notes is assumed to be their face value
with an interest rate of 11%.
(b) To record the redemption at par value of the Taj Bonds which have a
face value of $780,243 and a book value of $643,135 as of September 30,
1995, and an extraordinary loss of $137,498 which includes the
redemption of the Taj Holding Class B Common Stock (See note (c)
below).
(c) To record the payment of $.50 for the redemption of the 780,243
outstanding shares of Taj Holding Class B Common Stock as an
extraordinary loss.
(d) To record the retirement of the Plaza Notes which have a face value of
$330,000 and a book value of $326,543 as of September 30, 1995 for
$377,790 plus transaction costs, and related deferred loan costs,
resulting in an extraordinary loss of $61,563. It is assumed that 90%
of the outstanding Plaza Notes will be repurchased and an in-substance
defeasance is made of the remaining 10%.
(e) To record the payment of $28,000 in connection with exercise of the
Trump Plaza East Purchase Option and the effect of the termination of
the lease with an unaffiliated third party.
(f) To record the payment of accrued interest on the redemption of the Taj
Bonds as of September 30, 1995, including $ of the Additional Amount.
(g) To record the payment of transaction expenses associated with the
Mortgage Note Offering and the Merger Transaction.
(h) To record the satisfaction of indebtedness under the NatWest Loan which
had a book value of $44,986 for $36,500 dollars and an extraordinary
gain of $8,486 resulting from such satisfaction.
(i) To record the payment of accrued interest on the retirement of the
Plaza Notes as of September 30, 1995.
(j) To record the contribution by THCR to AC Holdings (on behalf of and at
the direction of THCR Holdings) of a portion of the net proceeds from
the Stock Offering of 7,000,000 shares at $20 per share. Assumes the
underwriters over-allotment option is not exercised.
(k) To record the payment to Bankers Trust to obtain certain releases of
the liens that Bankers Trust has with respect to the Trump
Indebtedness.
(l) To record the purchase of the Specified Parcels and the release of the
Taj Associates-First Fidelity Guarantee, the elimination of the lease
payments on the Specified Parcels and the additional depreciation
associated with the purchase. The aggregate cost of acquiring the
Specified Parcels is $50,000 in cash and the contribution by THCR to AC
Holdings (on behalf of and at the direction of THCR Holdings) of
500,000 shares of Common Stock valued at $10,000 (assumes a fair market
value of $20 per share). Taj Associates had accrued $16,525 with
respect of its obligations under the Taj Associates -- First Fidelity
Guarantee.
(m) To record the contribution by Trump to AC Holdings (on behalf and at
the direction of THCR Holdings) of all of his direct and indirect
ownership interest in 50% of Taj Associates and the purchase of the Taj
Holding Class A Common Stock by THCR which is pushed down to Taj
Associates. THCR will pay $30 for each of the 1,350,000 outstanding
shares of Taj Holding Class A Common Stock which is payable at the
option of the holder in cash or shares of THCR Common Stock. It is
assumed herein that all holders elect to receive shares of THCR Common
Stock.
(n) To record the historical negative book value of Taj Associates and Taj
Funding, as adjusted for the pro forma extraordinary loss on the
redemption of the Taj Bonds and the extraordinary gain resulting from
the satisfaction of indebtedness under the NatWest Loan, as part of the
push down of the cost of the purchase of the Taj Holding Class A Common
Stock by THCR.
54
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(o) To eliminate the capital deficit of Taj Associates as a result of the
purchase of the Taj Holding Class A Common Stock.
(p) To record adjustments to historical interest expense to give effect to
the Merger Transaction as follows:
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
Historical interest expense $ 164,372 $ 123,283
--------- ---------
(i) Elimination of interest and discount accre-
tion on the redemption of the Taj Bonds and
the Plaza Notes (141,403) (109,489)
(ii) Elimination of accretion on the Taj Asso-
ciates--First Fidelity Guarantee (2,047) (1,748)
(iii) Elimination of interest on the NatWest
Loan (4,299) (3,204)
(iv) Elimination of refinancing transaction ex-
penses (2,787) (1,352)
(v) Elimination of amortization of deferred of-
fering costs (1,792) (1,344)
(vi) Reflect First Mortgage Note interest on new
debt issuance 129,800 97,350
(vii) Reflect amortization of deferred loan
costs on the Mortgage Notes 6,299 4,281
--------- ---------
Pro Forma Adjustment $ (16,229) $ (15,506)
========= =========
(q) To eliminate interest expense (including amortization of deferred
financing costs) on the PIK Notes (as defined) which were redeemed with
the proceeds contributed by THCR Holdings to AC Holdings from the
offering of the Senior Notes.
(r) To record the elimination of the fee resulting from the termination of
the Taj Services Agreement.
(s) To reflect the reduction of costs resulting from the consolidation of
certain departments and the reduction of personnel.
(t) To record the additional depreciation expense resulting from the
allocation of the purchase price to property and equipment. Amounts are
being allocated to land and buildings based upon their respective
percentages and are being depreciated over the remaining life of the
building.
(u) To eliminate state taxes as the state tax net operating losses are used
to offset pro forma taxable income.
55
BUSINESS
GENERAL
AC Holdings agreed to acquire as part of the Merger Transaction, all of the
outstanding equity interests of Trump Taj Mahal Associates, which owns and
operates the Trump Taj Mahal Casino Resort. The Merger Transaction will create
one of the largest casino entertainment companies in the United States by
combining into one entity, AC Holdings two "Four Star" Atlantic City casino
hotels. Upon consummation of the Merger Transaction, AC Holdings, an indirect
subsidiary of THCR will own and operate the Taj Mahal and Trump Plaza Hotel
and Casino. The Taj Mahal is currently Atlantic City's largest casino hotel,
and Trump Plaza is expected to be the largest casino hotel in Atlantic City
upon completion of the Trump Plaza Expansion. Following the consummation of
the Merger Transaction, AC Holdings plans to undertake the Taj Mahal
Expansion.
The acquisition of the Taj Mahal will strengthen AC Holdings' position as a
leader in the casino entertainment industry through its ownership of two
successful land-based casino hotels. Furthermore, the Merger Transaction will
enhance AC Holdings' presence in the growing Atlantic City market, which, in
terms of gaming revenues, has demonstrated a ten-year compound annual growth
rate of 5.8% and a growth rate of 9.5% for calendar year 1995 versus calendar
year 1994. After giving effect to the Merger Transaction and the Trump Plaza
Expansion, AC Holdings will have approximately one-quarter of Atlantic City's
casino square footage, slot machines, table games and hotel room inventory. In
addition, the combination of the Taj Mahal with AC Holding's existing
operations will provide opportunities for operational efficiencies, economies
of scale and benefits from the talent, expertise and experience of management
at the operating entities.
Management believes AC Holdings will benefit from the following factors:
. THE "TRUMP" NAME. AC Holdings capitalizes on the widespread recognition
of the "Trump" name and its association with high quality amenities and
first class service. To this end, AC Holdings provides a broadly
diversified gaming and entertainment experience consistent with the
"Trump" name and reputation for quality, tailored to the gaming patron in
the Atlantic City market.
. LEADING ATLANTIC CITY FACILITIES. Upon consummation of the Merger
Transaction and the Trump Plaza Expansion, AC Holdings will own and
operate the two largest casino hotel properties in Atlantic City, both of
which are strategically located on The Boardwalk. AC Holdings believes
that the Atlantic City Properties' reputations for high quality amenities
and first class customer service, prime locations and targeted marketing
strategies are ideally suited to capitalize on the expected growth in the
Atlantic City gaming market. Management believes that its leading market
share in Atlantic City following the consummation of the Merger
Transaction, will provide it with a competitive advantage in marketing
the Atlantic City Properties, particularly to large convention groups and
multi-day stay destination resort visitors.
. ATLANTIC CITY PROPERTIES EXPANSION. AC Holdings is in the process of
executing expansion projects at the Atlantic City Properties to increase
gaming space and hotel room capacity, allowing AC Holdings to meet both
existing demand and the anticipated demand from the increased number of
available rooms and infrastructure improvements that are currently under
development to enhance further the "vacation destination appeal" of
Atlantic City.
The following table profiles AC Holdings' casino and hotel capacity
following the expansion of the Atlantic City Properties:
CURRENT PLANNED
-------------- ------------------------------
TRUMP TAJ TRUMP PLAZA TAJ MAHAL
PLAZA MAHAL EXPANSION(/1/) EXPANSION(/2/) TOTAL
------ ------- -------------- -------------- -------
Casino square footage... 73,000 120,000(/3/) 66,340 60,000 319,340(/3/)
Slot machines........... 2,325 3,550 2,025 2,500 10,400
Table games............. 97 162 46 -- 305
Hotel rooms............. 555 1,250 849(/4/) 1,280 3,934
---------------------
(1) Scheduled to be completed early in the second quarter of 1996.
(2) Plans for the Taj Mahal Expansion, scheduled to be completed in phases
from the first quarter of 1997 through 1999, are preliminary and
subject to modification.
(3) Excludes a 12,000 square foot poker, keno and race simulcasting room
which contains 64 poker tables.
(4) Includes 150 rooms which were opened at Trump Plaza East on October 30,
1995.
56
. OPERATING SYNERGIES. AC Holdings intends to capitalize on the
opportunities for efficiencies which can be generated by integrating
certain operations of the Atlantic City Properties which have previously
been operated separately. Management has identified certain potential
cost savings which, by the second years following the Merger Transaction,
are estimated to be approximately $18-20 million on an annual basis.
Management believes that it will be able to consolidate certain
departments at the Atlantic City Properties, reduce general and
administrative expenses through possible personnel reductions and the
consolidation of certain marketing efforts, and reduce operating costs
through efficiencies that are expected to result from the combined
purchasing power of the Atlantic City Properties.
ATLANTIC CITY PROPERTIES
TRUMP PLAZA
Management believes that Trump Plaza's "Four Star" Mobil Travel Guide rating
and "Four Diamond" American Automobile Association rating reflect the high
quality amenities and services that Trump Plaza provides to its casino patrons
and hotel guests. These amenities and services include a broad selection of
dining choices, headline entertainment, deluxe accommodations, tennis courts
and swimming and health spa facilities.
Trump Plaza Expansion. Management believes that as a result of the Trump
Plaza Expansion and Trump Plaza's strategic location, Trump Plaza is well
positioned to become one of the premier host properties in Atlantic City. The
Trump Plaza Expansion is currently scheduled to be completed early in the
second quarter of 1996 and would increase Trump Plaza's prime central frontage
on The Boardwalk to nearly a quarter of a mile. Management also believes that
the construction of the new convention center and tourist corridor linking the
new convention center with The Boardwalk will enhance the desirability of
Atlantic City generally and, as a result of Trump Plaza's central location,
will benefit Trump Plaza in particular. In addition, management expects to be
able to take advantage of recent gaming regulatory changes that will allow
casino space to be directly visible and accessible from The Boardwalk. Trump
Plaza's location on The Boardwalk at the end of the main highway into Atlantic
City makes it highly accessible for both "drive-in" and "walk-in" patrons.
Upon completion of the Trump Plaza Expansion, Trump Plaza's casino floor space
would be the largest in Atlantic City, increasing from 75,000 square feet to
an aggregate of approximately 139,340 square feet of gaming space, housing a
total of approximately 4,300 slot machines and 142 table games. Trump Plaza's
hotel capacity would increase to a total of 1,404 guest rooms from 555 rooms,
making Trump Plaza's guest room inventory the largest in Atlantic City.
AC Holdings is in the process of renovating and integrating into Trump
Plaza, Trump World's Fair, located on The Boardwalk adjacent to the existing
Atlantic City Convention Center, which is next to Trump Plaza at a remaining
cost of $ million. Upon completion, Trump World's Fair would add 49,340
square feet of casino floor space, approximately of which are directly
accessible from The Boardwalk and 500 hotel rooms, connected with the current
Trump Plaza's main tower by an enclosed walkway overlooking The Boardwalk.
Renovations are ongoing at Trump World's Fair and management expects, although
there can be no assurances, that the renovations at Trump World's Fair will be
completed early in the second quarter of 1996. See "Risk Factors--Trump Plaza
Expansion and the Taj Mahal Expansion."
Trump Plaza is also in the process of renovating and integrating into Trump
Plaza a hotel tower, Trump Plaza East, located adjacent to Trump Plaza's
existing facility, at a remaining cost of approximately $ million as of
December 31, 1995. On October 30, 1995, management opened nearly 50% of the
rooms and suites in Trump Plaza East. This opening of 150 rooms and suites was
ahead of schedule and under the budget set for this part of the expansion.
Management intends to open the remaining rooms and suites and the casino at
Trump Plaza East in the first quarter of 1996. When completed, Trump Plaza
East will have 15,000 square feet of casino space and 349 hotel rooms. Trump
Plaza currently leases Trump Plaza East and intends to exercise its option to
acquire it from an unaffiliated entity. See "--Properties--Trump Plaza--Trump
Plaza East." Trump Plaza East will be reconfigured to provide a new
entranceway to Trump Plaza directly off the Atlantic City Expressway.
Management believes the increased hotel capacity as a result of the Trump
Plaza Expansion will enable it better to meet demand and accommodate its
casino guests, as well as to host additional and larger conventions and
corporate meetings.
57
Management commenced the Trump Plaza Expansion in 1995 and has recently
launched a variety of new initiatives designed to increase the level of casino
gaming activity generally at its casino and, in particular, to attract casino
patrons who tend to wager more frequently and in larger denominations than the
typical Atlantic City patron. These initiatives include targeted marketing and
advertising campaigns directed to select groups of customers in the Boston-New
York-Washington, D.C. corridor, the introduction of new slot machines and
table games and the addition of bill acceptors on slot machines.
The following table details plans for the Trump Plaza Expansion:
TRUMP PLAZA TRUMP PLAZA TRUMP WORLD'S
FACILITY(1) EAST FAIR TOTAL
----------- ----------- ------------- -------
Casino square footage............. 75,000 15,000 49,340 139,340
Slot machines..................... 2,400 400 1,550 4,350
Table games....................... 97 13 33 142
Hotel rooms....................... 555 349(2) 500 1,404
- ---------------------
(1) Includes the 2,000 square foot area which will connect the existing
facility with Trump Plaza East and the 75 slot machines to be included in
this area.
(2) Includes 150 rooms which were opened on October 30, 1995.
In July 1994, Time Warner opened its second largest Warner Brothers Studio
Store pursuant to a sublease of the entire first floor of retail space on The
Boardwalk at Trump Plaza East (approximately 17,000 square feet). Management
believes that the commitment of Time Warner at Trump Plaza East, together with
other nationally known retail, restaurant and entertainment establishments
expected to participate in the Trump Plaza Expansion, evidences the continued
growth of, and highlights Trump Plaza's favored place within, the Atlantic
City casino market.
THE TAJ MAHAL
The Taj Mahal is currently the largest casino hotel in Atlantic City and has
ranked first among all Atlantic City casinos in terms of total gaming
revenues, table revenues and slot revenues since it commenced operations in
1990. The Taj Mahal capitalizes on the widespread recognition and marquee
status of the "Trump" name and its association with high quality amenities and
first class service as evidenced by its "Four Star" Mobil Travel Guide rating.
Management believes that the breadth and diversity of the Taj Mahal's casino,
entertainment and convention facilities and its status as a "must see"
attraction will enable the Taj Mahal to benefit from the expected continued
growth of the Atlantic City market.
In recent years, under the direction of Trump and the management team led by
Nicholas L. Ribis, its Chief Executive Officer, Taj Associates has completed
construction of the Taj Entertainment Complex, reconfigured and expanded the
casino floor to provide race simulcasting, poker wagering and the recently
introduced game of keno, opened an Asian themed table game area and increased
the number of poker tables and slot machines. Taj Associates continually
monitors operations to adapt to and anticipate industry trends. Since 1994,
the Taj Mahal has embarked on a strategy to refurbish all of its hotel guest
rooms and corridors by April 1996 and to replace all of its existing slot
machines by the middle of 1996 with new, more efficient machines with bill
collectors.
The Taj Mahal Expansion. Following the consummation of the Merger
Transaction, Management plans to undertake an expansion plan at the Taj Mahal
to meet both existing demand and the increase in demand that management
anticipates will result from the increased number of rooms and infrastructure
improvements that are currently being implemented to enhance further the
"vacation destination appeal" of Atlantic City. It is currently expected that
the Taj Mahal Expansion will be funded principally out of the Atlantic City
Properties' cash from operations and will be completed in phases from the
fourth quarter of 1996 through 1999. The Taj
58
Mahal Expansion, the plans for which are preliminary and subject to
modification, involves the construction of an approximately 2,200 space
expansion of the Taj Mahal's existing self-parking facilities and a new arena
on a surface parking area located adjacent to the Taj Mahal, each scheduled to
be completed in the first quarter of 1997; the conversion of the current site
of the Mark Etess Arena into a new 60,000-square foot circus-themed casino
with 2,500 slot machines, scheduled to be completed in 1997; and the
construction of two new hotel towers adjacent to the Taj Mahal's existing
hotel tower, each containing in excess of 640 rooms, the first of which is
scheduled to be completed in 1997, and the second of which is scheduled to
begin construction following the completion of the first tower and be
completed in 1999. See "Risk Factors--Trump Plaza Expansion and the Taj Mahal
Expansion--The Taj Mahal."
The following table details the plans for the Taj Mahal Expansion:
CURRENT TAJ
TAJ MAHAL MAHAL
FACILITIES EXPANSION TOTAL
---------- --------- -------
Casino square footage........................... 120,000(/1/) 60,000 180,000
Slot machines................................... 3,550 2,500 6,050
Table games..................................... 162 -- 162
Hotel rooms..................................... 1,250 1,280 2,530
- ---------------------
(/1/Excludes)a 12,000 square-foot poker, keno and race simulcasting room which
contains 64 poker tables.
The following table summarizes the different phases of the Taj Mahal
Expansion with their associated cost estimates:
PROJECT
PROJECT COST
------- -------
(IN MILLIONS)
Parking facility, approximately 2,200 spaces................... $ 26.0
New Arena...................................................... 15.0
Circus Casino.................................................. 53.3
First hotel tower, 640 rooms................................... 76.0
Second hotel tower, 640 rooms(/1/)............................. 83.6
------
Total........................................................ $253.9
======
- ---------------------
(1) Construction on the second hotel tower is to start after the completion
and opening of the first tower.
In addition, the Taj Mahal is contemplating adding several new nationally
recognized themed restaurants, including the Rainforest Cafe and the All-Star
Cafe. Construction costs for each of the three themed restaurants will be the
obligation of the lessees. The lease for the Rainforest Cafe will require Taj
Associates to contribute $2.5 million towards construction after the project
is completed and the restaurant opens for business.
ATLANTIC CITY MARKETING STRATEGY
In order to provide a sharpened marketing focus at the different properties
and appeal to a variety of segments in the Atlantic City marketplace,
management intends to pursue a targeted marketing approach with respect to the
Atlantic City Properties:
The Taj Mahal. The Taj Mahal will continue to capitalize on its status as
Atlantic City's "must see" casino entertainment facility by offering
"something for everyone." The Taj Mahal has been successful in attracting all
segments of the gaming market because of the size and diversity of its
entertainment and gaming facilities. The Taj Mahal has been particularly
successful in attracting the segments of the Atlantic City gaming market that
tend to wager more frequently and in larger denominations than the typical
Atlantic City gaming customer. To attract these high-end players, the Taj
Mahal offers international musical and entertainment attractions and has
recently opened an Asian themed gaming table game area which offers 16 popular
Asian table games catering to the Taj Mahal's growing Asian clientele.
59
Trump Plaza. As the Trump Plaza Expansion is completed, Trump Plaza East
will be integrated into Trump Plaza and together they will be operated as a
single hotel facility. Trump Plaza will continue the marketing strategies it
has found successful in the past, including targeting lucrative drive-in slot
customers. The additional hotel rooms and gaming facilities at Trump Plaza
East will better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the
typical walk-in or bus patron.
Trump World's Fair. Trump World's Fair will seek to attract the "middle
market" segment (primarily bus customers and boardwalk pedestrian traffic) by
offering a high value food and entertainment attractions in festive "World's
Fair" atmosphere. Trump's World's Fair will feature a Boardwalk level casino
offering walk-in customers direct access from The Boardwalk to approximately
575 slot machines. Trump World's Fair is constructing a new bus terminal which
will have a direct access escalator which will transport bus customers
directly to a separate casino entertainment area via a dedicated foot wide
escalator. The separate casino entertainment area will contain a 500-seat
buffet, an Oriental Pavilion and a casino with approximately 550 slot
machines. The new bus terminal and dedicated casino facilities will allow
Trump World's Fair to efficiently serve a high volume of bus customers. A
casino with approximately 420 slot machines and 33 table games along with
additional restaurants will be located on the second floor of Trump World's
Fair. With its prime location adjoining the current Atlantic City Convention
Center and near the new Atlantic City Convention Center, and with its newly
refurbished room base of 500 rooms and approximately 50,000 feet of total
gaming space, Trump World's Fair is ideally suited to attract convention
visitor traffic.
BUSINESS STRATEGY
"Comping" Strategy. In order to compete effectively with other Atlantic City
casino hotels, the Atlantic City Properties offer complimentary drinks, meals,
room accommodations and/or travel arrangements to their patrons
("complimentaries" or "comps"). Management focuses the Atlantic City
Properties' promotional activities, including complimentaries, on middle and
upper middle market "drive in" patrons who visit Atlantic City frequently and
have proven to be the most profitable market segment. Additionally, as a
result of increased regulatory flexibility, the Taj Mahal has implemented a
cash comping policy to high-end players in order to compete with similar
practices in Las Vegas and to attract international business.
Entertainment. Management believes headline entertainment, as well as other
entertainment and revue shows, are effective attracting and retaining gaming
patrons. Trump Plaza offers headline entertainment as part of its strategy to
attract high-end and other patrons. Trump Plaza offers headline entertainment
weekly during the summer and monthly during the off-season, and also features
other entertainment and revue shows. The Xanadu Theater allows the Taj Mahal
to offer longer running, more established productions that cater to the tastes
of the Taj Mahal's high-end international guests. The Taj Mahal's facilities
also include the Mark Etess Arena, an approximately 63,000 square-foot
exhibition hall facility. The Xanadu Theater, together with the Mark Etess
Arena, afford the Taj Mahal more flexibility in the use of its facilities for
sporting and other headline programs. The Taj Mahal regularly engages well-
known musicians and entertainment personalities and will continue to emphasize
weekend "marquee" events such as Broadway revues, high visibility sporting
events, festivals and contemporary concerts to maintain the highest level of
glamour and excitement. Mid-week uses for the facilities include convention
events and casino marketing sweepstakes.
Player Development/Casino Hosts. The Atlantic City Properties currently
employ gaming representatives in New Jersey, New York and other states, as
well as several international representatives, to promote the Atlantic City
Properties to prospective gaming patrons. Player development personnel host
special events, offer incentives and contact patrons directly in an effort to
attract high-end table game patrons from the United States, Canada and South
America. The Atlantic City Properties' casino hosts assist patrons on the
casino floor, make room and dinner reservations and provide general
assistance. In addition, targeted marketing to international clientele will be
continued and expanded at the Taj Mahal through new sales representatives in
Latin America, Mexico, Europe, the Far East and the Middle East. As a special
bonus to high-end players, the Taj Mahal offers
60
three clubs for the exclusive use of select customers: the Maharajah Club for
table game players, the Presidents Club for high-end slot players, and the
Bengal Club for other preferred slot players. The Atlantic City Properties
also plan to continue the development of their slot and coin programs through
direct mail and targeted marketing campaigns emphasizing the high-end player.
Promotional Activities. The Trump Card constitutes a key element in the
Atlantic City Properties' direct marketing program. Subject to regulatory
constraints, the Trump Card will be used in all of THCR's gaming facilities so
as to build a national database of gaming patrons. Slot machine players are
encouraged to register for and utilize their personalized Trump Card to earn
various complimentaries based upon their level of play. The Trump Card is
inserted during play into a card reader attached to the slot machine for use
in computerized rating systems. THCR's computer systems record data about the
cardholders, including playing preferences, frequency and denomination of play
and the amount of gaming revenues produced. The Atlantic City Properties
design promotional offers, conveyed via direct mail and telemarketing, to
patrons expected to provide revenues based upon their historical gaming
patterns. Such information is gathered on slot wagering by the Trump Card and
on table game wagering by the casino game supervisors. Promotional activities
include the mailing of vouchers for complimentary slot play. The Atlantic City
Properties also utilize a special events calendar (e.g., birthday parties,
sweepstakes and special competitions) to promote its gaming operations.
The Atlantic City Properties conduct slot machine and table game tournaments
in which cash prizes are offered to a select group of players invited to
participate in the tournament based upon their tendency to play. Special
events, such as "Slot Sweepstakes" and "bingo" at the Taj Mahal, are designed
to increase mid-week business and will continue to be emphasized throughout
1996. Players at these tournaments tend to play at their own expense during
"off-hours" of the tournament. At times, tournament players are also offered
special dining and entertainment privileges that encourage them to remain at
the Atlantic City Properties.
Bus Program. Trump Plaza and the Taj Mahal each have bus programs which
transport approximately 2,400 and gaming patrons per day during the week
and 3,500 and gaming patrons per day on the weekends, respectively.
Trump Plaza's Transportation Facility (as defined) contains 13 bus bays and is
connected by an enclosed pedestrian walkway to Trump Plaza, and the Taj Mahal
has an 18 bay bus terminal.
Credit Policy. Historically, the Atlantic City Properties have extended
credit to certain qualified patrons. For the years ended December 31, 1992,
1993 and 1994 and the nine months ended September 30, 1995 credit play as a
percentage of total dollars wagered at Trump Plaza was approximately 28%, 18%,
17%, and 18%, respectively. As part of Trump Plaza's business strategy, Trump
Plaza has imposed stricter standards on applications for new or additional
credit. Stricter standards in the extension of credit have contributed to the
reduction of credit play as a percentage of total dollars wagered and has led
to improved quality of the credit extended. For the years ended December 31,
1992, 1993 and 1994 and the nine months ended September 30, 1995, the Taj
Mahal's credit play as a percentage of total dollars wagered was approximately
26.0%, 23.5%, 22.8% and 22.9%, respectively. Since 1991, the Taj Mahal has
successfully attracted high-end table game patrons through its "junket"
marketing operations and has undertaken a marketing effort aimed at high-end
international table game patrons, which increased credit play as a percentage
of total dollars in 1991 and early 1992. Since the initial success of these
marketing efforts, the Taj Mahal has been more selective in its extension of
credit, thereby decreasing credit play as a percentage of gaming revenues in
1992, 1993 and 1994.
FACILITIES AND AMENITIES
Trump Plaza. The casino in the existing facility of Trump Plaza currently
offers 97 table games and 2,400 slot machines. In addition to the casino,
Trump Plaza's main tower consists of a 31-story tower with 555 guest rooms,
including 62 suites. Trump Plaza's main tower also offers 10 restaurants, a
750-seat cabaret theater, four cocktail lounges, 28,000 square feet of
convention, ballroom and meeting room space, a swimming pool, tennis courts
and a health spa.
The entry level of Trump Plaza's main tower includes a cocktail lounge, two
gift shops, a deli, a coffee shop, an ice cream parlor and a buffet. The
casino level houses the casino, a fast food restaurant, an exclusive
61
slot lounge for high-end patrons and a new oceanfront baccarat gaming area.
Upon completion, an enclosed walkway will connect Trump Plaza at the casino
level with the Atlantic City Convention Center and with Trump World's Fair.
Trump Plaza's main tower's guest rooms are located in a tower which affords
most guest rooms a view of the ocean. While rooms are of varying size, a
typical guest room consists of approximately 400 square feet. Trump Plaza also
features 16 one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites."
The Super Suites are located on the top two floors of Trump Plaza's main tower
and offer luxurious accommodations and 24-hour butler and maid service. The
Super Suites and certain other suites are located on the "Club Level" which
requires guests to use a special elevator key for access and contains a lounge
area (the "Club Level Lounge") that offers food and bar facilities.
Trump Plaza's main tower is connected by an enclosed pedestrian walkway to a
10-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino and is located directly off the Atlantic City
Expressway, the main highway into Atlantic City.
Plaza Associates is in the process of renovating and integrating Trump Plaza
East into Trump Plaza, which is located directly adjacent to its main tower.
The hotel will be opened in stages beginning with the hotel rooms, of which
150 were opened on October 30, 1995. This construction was completed ahead of
schedule and under the budget for this part of the expansion. Management
intends to open the remaining rooms and suites and the casino at Trump Plaza
East in the first quarter of 1996. In addition, the hotel has retail space
fronting The Boardwalk. Trump has entered into a 10-year sublease agreement
with Time Warner pursuant to which Time Warner has subleased the entire first
floor of the retail space (approximately 17,000 square feet) located at Trump
Plaza East for a Warner Brothers Studio Store which opened in July 1994. The
second floor, directly connected to Trump Plaza's main tower, will house
15,000 square feet of distinctly themed casino floor space with 400 slot
machines and one pit of 13 table games.
Trump World's Fair. Upon completion of the renovation early in the second
quarter of 1996, Trump World's Fair will be connected to Trump Plaza's main
tower by an enclosed walkway overlooking The Boardwalk and will add an
additional 500 hotel rooms to Trump Plaza. In addition, Trump World's Fair
will be outfitted with approximately 49,340 square feet of casino floor space
housing approximately 1,550 slot machines and 33 table games. In addition to
the casino, Trump World's Fair will feature three restaurants, including a
state-of-the-art buffet, a cocktail lounge, convention, ballroom and meeting
room space, a swimming pool and a health spa. The enclosed walkway will run
through a portion of the Atlantic City Convention Center, which is located
between Trump World's Fair and Trump Plaza's main tower. In this connection,
Plaza Associates has acquired an easement with regard to portions of the
Atlantic City Convention Center. See "--Properties--Trump Plaza--Trump World's
Fair" and "Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities."
THE TAJ MAHAL
The Taj Mahal currently features Atlantic City's largest casino, with
120,000-square-feet of gaming space, 162 table games and 3,550 slot machines.
In addition, the Taj Mahal has a 12,000-square-foot poker, keno and race
simulcasting room with 64 poker tables, which was added in 1993 and expanded
in 1994. The casino's offerings include blackjack, progressive blackjack,
craps, roulette, baccarat, mini baccarat, red dog, sic-bo, pai gow, pai gow
poker, Caribbean stud poker, big six, mini big six and let it ride.In December
1995, the Taj Mahal opened an Asian themed table game area which offers 16
popular Asian table games catering to the Taj Mahal's growing Asian clientele.
In addition, as a special bonus to high-end players, Taj Associates offers
three clubs for the exclusive use of select customers: the Maharajah Club for
table game players, the Presidents Club for high-end slot players, and the
Bengal Club for other preferred slot players.
62
The Taj Mahal currently consists of a 42-story hotel tower and contiguous
low-rise structure, sited on approximately 17 acres of land. The Taj Mahal has
1,250 guest rooms (including 242 suites), 15 restaurants, six lounges, parking
for approximately 4,600 cars, an 18-bay bus terminal and approximately 65,000-
square-feet of ballroom, meeting room and pre-function area space. The Taj
Mahal is currently contemplating adding several new themed restaurants to be
owned and operated by nationally recognized restaurant operators, including
the Rainforest Cafe and the All-Star Cafe. In addition, the Taj Mahal features
the Taj Entertainment Complex, a 20,000-square-foot multi-purpose
entertainment complex known as the Xanadu Theater with seating capacity for
approximately 1,200 people, which can be used as a theater, concert hall,
boxing arena or exhibition hall, and the Mark Etess Arena, which comprises an
approximately 63,000-square foot exhibition hall facility. The Xanadu Theater
and the Mark Etess Arena have allowed the Taj Mahal to offer longer running,
more established productions that cater to the tastes of the Taj Mahal's high-
end international guests, and has afforded the Taj Mahal more flexibility in
the use of its facilities for sporting and other headline programs. The Taj
Mahal regularly engages well-known musicians and entertainment personalities
and will continue to emphasize weekend marquee events such as Broadway revues,
high visibility sporting events, international festivals and contemporary
concerts to maximize casino traffic and to maintain the highest level of
glamour and excitement at the Taj Mahal.
Management believes that the Taj Mahal's 1,250-room capacity and vast
casino, entertainment, convention and exhibition space, including the Mark
Etess Arena, make it a highly attractive convention and destination resort
facility at which visitors may stay for extended periods. In addition to its
normal advertising, Taj Associates actively promotes the Taj Mahal with
various local chambers of commerce, travel agencies which specialize in
convention travel and various corporate travel departments in order to attract
convention business.
ATLANTIC CITY MARKET
The Atlantic City gaming market has demonstrated continued growth despite
the recent proliferation of new gaming venues across the country. The 12
casino hotels in Atlantic City generated approximately $3.75 billion in gaming
revenues in 1995, an approximately 9.5% increase over 1994 gaming revenues of
approximately $3.42 billion. From 1990 to 1995, total gaming revenues in
Atlantic City have increased 26.8%, while hotel rooms increased only slightly
during that period. Occupancy levels in Atlantic City increased to historic
highs in 1995, reaching %, up from 82.7% in 1990. Although total visitor
volume to Atlantic City remained relatively constant in 1995, the volume of
bus customers dropped to 8.8 million in 1995, continuing a decline from 13.1
million in 1989. The volume of customers traveling by other means to Atlantic
City has grown from 18.9 million in 1989 to million in 1995.
Total Atlantic City slot revenues increased % in 1995, continuing a
solid trend of increases over the past six years. From 1990 through 1995, slot
revenue growth in Atlantic City has averaged 8.3% per year. Total table
revenue increased % in 1995, while table game revenue from 1990 to 1995 has
decreased on average % per year. Management believes the slow growth in
table revenue is primarily attributable to two factors. First, the slot
product has been significantly improved over the last five years. Dollar bill
acceptors, new slot machines, video poker and blackjack and other improvements
have increased the popularity of slot play among a wider universe of casino
patrons. Casino operators in Atlantic City have added slot machines in favor
of table games due to increased public acceptance of slot play and due to slot
machines' comparatively higher profitability as a result of lower labor and
support costs. Since 1990, the number of slot machines in Atlantic City has
increased 39.1%, while the number of table games has decreased by 14.1%. Slot
revenues increased from 58% of total casino revenues in 1990 to 69% in 1995.
The second reason for historic slow growth in table revenue is that table game
players are typically higher end players and are more likely to be interested
in overnight stays and other amenities. During peak season and weekends, room
availability in Atlantic City is currently inadequate to meet demand, making
it difficult for casino operators to aggressively promote table play.
63
Despite lower overall growth rates than the Las Vegas market, management
believes that Atlantic City possesses similar revenue and cash flow generation
capabilities. The approximately $ billion of gaming revenue produced by the
12 casino hotels in Atlantic City in 1995 exceeded the approximately $
billion of gaming revenues produced by the 19 largest casino hotels on the Las
Vegas Strip, even though the Atlantic City casino hotels have less than one-
quarter the number of hotel rooms of the Las Vegas Strip casino hotels. Win
per unit figures in Atlantic City are at a significant premium to Las Vegas
win per unit performance, primarily due to the constrained supply of gaming
positions in Atlantic City compared to Las Vegas.
The regulatory environment in Atlantic City has improved recently. Most
significantly, 24-hour gaming has been approved, poker and keno have been
added and regulatory burdens have been reduced. In particular, Bill A61 was
passed in January of 1995, which has eliminated duplicative regulatory
oversight and channeled operator's funds from regulatory support into CRDA
uses. Administrative costs of regulation will be reduced while increasing
funds available for new development.
In addition to the planned casino expansions, major infrastructure
improvements have begun. The CRDA is currently overseeing the development of
the "tourist corridor" that will link the new convention center with The
Boardwalk and will, when completed, feature an entertainment and retail
complex. The tourist corridor is scheduled to be completed in conjunction with
the completion of the new convention center.
Trump Plaza is adjacent to the existing Atlantic City Convention Center and
will also be one of the closest casino hotels to the new convention center,
which as currently planned would hold approximately 500,000 square feet of
exhibit and pre-function space, 45 meeting rooms, food-service facilities and
a 1,600-car underground parking garage. The Taj Mahal is approximately 1.5
miles from the site of the new convention center. When completed, the new
approximately $290 million convention center would be the largest exhibition
space between New York City and Washington, D.C. It will be located at the
base of the Atlantic City Expressway and is currently planned to open in
January 1997. The State of New Jersey is also implementing an approximately
$125 million capital plan to upgrade and expand the Atlantic City
International Airport.
Management believes that recent gaming regulatory reforms will serve to
permit future reductions in operating expenses of casinos in Atlantic City and
to increase the funds available for additional infrastructure development
through the CRDA. Due principally to an improved regulatory environment,
general improvement of economic conditions in 1993 and 1994 and high occupancy
rates, significant investment in the Atlantic City market has been initiated
and/or announced. Bally recently bought a Boardwalk lot for $7.5 million, the
Sands just completed a major renovation, and in December of 1994, approval by
the CRDA was given to TropWorld to add 626 hotel rooms and the Grand for 295
rooms (both of which are under construction) and the Taj Mahal for 1,280 rooms
and a 1,500 space parking garage. Overall, various casinos in the market have
applied to the CRDA for funding to construct 3,400 new hotel rooms. Management
believes that these increases in hotel capacity, together with infrastructure
improvements, will be instrumental in stimulating future revenue growth in the
Atlantic City market. See "--Competition."
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza and at the Taj Mahal during the period from May through
September, and with December and January showing substantial decreases in
activity. Revenues have been significantly higher on Fridays, Saturdays,
Sundays and holidays than on other days.
64
EMPLOYEES AND LABOR RELATIONS
TRUMP PLAZA
Plaza Associates has approximately 3,800 employees of whom approximately
1,100 are covered by collective bargaining agreements. Management believes
that its relationships with its employees are satisfactory. Certain of Plaza
Associates employees must be licensed under the Casino Control Act. See
"Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees." Plaza Funding has no employees.
In April 1993, the National Labor Relations Board (the "NLRB") found that
Plaza Associates had violated the National Labor Relations Act (the "NLRA") in
the context of a union organizing campaign by table game dealers of Plaza
Associates in association with the Sports Arena and Casino Employees Union
Local 137, a/w Laborers' International Union of North America, AFL-CIO ("Local
137"). In connection with such finding, Plaza Associates was ordered to
refrain from interfering with, restraining, or coercing employees in the
exercise of the rights guaranteed them by Section 7 of the NLRA, to notify its
employees of such rights and to hold an election by secret ballot among its
employees regarding whether they desire to be represented for collective
bargaining by Local 137. The election was held on May 20 and 21, 1994 and the
vote, which has been certified by the NLRB, was in favor of management and
against representation by Local 137.
TAJ MAHAL
Taj Associates has approximately 6,100 employees for the operation of the
Taj Mahal, of whom approximately 1,850 employees are covered by collective
bargaining agreements. Taj Associates believes that its relationships with its
employees are satisfactory and that its staffing levels are sufficient to
provide superior service. Since opening in April 1990, during which time some
collective bargaining agreements with various unions have expired prior to the
execution of new agreements, the business of Taj Associates has not been
interrupted due to any labor disputes. The collective bargaining agreement
with HERE Local 54, which covers substantially all of Taj Associates' hotel
and restaurant employees, was renegotiated in September 1994 and will expire
on September 14, 1999.
Certain Taj Associates' employees must be licensed under the Casino Control
Act. See "Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees."
PROPERTIES
TRUMP PLAZA
Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is subject to the liens of the
mortgages associated with the Plaza Notes (collectively, the "Plaza
Mortgages") and certain other liens. Upon consummation of the Merger
Transaction, these parcels of land will secure the First Mortgage Notes. Upon
its acquisition, Trump Plaza East would also become subject to the mortgage
securing the First Mortgage Notes.
Plaza Casino Parcel. Trump Plaza's main tower is located on The Boardwalk in
Atlantic City, New Jersey, next to the existing Atlantic City Convention
Center. It occupies the entire city block (approximately 2.38 acres) bounded
by The Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the
"Plaza Casino Parcel").
The Plaza Casino Parcel consists of four tracts of land, one of which is
owned by Plaza Associates and three of which are leased to Plaza Associates
pursuant to three non-renewable ground leases, each of which expires on
December 31, 2078 (each, a "Plaza Ground Lease"). Trump Seashore Associates
("Trump Seashore"), Seashore Four Associates ("Seashore Four") and Plaza Hotel
Management Company (each, a "Plaza Ground Lessor") are the owners/lessors
under such respective Ground Leases (respectively, the "TSA Lease," "SFA
Lease" and "PHMC Lease"; the land which is subject to the Ground Leases (which
includes
65
Additional Parcel 1, as defined) is referred to collectively as the "Plaza
Leasehold Tracts" and individually as a "Plaza Leasehold Tract"). Trump
Seashore and Seashore Four are 100% beneficially owned by Trump and are,
therefore, affiliates of THCR.
The Plaza Ground Leases provide that each Plaza Ground Lessor may encumber
its fee estate with mortgage liens, but any such fee mortgage will not
increase the rent under the applicable Plaza Ground Lease and must be
subordinate to such Plaza Ground Lease. Accordingly, any default by a Plaza
Ground Lessor under any such fee mortgage will not result in a termination of
the applicable Plaza Ground Lease but would permit the fee mortgagee to bring
a foreclosure action and succeed to the interests of the Plaza Ground Lessor
in the fee estate, subject to Plaza Associates' leasehold estate under such
Plaza Ground Lease. Each Plaza Ground Lease also specifically provides that
the Plaza Ground Lessor may sell its interest in the applicable Plaza
Leasehold Tract, but any such sale would be made subject to Plaza Associates'
interest in the applicable Plaza Ground Lease.
On August 1, 1991, as security for indebtedness owed to a third party, Trump
Seashore transferred its interest in the TSA Lease to United States Trust
Company of New York ("UST"), as trustee for the benefit of such third party
creditor. The trust agreement among UST, Trump Seashore and such creditor
provides that the trust shall terminate on the earlier of (i) August 1, 2012
or (ii) the date on which such third party creditor certifies to UST that all
principal, interest and other sums due and owing from Trump Seashore to such
third party creditor have been paid.
On September 20, 1995, Trump Seashore and its third party lender entered
into a mortgage note modification and extension agreement, pursuant to which
Trump Seashore and such third party lender extended the term of the
indebtedness described above, which matured in October 1993, to September 30,
1996, and increased the interest rate to be paid on such indebtedness to one
and one-half percent in excess of the interest stated by such third party
lender to be its prime rate.
Each Plaza Ground Lease contains options pursuant to which Plaza Associates
may purchase the Plaza Leasehold Tract covered by such Plaza Ground Lease at
certain times during the term of such Plaza Ground Lease under certain
circumstances. The purchase price pursuant to each option is specified in the
applicable Plaza Ground Lease.
The Plaza Ground Leases are "net leases" pursuant to which Plaza Associates,
in addition to the payment of fixed rent, is responsible for all costs and
expenses with respect to the use, operation and ownership of the Plaza
Leasehold Tracts and the improvements now, or which may in the future be,
located thereon, including, but not limited to, all maintenance and repair
costs, insurance premiums, real estate taxes, assessments and utility charges.
The improvements located on the Plaza Leasehold Tracts are owned by Plaza
Associates during the terms of the respective Plaza Ground Leases and upon the
expiration of the term of each Plaza Ground Lease (for whatever reason),
ownership of such improvements will vest in the Plaza Ground Lessor.
If a bankruptcy case is filed by or commenced against a Plaza Ground Lessor
under applicable bankruptcy law, the trustee in bankruptcy in a liquidation or
reorganization case under the applicable bankruptcy law, or a debtor-in-
possession in a reorganization case under the applicable bankruptcy law, has
the right, at its option, to assume or reject the Plaza Ground Lease of the
debtor-lessor (subject, in each case, to court approval). If the Plaza Ground
Lease is assumed, the rights and obligations of Plaza Associates thereunder,
and the rights of the trustee with respect to the Plaza Notes (the "Plaza Note
Trustee") as leasehold mortgagee under the Plaza Note Agreements, would
continue in full force and effect. If the Plaza Ground Lease is rejected,
Plaza Associates would have the right, at its election, either (i) to treat
the Plaza Ground Lease as terminated or (ii) to continue in possession of the
land and improvements under the Plaza Ground Lease for the balance of the term
thereof and at the rental set forth therein (with a right to offset against
such rent any damages caused by the Plaza Ground Lessor's failure to
thereafter perform its obligations under such Plaza Ground Lease). The Plaza
Note
66
Agreements provide that if a Plaza Ground Lease is rejected, Plaza Associates
assigns to the Plaza Note Trustee its rights to elect whether to treat the
Plaza Ground Lease as terminated or to remain in possession of the leased
premises.
In the case of the Plaza Ground Leases, the rejection of a Plaza Ground
Lease by a trustee in bankruptcy or debtor-lessor (as debtor-in-possession)
may result in termination of any options to purchase the fee estate of the
debtor-lessor and the Plaza Note Trustee's option (as leasehold mortgagee as
described above), if the Plaza Ground Lease is terminated, to enter into a new
lease directly with the lessor. In addition, under an interpretation of New
Jersey law, it is possible that a court would regard such options as separate
contracts and, therefore, severable from the Plaza Ground Lease. In such
event, the trustee in bankruptcy or debtor-lessor (as debtor-in-possession)
could assume the Plaza Ground Lease, while rejecting some or all of such
options under the Ground Lease.
Parking Parcels. Plaza Associates owns a parcel of land (the "Plaza Garage
Parcel") located across the street from the Plaza Casino Parcel and along
Pacific Avenue in a portion of the block bounded by Pacific Avenue,
Mississippi Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has
constructed on the Plaza Garage Parcel a 10-story parking garage capable of
accommodating approximately 2,650 cars and which includes offices and a bus
transportation center with bays accommodating up to 13 buses at one time. An
enclosed pedestrian walkway from the parking garage accesses Trump Plaza at
the casino level. Parking at the parking garage is available to Trump Plaza's
guests, as well as to the general public. One of the tracts comprising a
portion of the Plaza Garage Parcel is subject to a first mortgage on Plaza
Associates fee interest in such tract. As of September 30, 1995, such mortgage
secured indebtedness had an approximate outstanding principal balance of $1.4
million.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet ("Additional Parcel 1")
and owns another unimproved parcel on Mississippi Avenue adjacent to
Additional Parcel 1 consisting of approximately 5,750 square feet (the
"Bordonaro Parcel"). In addition to the Plaza Mortgages, the Bordonaro Parcel
is encumbered by a first mortgage securing indebtedness having an outstanding
principal balance, as of September 30, 1995, of approximately $110,000.
Additional Parcel 1 and the Bordonaro Parcel are presently paved and used for
surface parking.
Plaza Associates also owns five unimproved parcels of land, aggregating
approximately 43,300 square feet, and subleases one parcel consisting of
approximately 3,125 square feet. All of such parcels are contiguous and are
located along Atlantic Avenue, in the same block as the Plaza Garage Parcel.
They are used for signage and surface parking and are not encumbered by any
mortgage liens other than those of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1995, of approximately $1.5 million and is encumbered by the
Plaza Mortgage.
Trump Plaza East. In connection with the Merger Transaction, Plaza
Associates intends to exercise the Trump Plaza East Purchase Option, a five-
year option to purchase the fee and leasehold interests comprising Trump Plaza
East. In October 1993, Plaza Associates assumed the leases associated with
Trump Plaza East. Until such time as the Trump Plaza East Purchase Option is
exercised or expires, Plaza Associates is obligated to pay the net expenses
associated with Trump Plaza East. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Plaza Associates-Liquidity and
Capital Resources" and "Certain Transactions--Plaza Associates--Trump Plaza
East." During years ended December 31, 1995 and 1994, Plaza Associates
incurred approximately $ million and $4.9 million, respectively, of such
expenses. Under the Trump Plaza East Purchase Option, Plaza Associates has the
right to acquire the fee interest in Trump Plaza East for a purchase price of
$28.0 million through December 31, 1996 increasing by $1.0 million annually
thereafter until expiration on June 30, 1998.
67
Plaza Associates currently intends to exercise the Trump Plaza East Purchase
Option in connection with the Merger Transaction. However, if Plaza Associates
does not exercise the Trump Plaza East Purchase Option in connection with the
Merger Transaction, up to $30.0 million of internally generated funds and/or
additional financing would be required to fund the acquisition pursuant to the
existing purchase option. There can be no assurance that such financing would
be available on attractive terms, if at all. In addition, the exercise of the
Trump Plaza East Purchase Option may require the consent of certain of Trump's
personal creditors, and there can be no assurance that such consent will be
obtained at the time Plaza Associates desires to exercise the Trump Plaza East
Purchase Option. The CCC has required that Plaza Associates exercise the Trump
Plaza East Purchase Option no later than July 1, 1996. Plaza Associates
intends to request that the CCC extend the July 1, 1996 deadline for
exercising the Trump Plaza East Purchase Option if not exercised in connection
with the Merger Transaction, although there can be no assurance that such
extension would be granted. Failure of AC Holdings to acquire Trump Plaza
East, to obtain an extension of the July 1, 1996 deadline or to obtain an
extension of the existing lease of the premises beyond its current June 30,
1998 expiration date would have a material adverse effect on the Company. See
"Certain Transactions--Plaza Associates--Trump Plaza East."
Plaza Associates has already begun development of Trump Plaza East. If Plaza
Associates is unable to finance the purchase price of Trump Plaza East
pursuant to the Trump Plaza East Purchase Option, any amounts expended with
respect to Trump Plaza East, including payments under the Trump Plaza East
Purchase Option and the lease pursuant to which Plaza Associates leases Trump
Plaza East, and any improvements thereon, would inure to the benefit of the
owner of Trump Plaza East and not to Plaza Associates and would increase the
cost of demolition of any improvements for which Plaza Associates would be
liable. As of December 31, 1995, Plaza Associates had capitalized
approximately $9.3 million in construction costs related to Trump Plaza East.
If the development of Trump Plaza East is not successful, AC Holdings would be
required to write off the capitalized construction costs associated with the
project.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into the Time Warner Sublease
with Time Warner pursuant to which Time Warner subleased the entire first
floor of retail space for a new Warner Brothers Studio Store which opened in
July 1994. The Time Warner Sublease provides for a 10-year term which expires
on the last day of the month immediately preceding the tenth anniversary of
the commencement date and contains two 5-year renewal options exercisable by
Time Warner. Time Warner renovated the premises in connection with opening the
studio store. Rent under the Time Warner Sublease is currently accruing and
will not become due and payable to Plaza Associates until the satisfaction of
certain conditions designed to protect Time Warner from the termination of the
Time Warner Sublease by reason of the termination of Plaza Associates,
leasehold estate in Trump Plaza East or the foreclosure of a certain mortgage
and until Time Warner's unamortized construction costs are less than accrued
rent. No assurances can be made that such conditions will be satisfied. In
addition, Time Warner may terminate the Time Warner Sublease at any time after
two years after the commencement date in the event that gross sales for the
store do not meet certain threshold amounts or at any time if Plaza Associates
fails to operate a first class hotel on Trump Plaza East. See "Certain
Transactions--Plaza Associates--Trump Plaza East."
Trump World's Fair. Pursuant to an easement agreement with The New Jersey
Sports and Exposition Authority ("NJSEA"), Plaza Associates has rights to an
exclusive easement over, in and through the portions of the Atlantic City
Convention Center to be used as the pedestrian walkway connecting the Main
Tower and Trump World's Fair. The easement is for a 25-year term and may be
renewed at the option of Plaza Associates for one additional 25-year period.
In consideration of the granting of the easement, Plaza Associates must pay to
NJSEA the sum of $2,000,000 annually, such annual payment to be adjusted every
five years to reflect changes in the consumer price index. Plaza Associates
will have the right to terminate the easement agreement at any time upon six
months' notice to NJSEA in consideration of a termination payment of
$1,000,000. See also "Certain Transactions--Plaza Associates--Trump World's
Fair" and "Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities."
68
Superior Mortgages. The liens securing the indebtedness on the Plaza Garage
Parcel, the Bordonaro Parcel and the Egg Harbor Parcel (all of such liens are
collectively called the "Existing Senior Plaza Mortgages") are all senior to
the liens of the Plaza Mortgages. The principal amount currently secured by
such Existing Senior Plaza Mortgages as of December 31, 1995 was, in the
aggregate, approximately $3.0 million.
Plaza Associates has financed or leased and from time to time will finance
or lease its acquisition of furniture, fixtures and equipment. The lien in
favor of any such lender or lessor may be superior to the liens of the Plaza
Mortgages.
TAJ MAHAL
Taj Associates owns and leases several parcels of land in Atlantic City, New
Jersey, each of which is used in connection with the operation of the Taj
Mahal and each of which is currently encumbered by the Amended Mortgage
securing the Taj Bonds, the Mortgage securing the First Fidelity Loan, and the
mortgage securing the $25 million Working Capital Facility. Upon consummation
of the Merger Transaction, these parcels of land will secure the Working
Capital Facility (or replacement facility) and the First Mortgage Notes. All
of the following properties (other than certain property underlying the casino
parcel, which is owned by Taj Associates) comprise the Specified Parcels.
The Casino Parcel. The land comprising the site upon which the Taj Mahal is
located consists of approximately 17 acres, which are bounded by The Boardwalk
to the south, Maryland Avenue to the east, Pennsylvania Avenue to the west and
which extends to the north towards Pacific Avenue for approximately three-
quarters of a city block on the western portion of the site and two-thirds of
a city block on the eastern portion of the site. Construction was
substantially completed and the Taj Mahal was opened to the public on April 2,
1990.
Taj Entertainment Complex. The Taj Entertainment Complex is situated on a
parcel of land leased from Realty Corp. and features a 20,000 square foot
multi-purpose entertainment complex known as the Xanadu Theater with seating
capacity for approximately 1,200 people, which can be used as a theater,
concert hall, boxing arena or exhibition hall. In connection with of the
Merger Transaction, Taj Associates will purchase the Taj Entertainment
Complex.
Steel Pier. Taj Associates leases the Steel Pier from Realty Corp. In
connection with of the Merger Transaction, Taj Associates will purchase the
Steel Pier. A condition imposed on Taj Associates' CAFRA Permit (which, in
turn, is a condition of Taj Associates' casino license) initially required
that Taj Associates begin construction of certain improvements on the Steel
Pier by October 1992, which improvements were to be completed within 18 months
of commencement. Taj Associates initially proposed a concept to improve the
Steel Pier, the estimated cost of which improvements was $30 million. Such
concept was approved by the New Jersey Department of Environmental Protection
("NJDEP"), the agency which administers CAFRA. In March 1993, Taj Associates
obtained a modification of its CAFRA Permit providing for the extension of the
required commencement and completion dates of the improvements to the Steel
Pier for one year based upon an interim use of the Steel Pier for an amusement
park. Taj Associates received an additional one-year extension, in March 1995,
of the required commencement and completion dates of the improvements of the
Steel Pier based upon the same interim use of the Steel Pier for an amusement
park pursuant to a sublease ("Pier Sublease") with an amusement park operator
("Pier Subtenant"). The Pier Sublease provides for a five-year lease term
through December 31, 1999. However, Taj Associates may terminate the Pier
Sublease after December 31 of each year if written notice of termination is
given to the Pier Subtenant on or before September 1 of such year. Taj
Associates is currently seeking further modification to its obligations under
the CAFRA Permit.
Office and Warehouse Space. Taj Associates owns an office building located
on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Trump's Castle Associates which are presently used for office
space which it leases to a commercial tenant.
69
Taj Associates has entered into a lease with The Trump-Equitable Fifth
Avenue Co., a corporation wholly owned by Trump, for the lease of office space
in The Trump Tower in New York City, which Taj Associates uses as a marketing
office. The monthly payments under the lease had been $1,000, and the premises
were leased at such rent for four months in 1992, the full twelve months in
1993 and 1994 and eight months in 1995. On September 1, 1995, the lease was
renewed for a term of five years with an option for Taj Associates to cancel
the lease on September 1 of each year, upon six months' notice and payment of
six months' rent. Under the renewed lease, the monthly payments are $2,184.
Parking. The Taj Mahal provides parking for approximately 4,600 cars of
which 3,600 spaces are located in indoor parking garages and 1,000 spaces are
located on land leased to Taj Associates by Realty Corp. In addition, Taj
Associates entered into a lease agreement with Trump's Castle Associates to
share its employee parking facilities. In connection with the Taj Mahal
Expansion, Taj Associates will expand its self-parking facilities by 2,200
spaces.
TRADEMARK/LICENSING
Pursuant to the License Agreement, Trump granted to THCR the world-wide
right and license to use the Marks in connection with casino and gaming
activities and related services and products. The license is exclusive,
subject to existing licenses of the Marks to the Taj Mahal (prior to the
Merger Transaction) and Trump's Castle. The License Agreement does not
restrict or restrain Trump from the right to use or further license the Trump
Names in connection with services and products other than casino services and
products.
The license is for a term of the later of: (i) 20 years; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant
to an employment, management, consulting or similar services agreement with
THCR. Upon expiration of the term of the License, Trump will grant THCR a non-
exclusive license for a reasonable period of transition on terms to be
mutually agreed upon between Trump and THCR. Trump's obligations under the
License Agreement are secured by a security agreement, pursuant to which Trump
granted THCR a first priority security interest in the Marks for use in
connection with casino services, as well as related hotel, bar and restaurant
services. See "Risk Factors--Limitations on License of the Trump Name."
RESTRUCTURINGS
THE 1992 PLAZA RESTRUCTURING
In 1991, Trump Plaza experienced liquidity problems. Management believes
that those liquidity problems were attributable, in part, to an overall
deterioration in the Atlantic City gaming market, as indicated by reduced
rates of casino revenue growth for the industry for the two prior years,
aggravated by an economic recession in the Northeast. In addition, increased
casino gaming capacity in Atlantic City, due in part to the opening of the Taj
Mahal in April 1990, may also have contributed to Trump Plaza's liquidity
problems.
In order to alleviate its liquidity problem, pursuant to the 1992 Plaza
Restructuring, Plaza Associates and Plaza Funding restructured their
indebtedness through a prepackaged plan of reorganization under Chapter 11 of
the Bankruptcy Code.
The purpose of the 1992 Plaza Restructuring was to improve the amortization
schedule and extend the maturity of Plaza Associates indebtedness by (i)
eliminating the sinking fund requirement on Plaza Funding's 12 7/8% Mortgage
Bonds, due 1998 (the "Original Plaza Bonds"), (ii) extending the maturity of
such indebtedness from 1998 to 2002, (iii) lowering the interest rate from 12
7/8% per annum to 12% per annum, (iv) reducing the aggregate principal amount
of the indebtedness under the Original Plaza Bonds and certain other
indebtedness from $250 million to $225 million and (v) eliminating certain
other indebtedness by reconstituting such debt in part as new bonds (the
"Successor Plaza Bonds") and in part as Stock Units (as defined). The 1992
Plaza Restructuring was necessitated by the inability to either generate cash
flow or obtain additional financing
70
sufficient to make the scheduled sinking fund payment on the Original Plaza
Bonds. In connection with the 1992 Plaza Restructuring, each holder of $1,000
principal amount of Original Plaza Bonds and such other indebtedness received
(i) $900 principal amount of Successor Plaza Bonds, (ii) 12 Stock Units, each
representing one share of Common Stock and one share of Preferred Stock of
Plaza Funding (the "Stock Units") and (iii) cash payments of approximately
$58.65, reflecting accrued interest.
On May 29, 1992, Plaza Funding, which theretofore had no interest in Plaza
Associates, received a 50% beneficial interest in TP/GP, Inc. ("Trump Plaza
GP"), and Plaza Funding and Trump Plaza GP were admitted as partners of Plaza
Associates. Plaza Funding also issued approximately three million Stock Units
to holders of the Original Plaza Bonds and certain other indebtedness.
Pursuant to the terms of Plaza Associates partnership agreement, Plaza Funding
was issued a preferred partnership interest, which provided Plaza Funding with
partnership distributions designed to pay dividends on, and the redemption
price of, the Stock Units. Trump Plaza GP became the managing general partner
of Plaza Associates, and, through its Board of Directors, managed the affairs
of Plaza Associates. Trump Plaza GP was subsequently merged with and into
Plaza Funding, which became the managing general partner of Plaza Associates.
The Successor Plaza Bonds and the Stock Units were redeemed in 1993 out of
the proceeds of a refinancing designed to enhance Trump Plaza's liquidity and
to position the Trump Plaza for a subsequent deleveraging transaction. The
1993 refinancing included (i) the sale by Plaza Funding of $330 million in
aggregate principal amount of Plaza Notes and (ii) the sale by AC Holdings of
$60 million aggregate principal amount of PIK Notes and PIK Note Warrants to
acquire an aggregate of $12 million in principal amount of additional PIK
Notes. Upon consummation of the refinancing, Plaza Funding held a 1% equity
interest in Plaza Associates and Plaza Holding held a 99% equity interest.
THE 1991 TAJ RESTRUCTURING
During 1990 and 1991, Taj Associates experienced liquidity problems. Taj
Associates believes that these problems were attributable, in part, to an
overall deterioration in the Atlantic City gaming market, as indicated by
reduced rates of casino revenue growth for the industry for the two prior
years, aggravated by an economic recession in the Northeast and the Persian
Gulf War, as well as the risks inherent in the establishment of a new business
enterprise. Comparatively, excessive casino gaming capacity in Atlantic City
may also have contributed to Taj Associates' liquidity problems.
As a result of Taj Associates' liquidity problems, Taj Funding failed to
make its November 15, 1990 and May 15, 1991 interest payments on its Old Taj
Bonds, resulting in an event of default under the indenture with respect to
such Old Taj Bonds. During 1990 and 1991, Taj Associates also failed to pay
certain principal and interest installments on certain indebtedness due under
its loan with NatWest.
In order to alleviate its liquidity problems, during 1991, TTMC, Taj
Funding, Taj Associates and TTMI (together, the "Debtors") restructured their
indebtedness through the 1991 Taj Restructuring, which was a "prepackaged"
plan of reorganization under Chapter 11 of the Bankruptcy Code. At the time,
the Debtors believed that there was no alternative to their liquidity problems
other than filing petitions under the Bankruptcy Code. Taj Associates had been
unable to obtain additional financing, and Taj Funding was restricted from
amending the payment terms of the Old Taj Bonds outside of a case under the
Bankruptcy Code without the unanimous consent of the holders thereof. The
purpose of the 1991 Taj Restructuring was to improve the amortization schedule
and extend the maturity of Taj Associates' indebtedness by reducing and
deferring the Debtors' annual debt service requirements by (i) restructuring
Taj Associates' and affiliated entities' long-term indebtedness to NatWest,
First Fidelity and Bankers Trust, and (ii) issuing the Taj Bonds with an
overall lower rate of interest as compared with the Old Taj Bonds.
Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj
Associates issued to the holders of the Old Taj Bonds a general partnership
interest representing 49.995% of the equity of Taj Associates. Such
71
holders in turn contributed such partnership interest to Taj Holding. Taj
Funding and Taj Holding also issued the Units to the holders of the Old Taj
Bonds. As part of the 1991 Taj Restructuring, TM/GP, which has no other
assets, received a 49.995% partnership interest in Taj Associates from Taj
Holding. Trump also contributed to Taj Holding a 50% ownership interest in
TTMC, which owns a .01% interest in Taj Associates, in exchange for the Taj
Holding Class C Common Stock, as described below.
At the time of these transfers, Taj Holding issued 1,350,000 shares of Taj
Holding Class A Common Stock and 729,458 shares of Taj Holding Class B Common
Stock to the holders of the Old Taj Bonds and 1,350,000 shares of Taj Holding
Class C Common Stock to Trump. In accordance with the terms of the Taj Bond
Indenture, a portion of the interest on the Taj Bonds may be paid in
additional Taj Bonds. At May 15, 1992, 1993, 1994 and 1995, 8,844 Units
comprised of $8,844,000 of Taj Bonds and 8,844 shares of Taj Holding Class B
Common Stock, 14,579 Units comprised of $14,579,000 of Taj Bonds and 14,579
shares of Taj Holding Class B Common Stock, and 12,249 Units comprised of
$12,249,000 of Taj Bonds and 12,249 shares of Taj Holding Class B Common
Stock, and 15,112 Units comprised of $15,112,000 of Taj Bonds and 15,112
shares of Taj Holding Class B Common Stock, respectively, were issued in lieu
of the payment of a portion of the cash interest on the outstanding Taj Bonds.
CERTAIN INDEBTEDNESS
THCR
THCR Holdings and THCR Funding (the "THCR Obligors") are the issuers of $155
million principal amount of Senior Notes. The Senior Notes are the joint and
several obligations of the THCR Obligors. Interest on the Senior Notes is
payable semiannually in arrears. In connection with the Merger Transaction,
the THCR Obligors will solicit from the holders of Senior Notes the waiver of,
and the consent to modify, certain provisions of the Senior Note Indenture. In
addition, the terms of the First Mortgage Notes will, under certain
circumstances and subject to certain limitations, require AC Holdings to make
distributions to THCR Holdings to enable THCR Holdings to make scheduled
interest payments on its Senior Notes. See "Description of the First Mortgage
Notes."
The Senior Notes mature on June 15, 2005. The Senior Notes are not
redeemable prior to June 15, 2000, except pursuant to a Required Regulatory
Redemption (as defined in the Senior Note Indenture). Thereafter, the Senior
Notes may be redeemed at the option of the THCR Obligors, in whole or in part,
at any time on or after June 15, 2000 at the redemption prices set forth in
the Senior Note Indenture, together with accrued and unpaid interest to the
date of redemption. In addition, upon the occurrence of a Senior Note Change
of Control (as defined in the Senior Note Indenture), each holder of Senior
Notes may require the THCR Obligors to repurchase such holder's Senior Notes
at 101% of the principal amount thereof, together with accrued and unpaid
interest to the date of repurchase.
The obligations of the THCR Obligors under the Senior Note Indenture are
secured by (1) an assignment and pledge to the trustee under the Senior Note
Indenture (the "Senior Note Trustee") of (a) 99% of the general partnership
interests in Plaza Associates, (b) 100% of the capital stock of Plaza Funding
(the holder of the remaining 1% general partnership interest in Plaza
Associates, which 1% is pledged exclusively for the benefit of the holders of
the Plaza Notes until the Plaza Note Purchase, at which time such interest
will be pledged for the exclusive benefit of the holders of the Senior Notes),
(c) 100% of the general partnership interests in AC Holdings, (d) 100% of the
capital stock of Plaza Holding Inc., (e) 100% of the capital stock of Trump
Indiana, (f) 100% of the capital stock of THCR Funding, (g) other equity
interests issued from time to time by THCR Holdings or any of its Subsidiaries
(as defined in the Senior Note Indenture), and (h) promissory notes issued by
THCR Holdings or any of its subsidiaries, excluding Unrestricted Subsidiaries
(as defined in the Senior Note Indenture), from time to time directly owned or
acquired by THCR Holdings; (2) certain remaining net proceeds from the June
1995 Offerings; and (3) certain proceeds from time to time received,
receivable or otherwise distributed in respect of the assets described in
clauses (1) and (2) above (collectively, the "Senior Note Collateral"). The
security interests in the Senior Note Collateral are first priority security
interests and will be exclusive except to the extent required by the Plaza
Note Indenture to equally and ratably secure the Plaza Notes with respect to
any of the direct or indirect equity interests in Plaza Associates, Plaza
Funding, AC Holdings and Plaza Holding Inc. Any equity interests in
Subsidiaries of THCR Holdings which are acquired by THCR
72
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.
PLAZA ASSOCIATES
The Plaza Notes, $330 million of which are outstanding, were issued by Plaza
Funding, with Plaza Associates providing a full and unconditional guaranty
thereof. In connection with the Merger Transaction the Plaza Notes will be
repurchased or defeased. The Plaza Notes will mature in 2001 and bear interest
semiannually in arrears. The Plaza Notes are subject to redemption at any time
on or after June 15, 1998, at the option of Plaza Funding or Plaza Associates,
in whole or in part, at the redemption prices set forth in the Plaza Note
Indenture. In addition, upon the occurrence of a Plaza Note Change of Control
(as defined in the Plaza Note Indenture), each holder of Plaza Notes may
require Plaza Funding or Plaza Associates to repurchase such holder's Plaza
Notes at 101% of the principal amount thereof, together with accrued and
unpaid interest to the date of repurchase.
Until such time as the Plaza Notes are retired in connection with the Merger
Transaction, Plaza Funding and Plaza Associates' obligations under the Plaza
Note Indenture will be secured principally by (i) the Plaza Note Mortgage
encumbering substantially all of Plaza Associates' assets (see "--Properties")
and (ii) the pledge by Plaza Funding of its 1% general partnership interest in
Plaza Associates and, equally and ratably with the Senior Notes to the extent
required by the Plaza Note Indenture, by a pledge of (x) THCR Holdings' 99%
general partnership interest in AC Holdings, (y) AC Holdings' 99% general
partnership interest in Plaza Associates, and (z) 100% of the capital stock of
Plaza Funding and Plaza Holding Inc. (the holder of the remaining 1% of Plaza
Holding).
In addition to the foregoing, Plaza Associates' consolidated long-term
indebtedness includes approximately $3.0 million of outstanding mortgage notes
described under "--Properties" as of December 31, 1995.
TAJ ASSOCIATES
Taj Bonds. In connection with the 1991 Restructuring, Taj Funding and Taj
Holding issued Units, each of which was comprised of $1,000 principal amount
of Taj Bonds and one share of Taj Holding Class B Common Stock. Pursuant to
the Taj Bond Indenture, Taj Funding may issue up to $860 million of Taj Bonds.
On October 4, 1991, at the time the Units were issued, the principal amount of
Taj Bonds issued was $729,458,000.
The principal and accrued and unpaid interest on the outstanding Taj Bonds
will be paid in full in connection with the Merger Transaction. Concurrently
with the retirement of the Taj Bonds, the outstanding shares of Taj Holding
Class B Common Stock will be redeemed in accordance with the terms of the Taj
Holding Certificate of Incorporation, at a redemption price of $.50 per share.
As of September 30, 1995, the principal amount of Taj Bonds issued was
$780,242,000. The Taj Bonds have a stated maturity date of November 15, 1999.
The Taj Bonds bear interest at 11.35% per annum. Interest on the Taj Bonds is
due semi-annually on each November 15 and May 15. Interest on the Taj Bonds
must be paid in cash on each interest payment date at a rate of 9.375% per
annum, and, in addition, effective May 15, 1992, and annually thereafter, an
additional amount of interest in cash or additional Taj Bonds or a combination
thereof, is payable in an amount to increase the interest paid to 11.35% per
annum. The obligations of Taj Funding to pay the principal of, premium, if
any, and interest on the Taj Bonds are guaranteed by Taj Associates. The Taj
Bonds are secured by an assignment by Taj Funding to the trustee under the Taj
Bond Indenture (the "Taj Bond Trustee") of a promissory note, dated as of
October 4, 1991, issued by Taj Associates to Taj Funding (the "Taj Bond
Partnership Note") in a principal amount of $675 million, with payment terms
substantially similar to the payment terms of the Taj Bonds, which is in turn
secured by an amended mortgage, dated as of October 4, 1991, by Taj Associates
as mortgagor and Taj Funding as mortgagee, securing payment of the Taj Bond
Partnership Note, as amended to reflect the terms of the Taj Bonds (the
"Amended Taj Mortgage"), which has been assigned to the Taj Bond Trustee and
encumbers Taj Associates' interest in the Taj Mahal and substantially all of
the other assets of Taj Associates, excluding certain furniture, furnishings,
fixtures, machinery
73
and equipment which is subject to the lien of the NatWest Loan. In addition,
the Taj Bond Partnership Note is secured by a second, subordinated lien on all
the real estate owned by Realty Corp. Moreover, Taj Associates has acquired an
option to purchase the real estate owned by Realty Corp., and such option has
been assigned to the Taj Bond Trustee as security for the Taj Bonds.
NatWest Loan. On November 3, 1989, Taj Associates entered into the NatWest
Loan, which provided financing of $50 million for certain items of furniture,
fixtures and equipment installed in the Taj Mahal. On October 4, 1991, in
connection with the 1991 Taj Restructuring, the NatWest Loan was amended in
order to, among other things, modify the interest rate and other payment
terms.
As of September 30, 1995, the outstanding principal amount outstanding under
the NatWest Loan was $44,986,000, and the interest rate was 9.375% per annum.
Principal and interest on the NatWest Loan are payable as follows:
(i) on the last business day of each month until the earlier of the last
business day of October 1999 or the date the NatWest Loan, together with
all interest thereon, is paid in full, the sum of $416,667, to be applied
first in respect of accrued interest on the NatWest Loan and thereafter, to
the extent available, in reduction of the principal of the NatWest Loan;
provided, however, up to $525,000 of such payments received by NatWest in
any year shall be paid to either First Fidelity or Bankers Trust for
application by First Fidelity in payment of obligations of Taj Associates
to First Fidelity, and by Bankers Trust on behalf of Taj Associates on
behalf of TTMI in payment of interest on the TTMI Note. Such amounts paid
by NatWest shall not have been applied by NatWest in payment of the
principal of, interest on or any other sums due in respect of the NatWest
Loan or otherwise payable to NatWest;
(ii) on May 15 of each year (if any of the principal of or interest on
the NatWest Loan is then outstanding), commencing on May 15, 1992 to and
including May 15, 1999, an amount (the "EACF
Payment") equal to 16.5% (or, if the First Fidelity Loan shall have been
paid in full on or prior to any such May 15, 20%) of Excess Available Cash
Flow (as defined in the Taj Bond Indenture) for the preceding calendar year
in excess of the Additional Amount (as defined in the Taj Bond Indenture)
payable on such May 15 (such remaining Excess Available Cash Flow, the
"Remaining EACF Amount"), if any, to be applied first in reduction of then
accrued but unpaid interest on and then to principal of the NatWest Loan;
and
(iii) on November 15, 1999 the outstanding principal of and all accrued
but unpaid interest on the NatWest Loan.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus any
after-acquired furniture, fixtures and equipment that replaces such property,
or of the same type; provided, however, that the NatWest Loan may be
subordinated to a lien to secure purchase money financing of such after-
acquired property which does not exceed 50% of the purchase price of such
after-acquired property.
Upon the occurrence of an event of default under the NatWest Loan,
including, without limitation, the sale of any real estate by Realty Corp. for
less than the release price set forth in the First Fidelity Loan (as defined
below) without the prior written consent of NatWest, NatWest may accelerate
any and all indebtedness outstanding under the NatWest Loan.
Taj Associates will satisfy the NatWest Loan in connection with the Merger
Transaction.
First Fidelity Loan/Specified Parcels. On November 22, 1988, First Fidelity,
Realty Corp. and Trump, as guarantor, entered into the First Fidelity Loan in
the aggregate principal amount of $75,000,000. Pursuant to an amendment to the
First Fidelity Loan, effective as of October 4, 1991, the rate of interest
payable was modified, the dates of payment of principal and interest were
deferred and accrued interest in the amount of $1,773,750 was capitalized. As
of September 30, 1995, the principal amount outstanding on the First Fidelity
Loan was approximately $78 million. Unpaid principal and accrued interest on
the First Fidelity Loan is due and payable on November 15, 1999, unless
otherwise extended in connection with the extension of the maturity of the Taj
Bonds.
74
Taj Associates currently leases the Specified Parcels from Realty Corp., a
corporation wholly owned by Trump, pursuant to an Amended and Restated Lease
Agreement, dated as of October 4, 1991 (the "Specified Parcels Lease").
Pursuant to the Specified Parcels Lease, Taj Associates is obligated to pay
Realty Corp. $3.3 million plus 3.5% of the Remaining EACF Amount per year.
Such annual payment, however, is reduced by (i) all of the Base Fees (as
defined therein) and the first $75,000 of the Incentive Fees (as defined
therein) payable to Trump pursuant to the Taj Services Agreement and assigned
by Trump to First Fidelity (which amounts were $575,000 in 1995) and (ii) the
portion of monies payable by Taj Associates to NatWest to be remitted to First
Fidelity (which amounts were $525,000 in 1995). The Specified Parcels Lease
expires on December 31, 2023; however, the lease may be terminated prior to
such date following a foreclosure or similar proceeding on the Specified
Parcels by First Fidelity, the holder of a first mortgage lien on the
Specified Parcels which secures the First Fidelity Loan (the "First Fidelity
Mortgage") or any other mortgagee thereof.
The Specified Parcels Lease provides that, upon payment of the First
Fidelity Loan, and upon discharge of the First Fidelity Mortgage, Taj
Associates may purchase the Specified Parcels for ten dollars. Payment of the
First Fidelity Loan is guaranteed by a guarantee (limited to any deficiency in
the amount owed under the First Fidelity Loan when due, up to a maximum of $30
million) by Taj Associates (the "Taj Associates-First Fidelity Guarantee"), a
personal guarantee by Trump (pursuant to which First Fidelity has agreed to
forbear from asserting any personal claim with respect thereto in excess of
approximately $19.2 million) (the "Trump-First Fidelity Guarantee") and
limited recourse guarantees by TTMC (the "TTMC-First Fidelity Guarantee") and
TTMI (as amended, the "TTMI-First Fidelity Guarantee" and, together with the
Trump-First Fidelity Guarantee and the TTMC-First Fidelity Guarantee, the
"Other First Fidelity Guarantees"). The Other First Fidelity Guarantees are
secured by pledges by Trump of 62.5% of his Taj Holding Class C Common Stock,
TTMC Common Stock and TTMI Common Stock and all of his shares of Realty Corp.
Common Stock, and pledges by TTMI and TTMC of 62.5% and 31.25%, respectively,
of their equity and financial interests as general partners in Taj Associates
(all such interests pledged to First Fidelity as security for the Other First
Fidelity Guarantees are referred to herein as the "Other First Fidelity
Guarantee Collateral"). First Fidelity's recourse under the TTMC-First
Fidelity Guarantee and the TTMI-First Fidelity Guarantee is limited to the
collateral pledged by TTMC and TTMI, respectively.
Upon the satisfaction in full of the obligations due under the First
Fidelity Loan at a negotiated amount of $50 million and 500,000 shares of
Common Stock, Taj Associates will purchase the Specified Parcels from Realty
Corp. In connection therewith, First Fidelity will (i) release and discharge
Realty Corp. from the First Fidelity Loan and release its lien on the
Specified Parcels, (ii) release Taj Associates from the Taj Associates-First
Fidelity Guarantee, (iii) release each of Trump, TTMC and TTMI from their
respective obligations under the Other First Fidelity Guarantees and (iv)
release its lien on the Other First Fidelity Guarantee Collateral. In
addition, the purchase of the Specified Parcels will eliminate Taj Associates'
current obligations under the Specified Parcels Lease and the termination
rights with respect to the Specified Parcels Lease, thereby facilitating the
Taj Mahal Expansion by securing the future use of the Specified Parcels by Taj
Associates. Holders of the First Mortgage Notes will have a security interest
in the Specified Parcels.
The principal and accrued and unpaid interest on the outstanding Taj Bonds
will be paid in full in connection with the Merger Transaction. Concurrently
with the retirement of the Taj Bonds, the outstanding shares of Taj Holding
Class B Common Stock will be redeemed in accordance with their terms, at a
redemption price of $.50 per share.
TTMI Note. On April 30, 1990, Trump loaned $25 million to Taj Associates on
an unsecured basis, in exchange for a note payable to Trump (the "Old Taj
Associates Note"). The Old Taj Associates Note was pledged to certain lenders
to Trump, including Bankers Trust, as security for certain of Trump's personal
indebtedness. On October 4, 1991, in connection with the 1991 Taj
Restructuring and in order to facilitate the reorganization of Taj Associates
and certain of its affiliates, the Old Taj Associates Note was canceled and,
in lieu thereof, TTMI, a corporation wholly owned by Trump which was formed
for the purpose of holding a general partnership interest in Taj Associates,
executed the TTMI Note, a promissory note payable to Trump in
75
the principal amount of $27,188,000. At such time, in order to secure the
Trump Indebtedness, Trump pledged to certain lenders, including Bankers Trust,
his right, title and interest in the TTMI Note. As additional security for the
Trump Indebtedness, Trump pledged to Bankers Trust and certain other lenders
all of his shares of Taj Holding Class C Common Stock, TTMC Common Stock and
TTMI Common Stock, which pledges are subordinate, in part, to the liens of
First Fidelity in such collateral. In addition, TTMI and TTMC have each
guaranteed the repayment of the Trump Indebtedness, which limited recourse
guarantees are secured by pledges by TTMI and TTMC to Bankers Trust and
certain other lenders of 100% and 50%, respectively, of their equity and
financial interests as general partners in Taj Associates, which pledges are
subordinate, in part, to the liens of First Fidelity in such collateral.
In connection with the Merger Transaction, Bankers Trust will receive $10
million from Taj Associates in respect of certain of the Trump Indebtedness.
Upon such payment, Bankers Trust will release (i) its lien on the TTMI Note,
(ii) its liens on the remaining collateral pledged by Trump to Bankers Trust
and (iii) TTMI and TTMC from their respective obligations as guarantors of
certain of Trump's personal indebtedness and the liens securing such
obligations. All other liens in respect of the foregoing in favor of other
lenders holding a portion of the Trump Indebtedness will be released at such
time.
Working Capital Facility. On November 14, 1991, Taj Associates entered into
the Working Capital Facility with Foothill Capital Corporation ("Foothill") in
the amount of $25.0 million, which is secured by a lien on Taj Associates'
assets senior to the lien of the Taj Bond Mortgage securing the Taj Bonds. On
September 1, 1994, Taj Associates and Foothill extended the maturity of the
Working Capital Facility to November 13, 1999, in consideration of
modifications of the terms thereof. Borrowings under the Working Capital
Facility bear interest at a rate equal to the prime lending rate plus 3%, with
a minimum of 0.666% per month. The agreement further provides for a .75%
annual fee and a .50% unused line fee. As of December 31, 1995, no amounts
were outstanding under the Working Capital Facility.
The occurrence of any of the following events constitute an event of default
under the Working Capital Facility: (i) failure to pay principal, interest,
fees, charges or reimbursements due to Foothill, when due and payable or when
declared due and payable; (ii) failure or neglect to perform certain duties
and covenants under the agreement; (iii) any material portion of Taj
Associates' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any judicial officer or
assignee and such attachment or writ is not dismissed within 60 days; (iv) an
insolvency proceeding is commenced by Taj Associates; (v) an insolvency
proceeding is commenced against Taj Associates, and is not dismissed within 60
days; (vi) Taj Associates is enjoined, restrained, or in any way prevented by
certain governmental agencies from continuing to conduct all or any material
part of its business affairs; (vii) Taj Associates fails to pay certain liens,
levies or assessments on the payment date thereof; (viii) certain judgments or
claims in excess of $500,000 become a lien or encumbrance upon a material
portion of Taj Associates' assets; (ix) Taj Associates defaults in payments
owing to NatWest or the Taj Bond Trustee; (x) Taj Associates makes
unauthorized payments on debt subordinated to the Working Capital Facility;
(xi) misrepresentations are made by Taj Associates to Foothill in any
warranty, representation, certificate, or report; (xii) certain ERISA
violations which could have a material adverse effect on the financial
condition of Taj Associates; or (xiii) Taj Associates incurs or enters into a
commitment to incur any indebtedness which is secured by Taj Associates assets
subject to the Working Capital Facility.
Upon the occurrence of an event of default, Foothill may, at its election,
without notice of its election and without demand, do any one or more of the
following: (i) declare all obligations immediately due and payable; (ii) cease
advancing money or extending credit; (iii) terminate the Working Capital
Facility without affecting Foothill's rights and security interest in Taj
Associates assets; (iv) settle disputes and claims directly with certain Taj
Associates debtors; (v) make such payments and perform such acts as Foothill
deems necessary to protect its security interests; (vi) set off amounts owed
under the Working Capital Facility by other Taj Associates accounts or
deposits held by Foothill; (vii) prepare for sale and sell, after giving
proper notice, Taj Associates assets securing the Working Capital Facility in
a commercially reasonable manner; (viii) exercise its rights under certain
mortgage and assignment documents between Taj Associates and Foothill; or (ix)
credit bid and purchase at any public sale subject to the provisions of the
Casino Control Act; or (x) any deficiency which exists after
76
disposition of Taj Associates assets securing the Working Capital Facility
will be paid immediately by Taj Associates; any excess will be returned to Taj
Associates, without interest.
Taj Associates anticipates either modifying the Working Capital Facility or
terminating the Working Capital Facility and replacing it with a new facility.
LEGAL PROCEEDINGS
PLAZA ASSOCIATES
General. Plaza Associates, its partners, certain members of its former
Executive Committee, and certain of its employees, have been involved in
various legal proceedings. In general, Plaza Associates has agreed to
indemnify such persons and entities against any and all losses, claims,
damages, expenses (including reasonable costs, disbursements and counsel fees)
and liabilities (including amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties) incurred by them in said legal
proceedings. Such persons and entities are vigorously defending the
allegations against them and intend to vigorously contest any future
proceedings
Trump Plaza East. From monies made available to it, the CRDA is required to
set aside $100 million for investment in hotel development projects in
Atlantic City undertaken by casino licensees which result in the construction
or rehabilitation of at least 200 hotel rooms by December 31, 1996. These
investments are to fund up to 35% of the cost to casino licensees of such
projects. See "Regulatory Matters--New Jersey Gaming Regulations--Investment
Alternative Tax Obligations." Plaza Associates made application for such
funding to the CRDA with respect to its proposed construction and
rehabilitation of the Trump Plaza East hotel rooms and related Boardwalk and
second level facilities, proposed demolition of an existing hotel expansion
structure attached thereto and development of an appurtenant public park,
roadway and parking area on the site thereof and proposed acquisition of the
entire project site.
The CRDA, in rulings through January 10, 1995, approved the hotel
development project and, with respect to same, reserved to Plaza Associates
the right to take investment tax credits in an amount equal to 27% ($14.1
million) of $52.4 million of eligible estimated project development costs. In
October 1994, following a September 1994 CCC ruling authorizing same, Plaza
Associates advised the CRDA of its intention to, without affecting either the
project development costs or the tax credits, locate approximately 15,000
square feet of casino space on the second floor of Trump Plaza East and was
advised by the CRDA that its proposed use of such space would not affect the
approval of the hotel development project.
As part of its approval and on the basis of its powers of eminent domain,
the CRDA, during 1994, initiated five condemnation proceedings in the Superior
Court of New Jersey, Atlantic County, to acquire certain small parcels of land
within the project site. The defendants in three of those matters, with
respect to parcels which impact only the public park and parking areas, Casino
Reinvestment Development Authority v. Banin, et al., Docket No. ATL-L-2676-94,
Casino Reinvestment Development Authority v. Sabatini, et al., Docket No.
ATL-L-2976-94, and Casino Reinvestment Development Authority v. Coking, et
al., Docket No. ATL-L-2974-94, asserted numerous defenses to the condemnation
complaints and filed counterclaims against CRDA and third-party complaints
against Plaza Associates alleging, inter alia, an improper exercise of CRDA
power for private purposes and conspiracy between the CRDA and Plaza
Associates. After the filing of briefs and a hearing, a New Jersey Superior
Court judge issued an opinion that the Trump Plaza East acquisition and
renovation was not eligible for CRDA funding and, as a result, the CRDA could
not exercise its power of eminent domain because the project included casino
floor space. The court, by order dated April 18, 1995, dismissed the
condemnation complaints with prejudice. On April 17, the same judge dismissed
the counter claims and third-party complaints without prejudice. Notices of
appeal were filed with the New Jersey Superior Court, Appellate Division on
April 21, 1995 by the CRDA and on April 24, 1995 by Plaza Associates. On May
1, 1995, the Casino Association of New Jersey on behalf of its members, 11 of
the 12 Atlantic City casino hotels, filed a motion to intervene or, in the
alternative, for leave to appear as an amicus curiae. Briefs have been filed
by all parties and the matter now awaits the scheduling of oral arguments.
77
The completion of the planned renovations of Trump Plaza East is not
dependent upon the utilization of CRDA funding or upon the CRDA's acquisition
of the real estate subject to the condemnation proceedings. Plaza Associates
intends to pursue this appeal vigorously and believes it will be successful,
based in part on the March 29, 1995 opinion of the New Jersey Office of
Legislative Services ("OLS"), which serves as legal counsel to the New Jersey
State Legislature, that N.J.S.A. 5:12-173.8 empowered the CRDA to approve and
fund projects such as Trump Plaza East and, in part, on the fact that Section
173.8 expressly exempts hotel development projects from the statutory
limitation with respect to any CRDA investment or project which directly and
exclusively benefits the casino hotel or related facility.
In a related matter, Vera Coking, et al. v. Atlantic City Planning Board and
Trump Plaza Associates, Docket No. ATL-L-339-94, the Atlantic City Planning
Board's approval of the Trump Plaza East renovation was challenged on various
grounds. In July, 1994, a New Jersey Superior Court judge upheld the Atlantic
City Planning Board approvals with respect to the hotel renovation component
of Trump Plaza East and the new roadway but invalidated the approval of the
valet parking lot and the public park because Plaza Associates lacked site
control with respect to the small parcels of land CRDA sought to condemn.
Plaintiff appealed the court's decision upholding the approval of the hotel
renovation and new roadway and Plaza Associates cross-appealed the court's
decision invalidating the approval of the public park and valet parking area.
Plaza Associates withdrew its cross-appeal and plaintiff's appeal is pending
in the Superior Court of New Jersey, Appellate Division, Docket No. A-1511-94-
T1. Plaza Associates received land-use approval for and has constructed the
valet parking area after deletion of the small parcels.
In another related matter, Josef Banin and Vera Coking v. Atlantic City
Planning Board and Trump Plaza Associates, Docket No. L-2188-95, the land-use
approval for this area has been challenged on various grounds. Plaza
Associates filed its answer to the complaint denying the allegations of the
complaint. The land use approval involves certain minor amendments to the
previously granted site plan approvals for the hotel renovation component of
Trump Plaza East and the new roadway. The amendments included certain design
changes with respect to the Trump Plaza East and certain design changes to the
roadway. The amendments did not require any variance relief and the amendments
fully complied with the Land Use Ordinance of the City of Atlantic City. The
plaintiffs allege the Atlantic City Planning Board acted in an arbitrary and
capricious manner in approving the amendments and further argue that the
chairperson of the Atlantic City Planning Board had a conflict of interest in
hearing the matter because of her status as an employee of the CRDA, the
entity that had approved certain funding for the project. The plaintiffs have
filed their brief in this matter and Plaza Associates has filed its response
brief. The matter is scheduled for oral argument on January 26, 1996. It is
likely the court will rule on the matter on that date.
Penthouse Litigation. On April 3, 1989, BPHC Acquisition, Inc. and BPHC
Parking Corp. (collectively, "BPHC") filed a third-party complaint (the
"Complaint") against Plaza Associates and Trump. The Complaint arose in
connection with the action entitled Boardwalk Properties, Inc. and Penthouse
International Ltd. v. BPHC Acquisition, Inc. and BPHC Parking Corp., which was
instituted on March 20, 1989 in the New Jersey Superior Court, Chancery
Division, Atlantic County.
The suit arose in connection with the conditional sale by Boardwalk
Properties, Inc. ("BPI") (or, with respect to certain of the property, BPI's
agreement to sell) to Trump of BPI's fee and leasehold interests in (i) Trump
Plaza East, (ii) an approximately 4.2-acre parcel of land located on Atlantic
Avenue, diagonally across from Trump Plaza's parking garage (the "Columbus
Plaza Site") which was then owned by an entity in which 50% of the interests
were each owned by BPHC and BPI and (iii) an additional 1,462-square foot
parcel of land located within the area of Trump Plaza East (the "Bongiovanni
Site"). Prior to BPI entering into its agreement with Trump, BPI had entered
into agreements with BPHC which provided, among other things, for the sale to
BPHC of Trump Plaza East, as well as BPI's interest in the Columbus Plaza
Site, assuming that certain contingencies were satisfied by a certain date.
Additionally, by agreement between BPHC and BPI, in the event BPHC failed to
close on Trump Plaza East, BPHC would convey to BPI the Bongiovanni Site. Upon
BPHC's failure to close on Trump Plaza East, BPI entered into its agreement
with Trump pursuant to which it sold Trump Plaza East to Trump and instituted
a lawsuit against BPHC for specific performance to compel BPHC to transfer
78
to BPI, BPHC's interest in the Columbus Plaza Site and Bongiovanni Site, as
provided for in the various agreements between BPHC and BPI and in the
agreement between BPI and Trump.
The Complaint alleged that Plaza Associates and/or Trump engaged in the
following activities: civil conspiracy, violations of the New Jersey Antitrust
Act, violations of the New Jersey RICO statute, malicious interference with
contractual relations, malicious interference with prospective economic
advantage, inducement to breach a fiduciary duty and malicious abuse of
process. The relief sought in the Complaint included, among other things,
compensatory damages, punitive damages, treble damages, injunctive relief, the
revocation of all of Plaza Associates and Trump's casino licenses, the
revocation of Plaza Associates current Certificate of Partnership, the
revocation of any other licenses or permits issued to Plaza Associates and
Trump by the State of New Jersey, and a declaration voiding the conveyance by
BPI to Trump of BPI's interest in Trump Plaza East, as well as BPI's and/or
Trump's rights to obtain title to the Columbus Plaza Site.
On October 13, 1993, a final judgment as to Trump and Plaza Associates was
filed. That judgment dismissed each and every claim against Trump and Plaza
Associates. The case remained open as to final resolution of all claims
between BPI and BPHC. Following the entry of a subsequent judgment as to those
claims, BPHC and BPI have settled all claims between them. BPHC is pursuing
its appeal as to Trump and Plaza Associates but only as to its money damages
claims of interference with contract and prospective economic advantage and of
inducing BPI to breach its fiduciary duty to BPHC. All other claims raised in
BPHC's complaint as to Trump and Plaza Associates and dismissed by the October
13, 1993 judgment have been finally determined in favor of Trump and Plaza
Associates. All briefs due in connection with BPHC's appeal are being filed.
No argument date has been set.
Other Litigation. Various legal proceedings are now pending against Plaza
Associates. THCR considers all such proceedings to be ordinary litigation
incident to the character of its business and not material to its business or
financial condition. The majority of such claims are covered by liability
insurance (subject to applicable deductibles), and THCR believes that the
resolution of these claims, to the extent not covered by insurance, will not,
individually or in the aggregate, have a material adverse effect on the
financial condition or results of operations of THCR.
Plaza Associates is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. THCR believes that the final outcome of these proceedings will
not, either individually or in the aggregate, have a material adverse effect
on THCR or on the ability of Plaza Associates to otherwise retain or renew any
casino or other licenses required under the Casino Control Act for the
operation of Trump Plaza. At this juncture the prospects of a favorable
outcome in actions described above cannot be assessed. Plaza Associates intend
to vigorously contest the allegations made against it.
TAJ ASSOCIATES
General. Taj Holding, TM/GP, TTMI and TTMC are not parties to any material
legal proceedings. Taj Associates, its partners, certain members of its former
Executive Committee, Taj Funding, TTMI and certain of their employees are or
were involved in various legal proceedings, some of which are described below.
Taj Associates has agreed to indemnify such persons and entities against any
and all losses, claims, damages, expenses (including reasonable costs,
disbursements and counsel fees) and liabilities (including amounts paid or
incurred in satisfaction of settlements, judgments, fines and penalties)
incurred by them in said legal proceedings. Such persons and entities are
vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
Atlantic City Lease Agreement. The City of Atlantic City is currently
disputing Taj Associates' termination of a lease agreement relating to
employee parking. On March 29, 1990, Taj Associates entered into a lease
agreement with the City of Atlantic City pursuant to which Taj Associates
leased a parcel of land containing approximately 1,300 spaces for employee
intercept parking at a cost of approximately $1 million. In addition, Taj
Associates has expended in excess of $1.4 million in improving the site. The
permit under which
79
the lease is operated was issued by NJDEP on December 20, 1989 for five years
and contains several conditions, one of which required Taj Associates to find
another location "off-island" for employee parking by April 2, 1992. NJDEP
extended this condition for two successive one-year periods through April 2,
1994. On November 14, 1994, as a result of the non-renewal of the permit, Taj
Associates notified the City that the lease agreement had become inoperative
and was therefore being canceled as of December 20, 1994. Taj Associates
subsequently obtained "off-island" parking with Trump's Castle Associates
sufficient to meet its employee parking requirements. The City has indicated
in letters to Taj Associates that it contests the cancellation of the lease
agreement and claims certain extensions to the permit apply, to which Taj
Associates does not agree.
Other Litigation. Various legal proceedings are now pending against Taj
Associates. Taj Associates considers all such proceedings to be ordinary
litigation incident to the character of its business. The majority of such
claims are covered by liability insurance (subject to applicable deductibles),
and Taj Associates believes that the resolution of these claims, to the extent
not covered by insurance, will not, individually or in the aggregate, have a
material adverse effect on the financial condition or results of operations of
Taj Associates.
COMPETITION
Competition in the Atlantic City casino hotel market is intense. Trump Plaza
and the Taj Mahal compete with each other and with the other casino hotels
located in Atlantic City, including the other casino hotel owned by Trump,
Trump's Castle. See "Risk Factors--Conflicts of Interest." Trump Plaza and the
Taj Mahal are located on The Boardwalk, approximately 1.2 miles apart from
each other. At present, there are 12 casino hotels located in Atlantic City,
including the Taj Mahal and Trump Plaza, all of which compete for patrons. In
addition, there are several sites on The Boardwalk and in the Atlantic City
Marina area on which casino hotels could be built in the future and various
applications for casino licenses have been filed and announcements with
respect thereto made from time to time (including a proposal by Mirage
Resorts, Inc.), although management is not aware of any current development of
such sites by third parties. No new casino hotels have commenced operations in
Atlantic City since 1990, although several existing casino hotels have
recently expanded or are in the process of expanding their operations. While
management believes that the addition of hotel capacity would be beneficial to
the Atlantic City market generally, there can be no assurance that such
expansion would not be materially disadvantageous to either Trump Plaza or the
Taj Mahal. There also can be no assurance that the Atlantic City development
projects which are planned or underway will be completed.
Trump Plaza and the Taj Mahal also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, Trump Plaza and the Taj Mahal face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in
its surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. In addition to competing with other
casino hotels in Atlantic City and elsewhere, by virtue of their proximity to
each other and the common aspects of certain of their respective marketing
efforts, including the common use of the "Trump" name, Trump Plaza and the Taj
Mahal compete directly with each other for gaming patrons. Although management
does not intend to operate Trump Plaza and the Taj Mahal to the competitive
detriment of the other, the effect may be that Trump Plaza and the Taj Mahal
will operate to the competitive detriment of each other.
In addition, Trump Plaza and the Taj Mahal face competition from casino
facilities in a number of states operated by federally recognized Native
American tribes. Pursuant to IGRA, any state which permits casino style gaming
(even if only for limited charity purposes) is required to negotiate gaming
contracts with federally
80
recognized Native American tribes. Under IGRA, Native American tribes enjoy
comparative freedom from regulation and taxation of gaming operations, which
provides them with an advantage over their competitors, including Trump Plaza
and the Taj Mahal.
In 1991, the Mashantucket Pequot Nation opened a casino facility in Ledyard,
Connecticut, located in the far eastern portion of such state, an
approximately three-hour drive from New York City and an approximately two and
one-half hour drive from Boston, which currently offers 24-hour gaming and
contains over 3,100 slot machines. The Mashantucket Pequot Nation has
announced various expansion plans, including its intention to build another
casino in Ledyard together with hotels, restaurants and a theme park. In
addition, the Mohegan Nation has commenced construction of a casino resort to
be located 10 miles from the Ledyard casino. The Mohegan Nation resort will be
built and managed by Sun International, an entity headed by a South African
investor, is scheduled to be as large as the Ledyard casino and is scheduled
to open in October 1996. There can be no assurance that any continued
expansion of gaming operations by the Mashantucket Pequot Nation or that any
commencement of gaming operations by the Mohegan Nation would not have a
materially adverse impact on Trump Plaza's or the Taj Mahal's operations.
A group in New Jersey calling itself the "Ramapough Indians" has applied to
the U.S. Department of the Interior to be Federally recognized as a Native
American tribe, which recognition would permit it to require the State of New
Jersey to negotiate a gaming compact under IGRA. In 1993, the Bureau of Indian
Affairs denied the Ramapough Indians Federal recognition. The Ramapough
Indians' appeal of this decision has been denied. Similarly, a group in
Cumberland County, New Jersey calling itself the "Nanticoke Lenni Lenape"
tribe has filed a notice of intent with the Bureau of Indian Affairs seeking
formal Federal recognition as a Native American tribe. Also, it has been
reported that a Sussex County, New Jersey businessman has offered to donate
land he owns there to the Oklahoma-based Lenape/Delaware Indian Nation which
originated in New Jersey and already has Federal recognition but does not have
a reservation in New Jersey. The Lenape/Delaware Indian Nation has signed an
agreement with the town of Wildwood, New Jersey to open a casino; however, the
plan requires federal and state approval in order to proceed. In July 1993,
the Oneida Nation opened a casino featuring 24-hour table gaming and
electronic gaming systems, but without slot machines, near Syracuse, New York,
and has announced an intention to open expanded gaming facilities.
Representatives of the St. Regis Mohawk Nation signed a gaming compact with
New York State officials for the opening of a casino, without slot machines,
in the northern portion of the state close to the Canadian border. The St.
Regis Mohawks have also announced their intent to open a casino at the
Monticello Race Track in the Catskill Mountains region of New York, however,
any Indian gaming operation in the Catskills is subject to the approval of the
Governor of New York. The Narragansett Nation of Rhode Island, which has
Federal recognition, is negotiating a casino gaming compact with Rhode Island.
The Aquinnah Wampanoags Tribe is seeking to open a casino in New Bedford,
Massachusetts. Other Native American nations are seeking Federal recognition,
land and negotiation of gaming compacts in New York, Pennsylvania, Connecticut
and other states near Atlantic City.
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans
to begin operating slot machines at race tracks in the state of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved large scale land-
based casinos. Additionally, since 1993, the gaming space in Las Vegas has
expanded significantly, with additional capacity planned and currently under
construction. The operations of Trump Plaza and the Taj Mahal could be
adversely affected by such competition, particularly if casino gaming were
permitted in jurisdictions near or elsewhere in New Jersey or in other states
in the Northeast. 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
81
gaming in Bridgeport, Connecticut, was voted down by that state's Senate. A
New York State Assembly plan has the potential of legalizing non-Native
American gaming in portions of upstate New York. Essential to this plan is a
proposed New York State constitutional amendment that would legalize gambling.
To amend the New York Constitution, the next elected New York State
Legislature must repass a proposal legalizing gaming and a statewide
referendum, held no sooner than November 1997, must approve the constitutional
amendment. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, a proposal has been introduced to legalize gaming in other
locations, including Philadelphia.
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. To date, no such
legislation has been enacted. AC Holdings is unable to predict whether any
such legislation, in New Jersey or elsewhere, will be enacted or whether, if
passed, it would have a material adverse impact on AC Holdings.
Management believes that competition in the gaming industry, is based on the
quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Management expects competition
in the casino gaming industry to be intense as more casinos are opened and new
entrants into the gaming industry become operational. Furthermore, new or
expanded operations by other persons can be expected to increase competition
for existing and future operations and could result in a saturation of the
Atlantic City gaming markets.
82
REGULATORY MATTERS
The following is only a summary of the applicable provisions of the Casino
Control Act of the State of New Jersey, the Riverboat Gambling Act of the
State of Indiana and certain other laws and regulations. It does not purport
to be a full description thereof and is qualified in its entirety by reference
to the New Jersey Casino Control Act, the Indiana Riverboat Gambling Act and
such other laws and regulations.
Management believes that it and its respective affiliates are in material
compliance with all applicable laws, rules and regulations discussed below.
NEW JERSEY GAMING REGULATIONS
In general, the Casino Control Act and its implementing regulations contain
detailed provisions concerning, among other things: the granting and renewal
of casino licenses; the suitability of the approved hotel facility, and the
amount of authorized casino space and gaming units permitted therein; the
qualification of natural persons and entities related to the casino licensee;
the licensing of certain employees and vendors of casino licensees; rules of
the games; the selling and redeeming of gaming chips; the granting and
duration of credit and the enforceability of gaming debts; management control
procedures, accounting and cash control methods and reports to gaming
agencies; security standards; the manufacture and distribution of gaming
equipment; the simulcasting of horse races by casino licensees; equal
employment opportunities for employees of casino operators, contractors of
casino facilities and others; and advertising, entertainment and alcoholic
beverages.
Casino Control Commission. The ownership and operation of casino/hotel
facilities in Atlantic City are the subject of strict state regulation under
the Casino Control Act. The CCC is empowered to regulate a wide spectrum of
gaming and non-gaming related activities and to approve the form of ownership
and financial structure of not only a casino licensee, but also its entity
qualifiers and intermediary and holding companies and any other related entity
required to be qualified ("CCC Regulations").
Operating Licenses. Taj Associates was issued its initial casino license in
April 1990. On June 22, 1995, the CCC renewed Taj Associates' casino license
through March 31, 1999. Plaza Associates was issued its initial casino license
on May 14, 1984. On June 22, 1995, the CCC renewed Plaza Associates' casino
license through June 30, 1999. Management believes that a casino license will
ultimately be issued for Trump World's Fair, although there can be no
assurance that the CCC will issue this casino license or what conditions may
be imposed, if any, with respect thereto.
Casino Licensee. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion
with regard to the issuance, renewal, revocation and suspension of such
licenses and approvals, which are non-transferable. The qualification criteria
with respect to the holder of a casino license include its financial
stability, integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. The casino licenses currently held by Taj Associates and
Plaza Associates are renewable for periods of up to four years. The CCC may
reopen licensing hearings at any time, and must reopen a licensing hearing at
the request of the Division of Gaming Enforcement (the "Division").
Each casino license entitles the holder to operate one casino, which must
consist of a "single room." Further, no person may be the holder of a casino
license if the holding of such license will result in undue economic
concentration in Atlantic City casino operations by that person. On May 17,
1995, the CCC adopted a regulation defining the criteria for determining undue
economic concentration which codifies the content of existing CCC precedent
with respect to the subject. In April 1995, Plaza Associates petitioned the
CCC for certain approvals. In its May 18, 1995 declaratory rulings with
respect to such petition, the CCC, among other things, (i) determined that
Trump World's Fair is an approved hotel permitted to contain a maximum of
60,000 square feet of casino space, that the 40,000 square feet of casino
space therein is a "single room" and that its operation by Plaza Associates
would not result in undue economic concentration in Atlantic City casino
83
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' main tower, Trump Plaza East and Trump World's
Fair; and (iv) determined that the approved hotel comprised of the main tower
and Trump Plaza East is permitted to contain a maximum of 100,000 square feet
of casino space. In addition, on December 13, 1995, Plaza Associates received
CCC authorization for 49,340 square feet of casino space at Trump World's
Fair. A separate Plaza Associates casino license with respect to Trump World's
Fair would have a renewable term of one year for each of its first three years
and thereafter be renewable for periods of up to four years. Plaza Associates
has made application for such separate casino license with respect to Trump
World's Fair but there can be no assurance that the CCC will issue this casino
license or what conditions may be imposed, if any, with respect thereto. In
addition, Taj Associates will be required to obtain a prior determination from
the CCC that the operation of the additional casino space created by the Taj
Mahal Expansion will not constitute undue economic concentration of Atlantic
City casino operations, and that such casino space, together with the Taj
Mahal's existing casino space, is a "single room" under the Casino Control
Act. See "Risk Factors--Trump Plaza Expansion and the Taj Mahal Expansion."
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a
superior first-class facility; and to pay, exchange, refinance or extend debts
which will mature or become due and payable during the license term. The CCC
is required to review and approve a transaction such as the Merger Transaction
with regard to the financial stability standards.
In the event a licensee fails to demonstrate financial stability, the CCC
may take such action as it deems necessary to fulfill the purposes of the
Casino Control Act and protect the public interest, including: issuing
conditional licenses, approvals or determinations; establishing an appropriate
cure period; imposing reporting requirements; placing restrictions on the
transfer of cash or the assumption of liabilities; requiring reasonable
reserves or trust accounts; denying licensure; or appointing a conservator.
See "--New Jersey Gaming Regulations--Conservatorship."
Management believes that, upon consummation of the Merger Transaction, Taj
Associates and Plaza Associates will each have, and will each continue to
have, adequate financial resources to meet the financial stability
requirements of the CCC for the foreseeable future. Taj Associates and Plaza
Associates plan to petition the CCC to approve the transactions contemplated
by the Merger Transaction. It is a condition to the consummation of the Merger
that the Merger Transaction is approved by the CCC.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership
in the licensee, each person who in the opinion of the CCC has the ability to
control or elect a majority of the board of directors of the licensee (other
than a banking or other licensed lending institution which makes a loan or
holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains and maintains qualification
approval from the CCC. Qualification approval means that such person must, but
for residence, individually meet the qualification requirements as a casino
key employee. Pursuant to a condition of its casino license, payments by Plaza
Associates to or for the benefit of any related entity or partner, with
certain exceptions, are subject to prior CCC approval; and, if Plaza
Associates' cash position falls below $5.0 million for three consecutive
business days, Plaza Associates must present to the CCC and the Division
evidence as to why it should not obtain a working capital facility in an
appropriate amount.
Control Persons. An entity qualifier or intermediary or holding company,
such as Taj Holding, TM/GP, AC Holdings, Plaza Holding Inc., Plaza Funding,
THCR Holdings, THCR Funding or THCR is required to register with the CCC and
meet the same basic standards for approval as a casino licensee; provided,
however, that the CCC, with the concurrence of the Director of the Division,
may waive compliance by a publicly-traded
84
corporate holding company with the requirement that an officer, director,
lender, underwriter, agent or employee thereof, or person directly or
indirectly holding a beneficial interest or ownership of the securities
thereof individually qualify for approval under casino key employee standards
so long as the CCC and the Director of the Division are, and remain, satisfied
that such officer, director, lender, underwriter, agent or employee is not
significantly involved in the activities of the casino licensee, or that such
security holder does not have the ability to control the publicly-traded
corporate holding company or elect one or more of its directors. Persons
holding five percent or more of the equity securities of such holding company
are presumed to have the ability to control the company or elect one or more
of its directors and will, unless this presumption is rebutted, be required to
individually qualify. Equity securities are defined as any voting stock or any
security similar to or convertible into or carrying a right to acquire any
security having a direct or indirect participation in the profits of the
issuer.
Financial Sources. The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bear any relation to any
casino project, including holders of publicly-traded securities of an entity
which holds a casino license or is an entity qualifier, subsidiary or holding
company of a casino licensee (a "Regulated Company"), to qualify as financial
sources. In the past, the CCC has waived the qualification requirement for
holders of less than 15% of a series of publicly-traded mortgage bonds so long
as the bonds remained widely distributed and freely traded in the public
market and the holder had no ability to control the casino licensee. Taj
Associates and Plaza Associates will each petition the CCC for a determination
that the First Mortgage Notes will be widely distributed and freely traded in
the public market. There can be no assurance, however, that the CCC will grant
such a petition, will determine that the holders of First Mortgage Notes have
no ability to control either Taj Associates or Plaza Associates as a casino
licensee or will continue the practice of granting such waivers and, in any
event, the CCC may require holders of less than 15% of a series of debt to
qualify as financial sources even if not active in the management of the
issuer or casino licensee.
Institutional Investors. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of Federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended; any collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; any
closed end investment trust; any chartered or licensed life insurance company
or property and casualty insurance company; any banking and other chartered or
licensed lending institution; any investment advisor registered under the
Investment Advisers Act of 1940, as amended; and such other persons as the CCC
may determine for reasons consistent with the policies of the Casino Control
Act.
An Institutional Investor may be granted a waiver by the CCC from financial
source or other qualification requirements applicable to a holder of publicly-
traded securities, in the absence of a prima facie showing by the Division
that there is any cause to believe that the holder may be found unqualified,
on the basis of CCC findings that: (i) its holdings were purchased for
investment purposes only and, upon request by the CCC, it files a certified
statement to the effect that it has no intention of influencing or affecting
the affairs of the issuer, the casino licensee or its holding or intermediary
companies; provided, however, that the Institutional Investor will be
permitted to vote on matters put to the vote of the outstanding security
holders; and (ii) if (x) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary company of
the casino licensee's holding or intermediary companies which is related in
any way to the financing of the casino licensee and represent either (A) 20%
or less of the total outstanding debt of the company, or (B) 50% or less of
any issue of outstanding debt of the company, (y) the securities are equity
securities and represent less than 10% of the equity securities of a casino
licensee's holding or intermediary companies, or (z) the securities so held
exceed such percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant such waiver
and, in any event, an Institutional Investor may be required to produce for
the CCC or the Division upon request, any document or information which bears
any relation to such debt or equity securities.
Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino
85
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 "--New Jersey Gaming Regulations--Interim Casino
Authorization."
Declaratory Rulings. Taj Associates and Plaza Associates will petition the
CCC for declaratory rulings approving the Merger Transaction and determining,
among other things, that after consummation thereof, Taj Associates and Plaza
Associates will continue to satisfy the CCC's financial stability
requirements; Trump will continue to demonstrate his financial stability; the
Regulated Companies and natural person qualifiers are qualified; the
certificates of incorporation and partnership agreements of the Regulated
Companies contain required provisions with respect to the transfer of
securities and qualification of security holders under the Casino Control Act;
the First Mortgage Notes are publicly traded securities and that CCC approval
of the issuance or subsequent transfer of the securities is not required; that
the individual holders of the First Mortgage Notes need not be qualified as
financial sources, and their qualification may be waived by the CCC and that
qualification of the holders of Common Stock be waived by the CCC.
Ownership and Transfer of Securities. The Casino Control Act imposes certain
restrictions upon the issuance, ownership and transfer of securities of a
Regulated Company and defines the term "security" to include instruments which
evidence a direct or indirect beneficial ownership or creditor interest in a
Regulated Company including, but not limited to, mortgages, debentures,
security agreements, notes and warrants. Currently, each of TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, certain other entities that own
Taj Holding Class A Common Stock or the Taj Holding Class B Common Stock,
Plaza Funding, AC Holdings, Plaza Holding Inc., Plaza Associates, THCR
Holdings, THCR Funding and THCR are deemed to be a Regulated Company, and
instruments evidencing a beneficial ownership or creditor interest therein,
including a partnership interest, are deemed to be the securities of a
Regulated Company.
If the CCC finds that a holder of such securities is not qualified under the
Casino Control Act, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company which issued
the securities. If a holder is found unqualified, it is unlawful for the
holder (i) to exercise, directly or through any trustee or nominee, any right
conferred by such securities, or (ii) to receive any dividends or interest
upon such securities or any remuneration, in any form, from its affiliated
casino licensee for services rendered or otherwise.
With respect to non-publicly-traded securities, the Casino Control Act and
CCC Regulations require that the corporate charter or partnership agreement of
a Regulated Company establish a right in the CCC of prior approval with regard
to transfers of securities, shares and other interests and an absolute right
in the Regulated Company to repurchase at the market price or the purchase
price, whichever is the lesser, any such security, share or other interest in
the event that the CCC disapproves a transfer. With respect to publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC,
such holder shall dispose of such securities. See "Description of First
Mortgage Notes--Regional Regulatory Redemption."
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
86
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 a licensee, such as Taj
Associates and Plaza Associates, to increase its casino space if the licensee
agrees to add a prescribed number of qualifying sleeping units within two
years after the commencement of gaming operations in the additional casino
space. However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed. See "Risk Factors--Atlantic City Properties Expansion."
Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines
87
that such persons do not have the ability to exercise significant control over
the building or the operation of the casino therein.
Agreements to lease an approved hotel building or the land under the
building must be for a durational term exceeding 30 years, must concern 100%
of the entire approved hotel building or the land upon which it is located and
must include a buy-out provision conferring upon the lessee the absolute right
to purchase the lessor's entire interest for a fixed sum in the event that the
lessor is found by the CCC to be unsuitable.
In its May 18, 1995 declaratory rulings with respect to the proposed
enclosed Atlantic City Convention Center walkway to Trump World's Fair, the
CCC, among other things, approved the proposed easement agreements with
respect to such walkway and determined, with the concurrence of the Attorney
General, that no CCC license is required to grant the easement and that the
easements satisfy the durational term requirement and need not concern 100% of
the entire approved hotel building or include such a buy-out provision. See
"Business--Properties--Trump Plaza--Trump World's Fair."
Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10% of all the outstanding equity
securities of the casino licensee. Such an agreement shall: (i) provide for
the complete management of the casino; (ii) provide for the unrestricted power
to direct the casino operations; and (iii) provide for a term long enough to
ensure the reasonable continuity, stability and independence and management of
the casino.
License Fees. The CCC is authorized to establish annual fees for the renewal
of casino licenses. The renewal fee is based upon the cost of maintaining
control and regulatory activities prescribed by the Casino Control Act, and
may not be less than $200,000 for a four-year casino license. Additionally,
casino licensees are subject to potential assessments to fund any annual
operating deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for use or in use
in any casino.
Gross Revenue Tax. Each casino licensee is also required to pay an annual
tax of 8% on its gross casino revenues. For the years ended December 31, 1992,
1993 and 1994 and for the nine months ended September 30, 1995, Plaza
Associates' gross revenue tax was approximately $21.0 million, $21.3 million,
$21.0 million and $18.1 million, respectively, and its license, investigation
and other fees and assessments totaled approximately $4.7 million, $4.0
million, $4.2 million and $3.2 million, respectively. For the years ended
December 31, 1992, 1993 and 1994 and for the nine months ended September 30,
1995, Taj Associates' gross revenue tax was approximately $33.0 million, $35.4
million, $36.7 million and $30.3 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $5.3
million, $5.2 million, $5.2 million and $3.8 million, respectively.
Investment Alternative Tax Obligations. An investment alternative tax
imposed on the gross casino revenues of each licensee in the amount of 2.5% is
due and payable on the last day of April following the end of the calendar
year. A licensee is obligated to pay the investment alternative tax for a
period of 30 years. Estimated payments of the investment alternative tax
obligation must be made quarterly in an amount equal to 1.25% of estimated
gross revenues for the preceding three-month period. Investment tax credits
may be obtained by making qualified investments or by the purchase of bonds
issued by the CRDA. CRDA bonds may have terms as long as fifty years and bear
interest at below market rates, resulting in a value lower than the face value
of such CRDA bonds.
For the first ten years of its tax obligation, the licensee is entitled to
an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of bonds issued to the licensee by the CRDA.
Thereafter, the licensee is (i) entitled to an investment tax credit in an
amount equal to twice the purchase price of such bonds or twice the amount of
its investments authorized in lieu of such bond investments or made in
projects designated as eligible by the CRDA and (ii) has the option of
entering into a contract with the CRDA
88
to have its tax credit comprised of direct investments in approved eligible
projects which may not comprise more than 50% of its eligible tax credit in
any one year.
From the monies made available to the CRDA, the CRDA is required to set
aside $100 million for investment in hotel development projects in Atlantic
City undertaken by a licensee which result in the construction or
rehabilitation of at least 200 hotel rooms by December 31, 1996. These monies
will be held to fund up to 35% of the cost to casino licensees of expanding
their hotel facilities to provide additional hotel rooms, a portion of which
will be required to be available upon the opening of the new Atlantic City
convention center and dedicated to convention events. The CRDA has determined
at this time that eligible casino licensees will receive up to 27% of the cost
of additional hotel rooms out of these monies set aside and may, in the
future, increase the percentage to no greater than 35%.
Minimum Casino Parking Charges. As of July 1, 1993, each casino licensee was
required to pay the New Jersey State Treasurer a $1.50 charge for every use of
a parking space for the purpose of parking, garaging or storing motor vehicles
in a parking facility owned or leased by a casino licensee or by any person on
behalf of a casino licensee. This amount is paid into a special fund
established and held by the New Jersey State Treasurer for the exclusive use
of the CRDA. Plaza Associates and Taj Associates currently charge their
respective parking patrons $2.00 in order to make their required payments to
the New Jersey State Treasurer and cover related expenses. Amounts in the
special fund will be expended by the CRDA for eligible projects in the
corridor region of Atlantic City related to improving the highways, roads,
infrastructure, traffic regulation and public safety of Atlantic City or
otherwise necessary or useful to the economic development and redevelopment of
Atlantic City in this regard.
Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and
known as the Atlantic City Fund, its proportional share of an amount related
to the amount by which annual operating expenses of the CCC and the Antitrust
Division are less than a certain fixed sum. Additionally, a portion of the
investment alternative tax obligation of each casino license for the years
1994 through 1998 allocated for projects in Northern New Jersey shall be paid
into and credited to the Atlantic City Fund. Amounts in the Atlantic City Fund
will be expended by the CRDA for economic development projects of a revenue
producing nature that foster the redevelopment of Atlantic City other than the
construction and renovation of casino hotels.
Conservatorship. If, at any time, it is determined that TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, Plaza Associates, Plaza Funding,
Plaza Holding Inc., AC Holdings, 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 Taj Associates' or Plaza Associates' 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 Taj Associates' or Plaza Associates'
casino hotel facilities. A conservator would be vested with title to all
property of Taj Associates or Plaza Associates 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. It would be the obligation of the
conservator to continue the debt service payments on the Taj Associates Note,
but no assurance can be given that the conservator would have sufficient funds
available to do so.
Qualification of Employees. Certain employees of Taj Associates and Plaza
Associates must be licensed by or registered with the CCC, depending on the
nature of the position held. Casino employees are subject to more stringent
requirements than non-casino employees and must meet applicable standards
pertaining to
89
financial stability, integrity and responsibility, good character, honesty and
integrity, business ability and casino experience and New Jersey residency.
These requirements have resulted in significant competition among Atlantic
City casino operators for the services of qualified employees.
Gaming Credit. Taj Associates' and Plaza Associates' casino games are
conducted on a credit as well as cash basis. Gaming debts arising in Atlantic
City in accordance with applicable regulations are enforceable in the courts
of the State of New Jersey. The extension of gaming credit is subject to
regulations that detail procedures which casinos must follow when granting
gaming credit and recording counter checks which have been exchanged, redeemed
or consolidated.
Control Procedures. Gaming at the Taj Mahal and Trump Plaza is conducted by
trained and supervised personnel. Taj Associates and Plaza Associates employ
extensive security and internal controls. Security checks are made to
determine, among other matters, that job applicants for key positions have had
no criminal history or associations. Security controls utilized by the
surveillance department include closed circuit video camera to monitor the
casino floor and money counting areas. The count of moneys from gaming also is
observed daily by representatives of the CCC.
OTHER LAWS AND REGULATIONS
The U.S. Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit, withdrawal,
exchange of currency, gambling tokens or chips, or other payments or transfers
by, through or to such casino which involves a transaction in currency of more
than $10,000 per patron, per gaming day. Such reports are required to be made
on forms prescribed by the Secretary of the Treasury and are filed with the
Commissioner of the Internal Revenue Service (the "Service"). In addition, AC
Holdings is required to maintain detailed records (including the names,
addresses, social security numbers and other information with respect to its
gaming customers) dealing with, among other items, the deposit and withdrawal
of funds and the maintenance of a line of credit.
In the past, the Service had taken the position that gaming winnings from
table games by nonresident aliens were subject to a 30% withholding tax. The
Service, however, subsequently adopted a practice of not collecting such tax.
Recently enacted legislation exempts from withholding tax table game winnings
by nonresident aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively feasible.
As the result of an audit conducted by the U.S. Department of Treasury,
Office of Financial Enforcement, Plaza Associates was alleged to have failed
to timely file the "Currency Transaction Report by Casino" in connection with
65 individual currency transactions in excess of $10,000 during the period
from October 31, 1986 to December 10, 1988. Plaza Associates paid a fine of
$292,500 in connection with these violations. Plaza Associates has revised its
internal control procedures to ensure continued compliance with these
regulations. From 1992 through 1995, the Service conducted an audit of
"Currency Transaction Reports by Casino" filed by Taj Associates for the
period from April 2, 1990 through December 31, 1991. The U.S. Department of
Treasury has received a report detailing the audit as well as the response of
Taj Associates. Taj Associates is awaiting comments from the U.S. Department
of Treasury as to any potential violations.
On April 5, 1994, OSHA proposed a regulation that would require, inter alia,
that employers who permit smoking in workplaces establish designated smoking
areas, permit smoking only in such areas, and assure that designated smoking
areas be enclosed, exhausted directly to the outside, and maintained under
negative pressure sufficient to contain tobacco smoke within the designated
area. Plaza Associates has estimated construction costs to build enclosed,
exhausted, negative-pressure smoking rooms in Trump Plaza to be $1.5 million
for its casino and $2.5 million for its restaurants. Plaza Associates has also
estimated construction costs to provide negative-pressure exhaust systems for
Trump Plaza hotel rooms to be $1,500 per room; however, management believes
that it is highly unlikely that the regulation, if promulgated, would require
hotel rooms to be equipped with exhaust systems if smoking is prohibited in
the rooms during housekeeping and maintenance activities. If the regulation is
promulgated and is applicable to Trump Plaza hotel rooms, the number of rooms
that would be
90
affected is not known at this time. Taj Associates is unable to estimate the
cost, if any, of compliance with these proposed regulations and is unable to
determine if the cost, if any, of such compliance would have a material
adverse effect on Taj Associates.
AC Holdings is subject to other federal, state and local regulations and, on
a periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages in the State of New Jersey as well as in
other jurisdictions. Management believes all required licenses and permits
necessary to conduct business of AC Holdings has been obtained for operations
in the State of New Jersey.
91
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The managing general partner of AC Holdings is THCR Holdings. The managing
general partner of THCR Holdings is THCR. The Partnership Agreement governing
THCR Holdings provides that all business activities of THCR must be conducted
through THCR Holdings or subsidiary partnerships or corporations, such as AC
Holdings. As the sole general partner of THCR Holdings, THCR will generally
have the exclusive rights, responsibilities and discretion in the management
and control of THCR Holdings, and as such, of AC Holdings.
The following table sets forth certain information concerning each of THCR's
directors and executive officers:
NAME POSITION
---- --------
Donald J. Trump......... Chairman of the Board
Nicholas L. Ribis....... President, Chief Executive Officer, Chief Financial Officer and Director
Robert M. Pickus........ Executive Vice President and Secretary
John P. Burke........... Senior Vice President of Corporate Finance and Corporate Treasurer
Wallace B. Askins....... Director
Don M. Thomas........... Director
Peter M. Ryan........... Director
Donald J. Trump--Mr. Trump, 49 years old, has been Chairman of the Board of
THCR and THCR Funding since their formation in 1995. Mr. Trump is also
Chairman of the Board of Directors, President and Treasurer of Plaza Funding
and the managing general partner of Plaza Associates. Trump was a 50%
shareholder, Chairman of the Board of Directors, President and Treasurer of
Trump Plaza GP and the managing general partner of Plaza Associates prior to
its merger into Plaza Funding in June 1993. Trump was Chairman of the
Executive Committee and President of Plaza Associates from May 1986 to May
1992 and was a general partner of Plaza Associates until June 1993. Trump has
been a director and President of Plaza Holding Inc. since February 1993 and
was a partner in AC Holdings from February 1993 until June 1995. Trump has
been Chairman of the Board of Directors of AC Funding since its formation in
January 1996. Trump has been Chairman of the Board and a Class C Director of
Taj Holding and TM/GP since October 1991; President and Treasurer of Taj
Holding since March 4, 1991; Chairman of the Board of Directors, President and
Treasurer of Taj Funding and TTMI since June 1988; sole director, President
and Treasurer of TTMC since March 1991; Chairman of the Executive Committee of
Taj Associates from June 1988 to October 1991; and President and sole Director
of Realty Corp. since May 1986. Trump has been Chairman of the Board of
Partner Representatives of TCA, the partnership that owns Trump's Castle,
since May 1992; and was Chairman of the Executive Committee of TCA from June
1985 to May 1992. In addition, Trump is the managing general partner of TCA.
Trump is also the President of The Trump Organization, which has been in the
business, through its affiliates and subsidiaries, of acquiring, developing
and managing real estate properties for more than the past five years. Trump
was a member of the Board of Directors of Alexander's Inc. from 1987 to March
1992.
Nicholas L. Ribis--Mr. Ribis, 51 years old, has been President, Chief
Executive Officer, Chief Financial Officer, and a director of THCR, THCR
Holdings and THCR Funding since their formation in 1995. Mr. Ribis has been
the Chief Executive Officer of Plaza Associates since February 1991, was
President from April 1994 to February 1995, and was a member of the Executive
Committee of Plaza Associates from April 1991 to May 29, 1992 and was a
director and Vice President of Trump Plaza GP from May 1992 until its merger
into Plaza Funding in June 1993. Mr. Ribis has been Vice President of Plaza
Funding since February 1995 and Vice President of Plaza Holding Inc. since
February 1995. Mr. Ribis has served as a director of Plaza Holding Inc. since
June 1993 and of Plaza Funding since July 1993. Mr. Ribis has been Chief
Executive Officer, President and director of AC Funding since its formation in
January 1996. Mr. Ribis has been a Class C Director and Vice President of
TM/GP and Taj Holding since October 1991; Chief Executive Officer of Taj
Associates since February 1991; Vice President of Taj Funding since September
1991; Vice President of TTMI since February 1991 and Secretary of TTMI since
September 1991; Director of Realty Corp. since October 1991; and a member of
the Executive Committee of Taj Associates from April 1991 to October 1991. He
has also been Chief
92
Executive Officer of TCA since March 1991; member of the Executive Committee
of TCA from April 1991 to May 1992; member of the Board of Partner
Representatives of TCA since May 1992; and has served as the Vice President
and Assistant Secretary of Trump's Castle Hotel & Casino, Inc. an entity
beneficially owned by Trump, since December 1993 and January 1991,
respectively. Mr. Ribis has served as Vice President of TC/GP, Inc. since
December 1993 and had served as Secretary of TC/GP, Inc. from November 1991 to
May 1992. Mr. Ribis has been Vice President of Trump Corp. since September
1991. From January 1993 to January 1995 Mr. Ribis served as the Chairman of
the Casino Association of New Jersey and has been a member of the Board of
Trustees of the CRDA since October 1993. From January 1980 to January 1991,
Mr. Ribis was Senior Partner in, and from February 1991 to December 1995 was
Counsel to, the law firm of Ribis, Graham & Curtin, which serves as New Jersey
legal counsel to all of the above-named companies and certain of their
affiliated entities.
Robert M. Pickus--Mr. Pickus, 41 years old, has been Executive Vice
President and Secretary of THCR since its formation in 1995. He has also been
the Executive Vice President of Corporate and Legal Affairs of Plaza
Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates
and, since April 1994, he has been the Vice President and Assistant Secretary
of Plaza Funding and Assistant Secretary of Plaza Holding Inc. Mr. Pickus has
been Secretary and director of AC Funding since its formation in January 1996.
Mr. Pickus has been the Executive Vice President of Corporate and Legal
Affairs of Taj Associates since February 1995 and a Class C Director of Taj
Holding and TM/GP since November 1995. He was the Senior Vice President and
Secretary of Trump's Castle Funding, Inc. from June 1988 to December 1993 and
General Counsel of TCA from June 1985 to December 1993. Mr. Pickus was also
Secretary of Trump's Castle Hotel & Casino, Inc., an entity beneficially owned
by Trump, from October 1991 until December 1993. Mr. Pickus has been the
Executive Vice President of Corporate and Legal Affairs of TCA since February
1995 and a member of the Board of Partner Representatives of TCA since October
1995.
John P. Burke--Mr. Burke, 48 years old, has been Senior Vice President of
Corporate Finance of THCR, THCR Holdings and THCR Funding since January 1996,
and has been the Corporate Treasurer of THCR, THCR Holdings and THCR Funding
since their formation in 1995. He has also been Corporate Treasurer of Plaza
Associates and Taj Associates since October 1991. Mr. Burke has been Treasurer
of AC Funding since its formation in January 1996. Mr. Burke has been a Class
C Director of TM/GP and Taj Holding and Vice President of TM/GP since October
1991. Mr. Burke has been the Corporate Treasurer of TCA since October 1991,
the Vice President of TCA, Trump's Castle Funding, Inc., TC/GP, Inc. and
Trump's Castle Hotel & Casino, Inc. since December 1993, and the Vice
President-Finance of The Trump Organization since September 1990. Mr. Burke
was an Executive Vice President and Chief Administrative Officer of Imperial
Corporation of America from April 1989 through September 1990.
Wallace B. Askins--Mr. Askins, 64 years old, has been a director of THCR
since June 1995. He has also been a director of Plaza Funding and Plaza
Holding Inc. since April 11, 1994, and has been a partner representative of
the Board of Partner Representatives of TCA since May 1992. Mr. Askins served
as a director of TC/GP, Inc. from May 1992 to December 1993. From 1987 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, 64 years old, has been a director of THCR since
June 1995. He has also been the Senior Vice President of Corporate Affairs of
the Pepsi-Cola Bottling Co. of New York since January 1985. Mr. Thomas was the
Acting Chairman, and a Commissioner, of the CRDA from 1985 through 1987, and a
Commissioner of the CCC from 1980 through 1984. From 1974 through 1980, Mr.
Thomas served as Vice President, General Counsel of the National Urban League.
From 1966 through 1974, Mr. Thomas served in various capacities with Chrysler
Corporation rising to the level of President-Auto Dealerships. Mr. Thomas was
an attorney with American Airlines from 1957 through 1966. Mr. Thomas was a
director of Trump Plaza GP until its merger into Plaza Funding in June 1993
and has been a director of Plaza Funding and Plaza Holding Inc. since June
1993. Mr. Thomas is an attorney licensed to practice law in the State of New
York.
Peter M. Ryan--Mr. Ryan, 58 years old, has been a director of THCR since
June 1995. He has also been the President of each of The Marlin Group, LLC and
The Brookwood Carrington Fund, LLC, real estate financial
93
advisory groups, since January 1995. Prior to that, Mr. Ryan was the Senior
Vice President of The Chase Manhattan Bank for more than five years. Mr. Ryan
has been a director of the Childrens Hospital FTD since October 1995.
The officers of THCR serve at the pleasure of the Board of Directors.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
Trump and Nicholas L. Ribis served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties
filed their petition for reorganization under Chapter 11 of the Bankruptcy
Code on July 17, 1991. The Second Amended Joint Plan of Reorganization of such
parties was confirmed on August 28, 1991, and was declared effective on
October 4, 1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus
also served as Executive Committee members, officers and/or directors of TCA
and its affiliated entities at the time such parties filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on March 9, 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
May 5, 1992, and was declared effective on May 29, 1992. Trump, Nicholas L.
Ribis and John P. Burke served as either executive officers and/or directors
of Plaza Associates and its affiliated entities when such parties filed their
petition for reorganization under Chapter 11 of the Bankruptcy Code in March
1992. The First Amended Joint Plan of Reorganization of such parties was
confirmed on April 30, 1992, and was declared effective on May 29, 1992. Trump
was a partner of Plaza Operating Partners Ltd. when it filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on November 2, 1992.
The plan of reorganization for Plaza Operating Partners Ltd. was confirmed on
December 11, 1992 and declared effective in January 1993.
THCR is the general partner of THCR Holdings. As the managing general
partner of THCR Holdings, THCR will generally have the exclusive rights,
responsibilities and discretion in the management and control of THCR
Holdings. Upon consummation of the Merger Transaction, TM/GP will also be a
general partner of THCR Holdings. See "Description of the THCR Holdings
Partnership Agreement."
MANAGEMENT OF TRUMP PLAZA
Until the consummation of the Merger Transaction, Plaza Funding will be the
managing general partner of Plaza Associates. The Board of Directors of each
of Plaza Funding and Plaza Holding Inc. consists of Messrs. Trump, Ribis,
Wallace B. Askins and Don M. Thomas. The Plaza Note Indenture requires that
two directors of each of Plaza Funding and Plaza Holding Inc. be persons who
would qualify as "Independent Directors" as such term is defined by the
American Stock Exchange, Inc. (the "Independent Directors"). Following the
consummation of the Merger Transaction, AC Holdings will be the managing
general partner of Plaza Associates.
Set forth below, are the names, ages, positions and offices held with Plaza
Funding and Plaza Associates and a brief account of the business experience
during the past five years of each of the executive officers of Plaza Funding
and Plaza Associates other than those who are also directors or executive
officers of THCR.
Barry J. Cregan--Mr. Cregan, 41 years old, has been Chief Operating Officer
of Plaza Associates since September 19, 1994 and President since March 1995.
Since February 21, 1995, Mr. Cregan has been Vice President of Plaza Funding
and Plaza Holding Inc. Prior to accepting these positions at Trump Plaza, Mr.
Cregan was President of The Plaza Hotel in New York for approximately three
years. Prior to joining The Plaza Hotel, he was Vice President of Hotel
Operations at Trump's Castle in Atlantic City. In addition, Mr. Cregan has
worked for Hilton and Hyatt in executive capacities as well as working in Las
Vegas and Atlantic City in executive capacities.
Francis X. McCarthy, Jr.--Mr. McCarthy, 42 years old, was Vice President of
Finance and Accounting of Trump Plaza GP from October 1992 until June 1993,
the date of Trump Plaza GP's merger into Plaza Funding, was Senior Vice
President of Finance and Administration of Plaza Associates from August 1990
to June 1994 and has been Executive Vice President of Finance and
Administration since June 1994; Chief Accounting Officer
94
of Plaza Funding since May 1992; Vice President and Chief Financial Officer of
Plaza Funding since July 1992 and Assistant Treasurer of Plaza Funding since
March 1991. Mr. McCarthy previously served in a variety of financial positions
for Greate Bay Hotel and Casino, Inc. from June 1980 through August 1990.
Fred A. Buro--Mr. Buro, 38 years old, has been the Senior Vice President of
Marketing of Plaza Associates since May 1994. Mr. Buro previously served as
the President of Casino Resources, Inc., a casino marketing, management and
development organization from 1991 through 1994. Prior to that, Mr. Buro
served from 1984 through 1991 as the President of a professional services
consulting firm.
James A. Rigot--Mr. Rigot, 43 years old, has been Executive Vice President
of Casino Operations of Plaza Associates since November 1994. Mr. Rigot served
as Vice President of Casino Operations of TropWorld Casino and Entertainment
Resort from July 1989 through November 1994. From January 1989 through July
1989, Mr. Rigot was Assistant Casino Manager of Resorts Casino Hotel.
Kevin S. Smith--Mr. Smith, 38 years old, has been the Vice President,
General Counsel of Plaza Associates since February 1995. Mr. Smith was
previously associated with Cooper Perskie April Niedelman Wagenheim &
Levenson, an Atlantic City law firm specializing in trial litigation. From
1989 until February 1992, Mr. Smith handled criminal trial litigation for the
State of New Jersey, Department of Public Defender, assigned to the Cape May
and Atlantic County Conflict Unit.
Patrick J. O'Malley--Mr. O'Malley, 41 years old, has been the Executive Vice
President of Hotel Operations of Plaza Associates since September 1995. Prior
to joining Trump Plaza, from September 1994 until September 1995, Mr. O'Malley
was President of the Plaza Hotel in New York City. From December 1989 until
September 1994, Mr. O'Malley was the Vice President of Finance of the Plaza
Hotel in New York City. Prior to joining the Plaza Hotel in New York City,
from 1986 to 1989, Mr. O'Malley was a Regional Financial Controller for the
Four Seasons Hotel and Resorts, Ltd. From 1979 to 1986, Mr. O'Malley worked in
the Middle East and Europe as Hotel Controller for Marriot International
Hotels.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
MANAGEMENT OF THE TAJ MAHAL
Until the consummation of the Merger Transaction, TM/GP will be the managing
general partner of Taj Associates. Following the consummation of the Merger
Transaction, AC Holdings will be the managing general partner of Taj
Associates.
Set forth below are the names, ages, positions and offices, and a brief
account of the business experience during the past five years, of each of the
executive officers of Taj Holding and a key employee of Taj Associates other
than those who are also directors or executive officers of THCR.
R. Bruce McKee--Mr. McKee, 49 years old, has been acting Chief Operating
Officer of Taj Associates since October 1995; Senior Vice President, Finance
of Taj Associates since July 1993; Vice President, Finance of Taj Associates
from September 1990 through June 1993; Assistant Treasurer of Taj Funding,
TM/GP, Taj Holding, Realty Corp., TTMC and TTMI since October 1991; Vice
President of Finance of Elsinore Shore Associates, the owner and operator of
the Atlantis Casino Hotel, Atlantic City, from April 1984 to September 1990;
and Treasurer of Elsinore Finance Corp., Elsinore of Atlantic City and Elsub
Corp. from June 1986 to September 1990. The Atlantis Casino Hotel now
constitutes the portion of Trump Plaza known as Trump World's Fair.
Nicholas F. Moles--Mr. Moles, 42 years old, has been Assistant Secretary of
Taj Holding and TM/GP from October 1991 to February 1995; Secretary of Taj
Holding and TM/GP since February 1995; Senior Vice President, Law and General
Counsel of Taj Associates since June 1993; Assistant Secretary of Taj Funding
since October 1991 and Assistant Secretary of TTMI since January 1989. From
May 1986 to May 1988, Mr. Moles
95
was General Counsel of Plaza Associates and was Vice President and General
Counsel of Plaza Associates from May 1988 to December 1988. Mr. Moles was Vice
President and General Counsel of Elsinore Shore Associates from May 1985 to
May 1986 and was Director and Assistant Secretary of Elsinore Finance
Corporation from November 1985 to May 1986.
Larry W. Clark--Mr. Clark, 50 years old, has been Executive Vice President,
Casino Operations of Taj Associates since November 1991; Senior Vice
President, Casino Operations of Taj Associates from May 1991 to November 1991;
Vice President, Casino Administration of Taj Associates from April 1991 to May
1991 and from January 1990 to November 1990; Vice President, Casino
Operations, Dunes Hotel & Country Club from November 1990 to April 1991, and
was Director of Casino Marketing and Vice President, Casino Operations,
Showboat Hotel & Casino from November 1988 to January 1990.
Rudy E. Prieto--Mr. Prieto, 51 years old, has been Executive Vice President,
Operations of Taj Associates since December 1995. Prior to joining the Taj
Mahal, Mr. Prieto was Executive Vice President and Chief Operating Officer for
Elsinore Corporation from May 1995 to November 1995; Senior Vice President in
charge of the development of the Mojave Valley Resort for Elsinore Corporation
from April 1994 to April 1995 and Executive Vice President and Assistant
General Manager for the Tropicana Resort and Casino from May 1988 to October
1994.
Walter Kohlross--Mr. Kohlross, 54 years old, has been Senior Vice President,
Marketing and Food & Beverage of Taj Associates since April 1992; Vice
President, Hotel Operations of Taj Associates from June 1991 to June 1992 and
was Vice President, Food & Beverage of Taj Associates from 1986 to June 1991.
Richard D. Kline--Mr. Kline, 50 years old, has been Senior Vice President,
Hotel Operations of Taj Associates since September 1994; Vice President, Hotel
Operations of Taj Associates from June 1993 to September 1994, and was Vice
President, Property Management of Taj Associates from March 1992 to June 1993.
From 1966 to 1992, Mr. Kline held a variety of command and staff positions in
the United States Army, and retired with the rank of Colonel.
Nicholas J. Niglio--Mr. Niglio, 49 years old, has been Senior Vice
President, Casino Marketing of Taj Associates since October 31, 1995. From
February 6, 1995 to October 31, 1995, Mr. Niglio was Vice President,
International Marketing of Taj Associates. Prior to joining Taj Associates, Mr
Niglio was Executive Vice President of International Marketing/Player
Development for TCA, the partnership that owns and operates Trump's Castle,
from October 1993 until February 1995. Prior to that, Mr. Niglio served as
Senior Vice President of Eastern Operations of Caesars World Marketing
Corporation for three years. Prior to that he served as Vice President-Casino
Manager at Caesars Atlantic City for three years.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
Trump, Nicholas L. Ribis, John P. Burke, R. Bruce McKee, Nicholas F. Moles,
Larry W. Clark and Walter Kohlross served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties
filed their petition for reorganization under Chapter 11 of the Bankruptcy
Code on July 17, 1991. The Second Amended Joint Plan of Reorganization of such
parties was confirmed on August 28, 1991, and was declared effective on
October 4, 1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus
served as Executive Committee members, officers and/or directors of TCA and
its affiliated entities at the time such parties filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on March 9, 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
May 5, 1992, and was declared effective on May 29, 1992. Trump, Nicholas L.
Ribis and John P. Burke served as either executive officers and/or directors
of Plaza Associates and its affiliated entities when such parties filed their
petition for reorganization under Chapter 11 of the Bankruptcy Code in March
1992. The First Amended Joint Plan of Reorganization of such parties was
confirmed on April 30, 1992, and was declared effective on May 29, 1992. Trump
was a partner of
96
Plaza Operating Partners Ltd. when it filed a petition for reorganization
under Chapter 11 of the Bankruptcy Code on November 2, 1992. The plan of
reorganization for Plaza Operating Partners Ltd. was confirmed on December 11,
1992 and declared effective in January 1993.
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. See "Description of the THCR
Holdings Partnership Agreement."
1995 Stock Incentive Plan. The Board of Directors of THCR adopted the 1995
Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which, directors,
employees and consultants of THCR and certain of its subsidiaries and
affiliates who have been selected as participants are eligible to receive
awards of various forms of equity-based incentive compensation, including
stock options, stock appreciation rights, stock bonuses, restricted stock
awards, performance units and phantom stock, and awards consisting of
combinations of such incentives. The 1995 Stock Plan is administered by the
Stock Incentive Plan Committee of the Board of Directors of THCR (the "Stock
Incentive Plan Committee"). Subject to the provisions of the 1995 Stock Plan,
the Stock Incentive Plan Committee has sole discretionary authority to
interpret the 1995 Stock Plan and to determine the type of awards to grant,
when, if and to whom awards are granted, the number of shares covered by each
award and the terms and conditions of the award.
Options granted under the 1995 Stock Plan may be "incentive stock options"
("ISOs"), within the meaning of Section 422 of the Code, or nonqualified stock
options ("NQSOs"). The vesting, exercisability and exercise price of the
options are determined by the Stock Incentive Plan Committee when the options
are granted, subject to a minimum price in the case of ISOs of the Fair Market
Value (as defined in the 1995 Stock Plan) of the Common Stock on the date of
grant and a minimum price in the case of NQSOs of the par value of Common
Stock. In the discretion of the Stock Incentive Plan Committee, the option
exercise price may be paid in cash or in shares of Common Stock or other
property having a fair market value on the date of exercise equal to the
option exercise price, or by delivering to THCR a copy of irrevocable
instructions to a stockbroker to deliver promptly to THCR an amount of sale or
loan proceeds sufficient to pay the exercise price. Except as provided by the
Stock Incentive Plan Committee in an underlying stock option agreement, in the
event of a Change of Control (as defined in the 1995 Stock Plan or in the
stock option agreement), all options subject to such agreement will be fully
exercisable.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant
SARs, either alone or in connection with an option. An SAR entitles its holder
to be paid an amount equal to the fair market value of Common Stock subject to
the SAR on the date of exercise of the SAR, less the exercise price of the
related stock option in the case of an SAR granted in connection with a stock
option, or the fair market value of one share of stock on the date the SAR was
granted, in the case of an SAR granted independent of an option. Shares of
Common Stock covered by a restricted stock award are issued to the recipient
at the time the award is granted, but are subject to forfeiture in the event
continued employment and/or other restrictions and conditions established by
the Stock Incentive Plan Committee at the time the award is granted are not
satisfied. Unless otherwise determined by the Stock Incentive Plan Committee,
a recipient of a restricted stock award has the same rights as an owner of
Common Stock, including the right to receive cash dividends and to vote the
shares. A performance unit or phantom stock award provides for the future
payment of cash or the issuance of shares of Common Stock to the recipient if
continued employment and/or other performance objectives established by the
97
Stock Incentive Plan Committee at the time of grant are attained. The 1995
Stock Plan also provides that performance unit and phantom stock awards may be
settled in cash, in the discretion of the Stock Incentive Plan Committee and
if indicated in the applicable award agreement, on each date on which shares
of Common Stock covered by the awards would otherwise have been delivered or
become unrestricted, in an amount equal to the fair market value of such
shares on such date. Except as provided in a particular award agreement, in
the event of a Change in Control (as defined in the 1995 Stock Plan),
notwithstanding any vesting schedule with respect to an award of options,
SARs, phantom stock units or restricted stock, such options or SAR will become
immediately exercisable with respect to the shares subject to such option or
SAR, and restrictions with respect to such phantom stock units or shares of
restricted stock will immediately expire. In addition, payment will be made as
determined by the Stock Incentive Plan Committee with respect to performance
units. The 1995 Stock Plan also provides for the grant of unrestricted stock
bonus awards.
THCR has reserved 1,000,000 shares of Common Stock for issuance under the
1995 Stock Plan, provided, however, that in the event of changes in the
outstanding stock or the capital structure of THCR, adjustments will be made
by the Stock Incentive Plan Committee as to (i) the number, price or kind of a
share of stock or other consideration subject to outstanding awards and (ii)
the maximum number of shares of stock subject to all awards under the 1995
Stock Plan.
In 1995, the Stock Incentive Plan Committee granted to Nicholas L. Ribis,
under the 1995 Stock Plan: (a) a stock bonus award of 66,667 shares of Common
Stock, which was fully vested when issued, (b) a phantom stock unit award of
66,666 units, entitling Mr. Ribis to receive 66,666 shares of Common Stock on
June 12, 1997, subject to certain conditions, and (c) an award of NQSOs
entitling Mr. Ribis to purchase 133,333 shares of the Common Stock, subject to
certain conditions (including vesting at a rate of 20% per year over a five-
year period). The options have an exercise price of $14.00 per share.
Summary Compensation Tables. The following table sets forth information
regarding compensation paid to or accrued by all the executive officers of
THCR for each of the last three completed fiscal years. Compensation accrued
during one year and paid in another is recorded under the year of accrual.
Because THCR was formed in 1995, compensation for the years ended December 31,
1994 and 1993 reflect solely the compensation paid or accrued to these
individuals as executive officers of Plaza Associates and Taj Associates.
Compensation for the year ended December 31, 1995 includes compensation paid
or accrued to these individuals as executive officers of THCR, Plaza
Associates and Taj Associates.
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS ($) OPTIONS ($) COMPENSATION
- --------------------------- ---- ---------- --------- --------------- ---------- ----------- ------------
Donald J. Trump......... 1995 $ 583,333 $ -- $ -- -- -- $2,947,000(/2/)
Chairman of the Board 1994 -- -- -- -- -- 2,641,000(/2/)(/3/)
1993 -- -- -- -- -- 2,813,000(/2/)
Nicholas L. Ribis(/4/).. 1995 $1,355,636 $ 933,338 $ -- 933,324(/5/) 133,333 $ --
Chief Executive Officer 1994 1,153,000 250,000 280,407 -- -- --
1993 524,253 500,000 545,497 -- -- --
Robert M. Pickus........ 1995 $ 198,972 $ 85,000 $ -- -- -- $ 4,004(/6/)
Executive Vice President 1994 163,759 32,500 -- -- -- 3,291(/6/)
and
Secretary 1993 5,808 -- -- -- -- --
John P. Burke........... 1995 $ 100,000 $ 51,666 $ -- -- -- $ --
Senior Vice President of 1994 100,000 -- 46,000 -- -- --
Corporate Finance and 1993 95,590 28,000 46,000 -- -- --
Corporate Treasurer
98
- ---------------------
(1) Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for income
taxes and directors' fees. Following SEC (as defined) rules, perquisites
and other personal benefits are not included in this table because the
aggregate amount of that compensation is less than the lesser of $50,000
or 10% of the total of salary and bonus for each member of the Executive
Group.
(2) The amounts listed represent amounts paid to Trump pursuant to the
services agreements with Plaza Associates and Taj Associates. Payments
received by TPM under the TPM Services Agreement (as defined) are
currently pledged by TPM to secure lease payments for a helicopter that
TPM makes available to Plaza Associates. See "Certain Transactions--Plaza
Associates--TPM Services Agreement" and "--Taj Associates and Affiliates--
Taj Services Agreement." Trump is neither an employee of Plaza Associates
nor Taj Associates and receives no compensation from Plaza Associates or
Taj Associates other than pursuant to the TPM Services Agreement and the
Taj Services Agreement, respectively.
(3) In addition to the amount listed as payments under the TPM Services
Agreement and the Taj Services Agreement, during 1994, Plaza Associates
paid to Trump an aggregate of $1,572,000 under a construction service
agreement and as a commission to secure a retail lease at Trump Plaza. See
Note 8 to Consolidated Financial Statement of AC Holdings and Plaza
Associates.
(4) Mr. Ribis devotes a majority of his time to the affairs of THCR. See "--
Employment Agreements."
(5) As of December 31, 1995 Mr. Ribis held 66,666 phantom stock units issued
pursuant to the 1995 Stock Plan. These units had a value as of December
31, 1995 of $1,433,319. These phantom stock units were issued to Mr. Ribis
in connection with his employment agreement with THCR. Each phantom stock
unit entitles Mr. Ribis to one share of Common Stock on the vesting date
of the phantom stock unit. All of the phantom stock units are scheduled to
vest on June 12, 1997. Vesting will accelerate in the event of Mr. Ribis'
termination of employment with THCR (i) because of his death or
disability, (ii) by THCR without cause or (iii) voluntarily by Mr. Ribis
under circumstances which constitute a constructive termination.
Alternatively, the phantom stock units may expire prior to June 12, 1997
in the event Mr. Ribis voluntarily terminates his employment with THCR
under circumstances which do not constitute constructive termination or if
he is terminated by THCR with cause. Dividend equivalents with respect to
the phantom stock units will be credited to a bookkeeping account on
behalf of Mr. Ribis and will be paid out in cash at the time the phantom
stock units vest or will expire along with the phantom stock units.
(6) Represents vested and unvested contributions made by Plaza Associates to
Trump Plaza Hotel and Casino Retirement Savings Plan. Funds accumulated
for an employee under this plan consisting of a certain percentage of the
employee's compensation plus Plaza Associates' employer matching
contributions equaling 50% of the participant's contributions, are
retained until termination of employment, attainment of age 59 1/2 or
financial hardship, at which time the employee may withdraw his or her
vested funds.
The following table sets forth options granted to Mr. Ribis in 1995. No
other member of the Executive Group received stock options in 1995. THCR did
not issue any stock appreciation rights in 1995. This table also sets forth
the hypothetical gains that would exist for the options at the end of their
ten-year terms at assumed annual rates of stock appreciation of 5% and 10%.
The actual future value of the options will depend on the market value of the
Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL STOCK APPRECIATION
GRANTS FOR OPTION TERM
--------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ------------- ---------- ----------
Nicholas L. Ribis....... 133,333 100% $14.00 June 12, 2005 $1,173,060 $2,960,580
The following table sets forth the number of shares covered by options held
by Mr. Ribis and the value of the options as of December 31, 1995. Mr. Ribis
was the only member of the Executive Group who held options in 1995. None of
these options were exercisable in 1995.
FY-END OPTION VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END ($)
-------------------------- --------------------------
NAME EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
---- ------------ ------------- ------------ -------------
Nicholas L. Ribis........ N/A 133,333 N/A $2,866,660
99
EMPLOYMENT AGREEMENTS
THCR and Plaza Associates. Trump serves as the Chairman of the Board of
Directors of THCR pursuant to the Executive Agreement dated as of June 12,
1995, among Trump, THCR and THCR Holdings (the "Executive Agreement"). In
consideration for Trump's services under the Executive Agreement, Trump
receives a salary of $1 million per year. Pursuant to the terms of the
Executive Agreement, Trump provides to THCR, from time to time, when
reasonably requested, marketing, advertising, professional and other similar
and related services with respect to the operation and business of THCR. The
Executive Agreement continues in effect (i) for an initial term of five years
and (ii) thereafter, for a three-year rolling term until either Trump or THCR
provides notice to the other of its election not to continue extending the
term, in which case the term of the Executive Agreement will end three years
from the date such notice is given. The Executive Agreement also provides that
Trump may devote time and effort to the Taj Mahal and Trump's Castle and,
subject to the terms of the Contribution Agreement, to other business matters,
and that the Executive Agreement will not be construed to restrict Trump from
operating the Taj Mahal and Trump's Castle in a commercially reasonable manner
and/or having an interest therein or conducting any other activity not
prohibited under the Contribution Agreement. See "Risk Factors--Conflicts of
Interest" and "Description of the THCR Holdings Partnership Agreement."
Plaza Associates had an employment agreement with Nicholas L. Ribis (the
"Ribis Plaza Agreement") pursuant to which Mr. Ribis acted as Chief Executive
Officer of Plaza Associates. The Ribis Plaza Agreement provided for an annual
salary of $550,000 with annual increases of 10% on each anniversary. Mr. Ribis
received a $250,000 signing bonus. Pursuant to the terms of the Ribis Plaza
Agreement, in the event Plaza Associates engaged in an offering of common
shares to the public, Plaza Associates and Mr. Ribis would agree to negotiate
new compensation arrangements to include equity participation for Mr. Ribis.
As a result of the June 1995 Offerings, THCR and THCR Holdings entered into a
revised employment agreement with Mr. Ribis (the "Revised Ribis Plaza
Agreement") to replace the Ribis Plaza Agreement, pursuant to which he agreed
to serve as President and Chief Executive Officer of THCR and Chief Executive
Officer of THCR Holdings. The term of the Revised Ribis Plaza Agreement is
five years and Mr. Ribis is required to devote the majority of his
professional time to the affairs of THCR, as measured on a quarterly basis,
based on a 40-hour work week. Under the Revised Ribis Plaza Agreement, Mr.
Ribis's annual salary is $988,250, which is 50% of the aggregate current
annual base salary ($1,996,500) that Mr. Ribis receives as Chief Executive
Officer of THCR ($988,250), Taj Mahal ($499,125) and Trump's Castle
($499,125). Following the consummation of the Merger Transaction, Mr. Ribis
will devote 75% of his professional time to the operations of THCR, Plaza
Associates and Taj Associates, and his annual salary will be $1,497,375 per
year with respect to his services to these entities. Mr. Ribis will continue
to receive $499,125 per year with respect to his services to Trump's Castle.
In 1995, the Stock Incentive Plan Committee granted to Mr. Ribis, under the
1995 Stock Plan: (a) a stock bonus award of 66,667 shares of Common Stock,
which was fully vested when issued, (b) a phantom stock unit award of 66,666
units, entitling him to receive 66,666 shares of Common Stock on June 12,
1997, subject to certain conditions, and (c) an award of NQSOs entitling Mr.
Ribis to purchase 133,333 shares of the Common Stock at an exercise price of
$14.00 per share. The options will vest at the rate of 20% per year over a
five-year period, and be subject to certain other conditions. In the event Mr.
Ribis's employment is terminated by THCR other than for "cause" or if he
incurs a "constructive termination without cause" (as each term is defined in
the Revised Ribis Plaza Agreement), 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 phantom stock units will also automatically vest upon
the death or disability of Mr. Ribis. The Revised Ribis Plaza Agreement also
provides for up to an aggregate of $2.0 million of loans to Mr. Ribis to be
used by him to pay his income tax liability in connection with stock options,
phantom stock units and stock bonus awards, which loans will be forgiven,
including both principal and interest, in the event of a "Change of Control"
(as defined in the Revised Ribis Plaza Agreement). The Revised Ribis Plaza
Agreement also provides certain demand and piggyback registration rights for
Common Stock issued pursuant to the foregoing.
Mr. Ribis also has an employment agreement with Taj Associates (the "Ribis
Taj Agreement") pursuant to which Mr. Ribis acts as Chief Executive Officer of
Taj Associates. Mr. Ribis received a $250,000 signing bonus. Pursuant to the
terms of the Ribis Taj Agreement, in the event that Taj Associates, or any
entity which acquires
100
substantially all of Taj Associates, proposes to engage in an offering of
common shares to the public, Taj Associates and Mr. Ribis will negotiate new
compensation arrangements to include equity participation for Mr. Ribis. Taj
Associates may at any time terminate Mr. Ribis's employment for "cause" (as
such term is defined in the Ribis Taj Agreement). The Ribis Taj Agreement
expires on September 25, 1996. Taj Associates and Mr. Ribis expect to amend
the Ribis Taj Agreement, effective as of June 12, 1995, pursuant to which,
among other things, Mr. Ribis's annual salary will change from $550,000 (with
annual increases of 10% on each anniversary) to $499,125.
Mr. Ribis is also Chief Executive Officer of TCA, the partnership that owns
Trump's Castle, and receives compensation from this entity for such services
as set forth above. Pursuant to the Revised Ribis Agreement, he is required to
devote the majority of his time to the affairs of THCR, and following the
consummation of the Merger Transaction, Mr. Ribis will devote approximately
75% of his professional time to THCR. All other executive officers of Plaza
Associates, except Messrs. Burke and Pickus, devote substantially all of their
time to the business of Plaza Associates.
THCR Holdings has an employment agreement with Robert M. Pickus (the "Pickus
Agreement") pursuant to which he serves as Executive Vice President and
General Counsel. The Pickus Agreement, which expires on July 9, 1998 if not
extended, provides for annual compensation of $275,000 plus bonus. Employment
may be terminated only for "cause" (as defined in the Pickus Agreement), which
includes revocation of Mr. Pickus' casino key employee license by the CCC and
conviction of a crime. Upon termination for cause, Mr. Pickus will receive
only compensation earned to the date of termination.
Taj Associates. Taj Associates has an employment agreement with Nicholas L.
Ribis (the "Ribis Taj Agreement") pursuant to which Mr. Ribis acts as Chief
Executive Officer of Taj Associates. Mr. Ribis received a $250,000 signing
bonus. Pursuant to the terms of the Ribis Taj Agreement, in the event that Taj
Associates, or any entity which acquires substantially all of Taj Associates,
proposes to engage in an offering of common shares to the public, Taj
Associates and Mr. Ribis will negotiate new compensation arrangements to
include equity participation for Mr. Ribis. Taj Associates may at any time
terminate Mr. Ribis's employment for "cause" (as such term is defined in the
Ribis Taj Agreement). The Ribis Taj Agreement expires on September 25, 1996.
Taj Associates and Mr. Ribis expect to amend the Ribis Taj Agreement,
effective as of June 12, 1995, pursuant to which, among other things, Mr.
Ribis's annual salary will change from $550,000 (with annual increases of 10%
on each anniversary) to $453,750. Mr. Ribis acts as President, Chief Executive
Officer and Chief Financial Officer of THCR and THCR Holdings, the Chief
Executive Officer of TCA and Plaza Associates, the partnerships that own
Trump's Castle and Trump Plaza, and receives additional compensation from such
entities. Mr. Ribis devotes approximately one quarter of his professional time
to the affairs of Taj Associates. Following the consummation of the Merger
Transaction, Mr. Ribis will devote 75% of his professional time to the
operations of THCR, Plaza Associates and Taj Associates. See "--Employment
Agreements."
Taj Associates has an employment agreement with R. Bruce McKee pursuant to
which he serves as Senior Vice President, Chief Financial Officer of Taj
Associates. The agreement, which expires on September 30, 1997, provides for
an annual salary of $175,000, a guaranteed bonus of $25,000 and is terminable
by Mr. McKee on each anniversary date of the agreement. Mr. McKee will further
be considered for additional bonus compensation at Taj Associates' sole
discretion. Factors considered by Taj Associates in the awarding of all
discretionary bonuses generally are the attainment by Taj Associates of
budgeted or forecasted goals and the individual's perceived contribution to
the attainment of such goals.
Taj Associates has an employment agreement with Larry W. Clark pursuant to
which he serves as Executive Vice President, Casino Operations of Taj
Associates. The agreement, which expires on November 30, 1997, provides for an
annual salary of $300,000 and, in addition, a minimum guaranteed bonus of at
least $97,500 per annum.
Taj Associates has an employment agreement with Nicholas J. Niglio which was
assigned to Taj Associates by TCA on February 6, 1995, pursuant to which he
serves as Senior Vice President, Casino Marketing of Taj
101
Associates. The agreement, which expires on December 31, 1996, provides for an
annual salary of $250,000 and an annual bonus at the sole discretion of
management of Taj Associates. Mr. Niglio previously served as Executive Vice
President of TCA.
Taj Associates may terminate the employment agreements of Messrs. Clark,
McKee and Niglio in its sole discretion, without cause. If Mr. Clark's
employment agreement is terminated, Taj Associates would be obligated to pay
Mr. Clark the greater of one year's salary or his salary for the number of
months remaining in the agreement, each at his then current salary. If Mr.
McKee's employment agreement is terminated, Taj Associates would be obligated
to pay Mr. McKee an amount equal to one year's then current salary. If Mr.
Niglio's employment agreement is terminated, Taj Associates would be obligated
to pay Mr. Niglio the lesser of three month's salary or his salary for the
number of months remaining in the agreement, each at his then current salary.
Taj Associates entered into a severance agreement with Nicholas F. Moles
(the "Moles Agreement") on August 11, 1994. The Moles Agreement provides that
upon Mr. Moles' termination other than for "cause" (as defined in the Moles
Agreement), loss of his casino key employee license from the CCC or voluntary
resignation, Taj Associates will pay Mr. Moles a severance payment equal to
the amount of his salary at its then current rate for the period of one year.
Taj Associates had an employment agreement with Dennis C. Gomes, pursuant to
which Mr. Gomes served as President and Chief Operating Officer of Taj
Associates. The agreement provided for an annual salary of $1,500,000 and
annual increases of 10% on each anniversary. Mr. Gomes received a signing
bonus of $600,000. On September 19, 1995, pursuant to the terms of the
employment agreement, Mr. Gomes terminated his employment agreement as
President and Chief Operating Officer of Taj Associates and continued to serve
in that position as an employee-at-will. On October 3, 1995, the Board of
Directors of TM/GP terminated Mr. Gomes from his position as President and
Chief Operating Officer of Taj Associates and Vice President of Taj Holding.
On that same date, Trump, the holder of the Taj Holding Class C Common Stock,
terminated Mr. Gomes as a Class C Director of TM/GP and Taj Holding. Mr. Gomes
did not receive any severance compensation in connection with his termination.
COMPENSATION OF DIRECTORS
Directors of THCR who are also employees or consultants of THCR and its
affiliates receive no directors fees. Non-employee directors are paid an
annual directors fee of $50,000, plus $2,000 per meeting attended plus
reasonable out-of-pocket expenses incurred in attending these meetings,
provided that directors currently serving on the Board of Directors of Plaza
Funding or Plaza Holding Inc. receive no additional compensation. All such
fees are reimbursed to THCR by THCR Holdings in accordance with the THCR
Holdings Partnership Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
THCR has an Executive Committee, an Audit Committee, a Special Committee, a
Stock Incentive Plan Committee and a Compensation Committee. The Executive
Committee is composed of Messrs. Trump and Ribis. The Audit Committee and the
Special Committee are composed of Messrs. Askins, Ryan and Thomas, each of
whom is an independent director of THCR. The Stock Incentive Plan Committee is
composed of Messrs. Trump, Askins, Ryan and Thomas. The Compensation Committee
is composed of Messrs. Trump, Ribis, Askins and Thomas. The Special Committee
was established pursuant to THCR By-Laws and the THCR Holdings Partnership
Agreement and is empowered to vote on any matters which require approval of a
majority of the independent directors of THCR, including affiliated
transactions. See "Description of the THCR Holdings Partnership Agreement."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
THCR and Plaza Associates. Trump and certain affiliates have engaged in
certain related party transactions. See "Certain Transactions."
102
In general, the compensation of executive officers of THCR is determined by
the Compensation Committee of the Board of Directors of THCR. No officer or
employee of THCR, other than Messrs. Trump and Ribis, who serves on the Board
of Directors of THCR, participated in the deliberations of the Board of
Directors of THCR concerning executive compensation.
The Securities and Exchange Commission (the "SEC") requires issuers to
disclose the existence of any other corporation in which both (i) an executive
officer of the registrant serves on the board of directors and/or compensation
committee, and (ii) a director of the registrant serves as an executive
officer. Messrs. Ribis, Pickus and Burke, executive officers of THCR, have
served on the board of directors of other entities in which members of the
Board of Directors (namely, Messrs. Trump and Ribis) served and continue to
serve as executive officers. Management believes that such relationships have
not affected the compensation decisions made by the Board of Directors in the
last fiscal year.
Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
the managing general partner of Plaza Associates, of which Messrs. Trump and
Ribis are executive officers. Messrs. Trump and Ribis also serve on the Board
of Directors of Plaza Holding Inc., of which Messrs. Trump, Ribis and Burke
are also executive officers. Trump is not compensated by such entities for
serving as an executive officer, however, he has entered into a personal
services agreement with Plaza Associates and THCR. Messrs. Ribis and Burke are
not compensated by the foregoing entities, however, they are compensated by
Plaza Associates for their service as executive officers.
Messrs. Ribis, Pickus and Burke serve on the Board of Directors of Taj
Holding, which holds an indirect equity interest in Taj Associates, the
partnership that owns the Taj Mahal, of which Messrs. Trump and Ribis are
executive officers. Such persons also serve on the Board of Directors of
TM/GP, the managing general partner of Taj Associates, of which Messrs. Trump
and Ribis are executive officers. Mr. Ribis is compensated by Taj Associates
for his services as its Chief Executive Officer. See "--Employment
Agreements."
Mr. Ribis also serves on the Board of Directors of Realty Corp., which
leases certain real property to Taj Associates, of which Trump is an executive
officer. Trump, however, does not receive any compensation for serving as an
executive officer of Realty Corp. Mr. Ribis receives compensation from TCA for
acting as its Chief Executive Officer. See "--Employment Agreements."
Compensation Committee Interlocks and Insider Participation: Taj
Associates.--In general, the compensation of executive officers of Taj
Associates is determined (prior to the Merger Transaction) by the Board of
Directors of Taj Holding and TM/GP. No officer or employee of Taj Associates
other than Mr. Ribis who serves on the Board of Directors of Taj Holding and
TM/GP, participated in the deliberations concerning executive compensation.
The SEC requires registrants to disclose the existence of any other
corporation in which both (i) an executive officer of the registrant serves on
the board of directors and/or compensation committee, and (ii) a director of
the registrant serves as an executive officer. Mr. Ribis, an executive officer
of Taj Associates, is a member of the Board of Directors of other entities in
which members of the Board of Directors of TM/GP, the managing general partner
of Taj Associates (namely, Messrs. Trump, Ribis and Burke), are executive
officers. Messrs. Trump and Ribis, executive officers of Taj Holding, are
members of the Board of Directors of other entities in which members of the
Board of Directors of Taj Holding (namely, Messrs. Trump, Ribis and Burke) are
executive officers. Mr. Ribis, an executive officer of Taj Funding and TTMI,
serves on the Board of Directors of other entities in which the sole Director
of Taj Funding and TTMI (namely, Trump) serves as an executive officer. In
addition, Trump or entities owned by him receive management or services fees
pursuant to fixed formulas provided for in agreements with Taj Associates,
Plaza Associates, THCR and TCA, of which Mr. Ribis is a director or a director
of the managing general partner.
Mr. Ribis serves on the Board of Directors of Taj Holding, which is the 100%
beneficial owner of TM/GP, of which Trump is an executive officer. Messrs.
Trump and Ribis serve on the Board of Directors of TM/GP,
103
which is the managing general partner of Taj Associates, of which Messrs.
Ribis and Burke are executive officers. Trump, however, does not receive any
compensation for serving as an executive officer of TM/GP or Taj Holding.
Messrs. Trump and Ribis also serve on the Board of Directors of Realty Corp.,
which leases certain real property to Taj Associates, of which Messrs. Trump
and Ribis are executive officers. Messrs. Trump and Ribis, however, do not
receive any compensation for serving as executive officers of Realty Corp.
Trump is also a director of TTMI, TTMC and Taj Funding; Mr. Ribis serves as an
executive officer of one or more of such entities; however, he does not
receive any compensation for serving in such capacities.
Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
Inc., the managing general partner of Plaza Associates, of which Messrs. Trump
and Ribis are executive officers. Messrs. Trump and Ribis also serve on the
Board of Directors of Plaza Holding, Inc., of which Messrs. Trump, Ribis and
Burke are also executive officers. Trump is not compensated by such entities
for serving as an executive officer; however, he has entered into a personal
services agreement with Plaza Associates and THCR. Messrs. Ribis and Burke are
not compensated by the foregoing entities; however, they are compensated by
Plaza Associates for their service as executive officers.
Trump serves on the Board of Directors of THCR and TC/GP, Inc., of which
Messrs. Ribis and Burke are executive officers. Trump is not compensated by
such entities for serving as an executive officer; however, a corporation
controlled by him has entered into a services agreement with TCA. Messrs.
Ribis and Burke are not compensated by the foregoing entities; however, they
are compensated by TCA for their service as executive officers.
104
CERTAIN TRANSACTIONS
Payments to affiliates in connection with any such transactions are governed
by the provisions of the First Mortgage Note Indenture, which provisions will
generally require that such transactions be on terms as favorable as would be
obtainable from an unaffiliated party, and require the approval of a majority
of the independent directors of AC Funding for certain affiliated
transactions.
THCR
Trump entered into the Executive Agreement, the Contribution Agreement and
the License Agreement in June 1995, and is currently the sole limited partner
of THCR Holdings. See "Management--Employment Agreements" and "Business--
Trademark/Licensing." The only cash compensation paid to Trump in connection
with his services to THCR is pursuant to the Executive Agreement, other than
payments paid to TPM under the TPM Services Agreement, which payments are
currently pledged by TPM to secure lease payments for a Super Puma helicopter
that TPM makes available to Plaza Associates. See "--Plaza Associates--TPM
Services Agreement."
Upon consummation of the June 1995 Offerings, Trump contributed to the
capital of Trump Indiana and other jurisdiction subsidiaries payments made by
him relating to expenditures for the development of Trump Indiana and other
gaming ventures. As of June 12, 1995 these advances totaled approximately $4.4
million. Of these amounts, approximately $3.0 million was 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 prime
rate, plus 1%, payable annually. The promissory note will be automatically
canceled in the event that at any time during the periods set forth below, the
Common Stock trades on the New York Stock Exchange, 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
THCR has entered into a ten year lease with The Trump-Equitable Fifth Avenue
Company, a corporation wholly owned by Trump, dated as of July 1, 1995, for
the lease of office space in The Trump Tower in New York City, which THCR may
use for its general executive and administrative offices. The fixed rent is
$115,500 per year, paid in equal monthly installments, for the period from
July 1, 1995 to June 30, 2000 and will be $129,250 per year, paid in equal
monthly installments, for the period from July 1, 2000 to June 30, 2005. In
addition, THCR will pay as additional rent, a portion of the property taxes
due each year. THCR has the option to terminate this lease upon ninety days
written notice and payment of $32,312.50.
In connection with the Merger Transaction, Trump and THCR entered into an
agreement, dated January 8, 1996, as amended on January 31, 1996 pursuant to
which Trump agreed to take the actions contemplated to be taken by Trump in
connection with the Merger Transaction, including to vote, or cause to be
voted, all shares of Common Stock and Class B Common Stock beneficially owned
by Trump in favor of the approval of the Merger Transaction. THCR agreed to
use reasonable efforts to fulfill, and cause to be fulfilled, those
obligations owed to Trump in connection with the Merger Transaction.
Mr. Ribis, the Chief Executive Officer of each of Plaza Associates and Taj
Associates, was Counsel to the law firm of Ribis, Graham and Curtin until
December 1995, which serves as New Jersey Counsel to THCR, THCR Holdings and
its subsidiaries, Taj Holdings, Taj Associates, and certain of their
affiliated entries.
105
PLAZA ASSOCIATES
Plaza Associates has joint property insurance coverage with TCA, Taj
Associates and other entities affiliated with Trump for which the annual
premium paid by Plaza Associates was approximately $1.4 million for the twelve
months ended May 1996.
Plaza Associates leased from Taj Associates certain office facilities
located in Pleasantville, New Jersey. In 1993 and 1992, lease payments by
Plaza Associates to Taj Associates totaled approximately $30,000 and $138,000,
respectively. Such lease terminated on March 19, 1993, and Plaza Associates
vacated the premises. Through February 1, 1993, Plaza Associates also leased
from Trump approximately 120 parking spaces at Trump Plaza East for
approximately $5.50 per parking space per day, with payments under such
arrangement for the years ended December 31, 1993 and December 31, 1992
totaling $21,000 and $227,000, respectively.
Plaza Associates also leased portions of its warehouse facility located in
Egg Harbor Township, New Jersey to TCA until January 31, 1994; lease payments
by TCA to Plaza Associates totaled $6,000, $15,000 and $14,000 in 1994, 1993
and 1992, respectively.
Seashore Four is the fee owner of a parcel of land constituting a portion
of the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to
the SFA Lease. Seashore Four was assigned the lessor's interest in the
existing SFA Lease in connection with its acquisition of fee title to such
parcel from a non-affiliated third party in November 1983. The SFA Lease was
entered into by Plaza Associates with such third party on an arm's-length
basis. Plaza Associates recorded rental expenses of approximately $788,000,
$900,000 and $900,000 in 1995, 1994 and 1993, respectively, concerning rent
owed to Seashore Four.
Trump Seashore is the fee owner of a parcel of land constituting a portion
of the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to
the TSA Lease. In July 1988, Trump Seashore exercised a $10 million option to
purchase the fee title to such parcel from a non-affiliated third party. In
connection therewith, Trump Seashore was assigned the lessors' interest in the
Trump Seashore Lease, which interest has, however, been transferred to UST.
See "Business--Properties." Plaza Associates made rental payments to Trump
Seashore of approximately $750,000, $1.0 million and $1.0 million in 1995,
1994 and 1993, respectively.
Trump World's Fair. In June 1989, Trump Crystal Tower Associates Limited
Partnership ("Trump Crystal"), a New Jersey limited partnership wholly owned
by Trump, acquired from Elsinore Shore Associates all of the assets
constituting the former Atlantis Casino Hotel ("Atlantis"), which is located
on The Boardwalk adjacent to the Atlantic City Convention Center on the
opposite side from Trump Plaza and is otherwise referred to herein as Trump
World's Fair. Prior to such acquisition, all of the Atlantis' gaming
operations were discontinued. The facility was renamed the Trump Regency Hotel
and, in August 1990, pursuant to a triple net lease with an affiliate of Plaza
Associates, leased to Plaza Associates, which operated it solely as a non-
casino hotel. During such period of operation, losses attributable to the
former Trump Regency Hotel aggregating approximately $14.1 million adversely
affected the results of operations of Plaza Associates. Pursuant to the 1992
Plaza Restructuring, Plaza Associates ceased operating the former Trump
Regency Hotel as of September 30, 1992. As part of the 1992 Plaza
Restructuring, the triple-net lease was terminated and Plaza Associates issued
to Chemical Bank ("Chemical"), the assignee of rents payable under such lease,
a promissory note in the original principal amount of $17.5 million (the
"Regency Note"). At such time, title to the former Trump Regency Hotel was
transferred by Trump to ACFH Inc. ("ACFH"), a wholly owned subsidiary of
Chemical. From that time until June 12, 1995, the former Trump Regency Hotel
was operated on behalf of ACFH as a non-casino hotel by Sovereign Management,
a third party unaffiliated with THCR, Trump or their respective affiliates.
Pursuant to an agreement between Trump Crystal, and ACFH, Trump Crystal
granted ACFH a non-exclusive license to use the "Trump" name in connection
with such property. Plaza Associates repaid the Regency Note with a portion of
the proceeds from the sale of the Plaza Notes and PIK Notes.
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical and ACFH. The Original Chemical
Option Agreement granted to Trump an option to purchase (i) the former Trump
Regency Hotel (including the land, improvements and personal property used in
the operation
106
of the hotel) and (ii) certain promissory notes (including a personal
promissory note of Trump payable to Chemical for $35.9 million (the "Trump
Note")) made by Trump and/or certain of his affiliates and payable to Chemical
(the "Chemical Notes") which are secured by certain real estate assets located
in New York, unrelated to Plaza Associates, including the Trump Note which was
made by Trump on July 20, 1987. As of September 30, 1995, the aggregate amount
owed by Trump and his affiliates under the Chemical Notes (none of which
constitutes an obligation of Plaza Associates) was approximately $65.8
million. In connection with exercise of the Trump World's Fair Purchase
Option, as discussed below, the Trump Note was canceled.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $80 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option
by January 5, 1994. In addition, the Original Chemical Option Agreement
provided for an expiration of the option on May 8, 1994, subject to an
extension until June 30, 1994 upon payment of an additional $250,000 on or
before May 8, 1994. The Original Chemical Option Agreement did not allocate
the purchase price among the assets subject to the option or permit the option
to be exercised for some, but not all, of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Plaza Associates was to make the initial $1 million payment, and, in
consideration of such payment to be made by Plaza Associates, Trump agreed
with Plaza Associates that, if Trump was able to acquire the former Trump
Regency Hotel pursuant to the exercise of the option, he would make it
available for the sole benefit of Plaza Associates on a basis consistent with
Plaza Associates' contractual obligations and requirements. Trump further
agreed that Plaza Associates would not be required to pay any additional
consideration to Trump in connection with any assignment to Plaza Associates
of the option to purchase the former Trump Regency Hotel. On January 5, 1994,
Plaza Associates obtained the approval of the CCC to make the $1 million
payment, and the payment was made on that date.
On June 16, 1994, Trump, Chemical and ACFH amended and restated the Original
Chemical Option Agreement (the "First Amended Chemical Option Agreement"). The
First Amended Chemical Option Agreement provided for an extension of the
expiration of the option through September 30, 1994, upon payment of $250,000.
Such payment was made on June 27, 1994. The First Amended Chemical Option
Agreement provided for a $60 million option price for the former Trump Regency
Hotel and the Trump Note, and a separate $20 million option price for the
other Chemical Notes. On August 30, 1994, Trump, Chemical and ACFH entered
into an amendment to the First Amended Chemical Option Agreement (the "Second
Amended Chemical Option Agreement"). The Second Amended Chemical Option
Agreement provided for an extension of the expiration of the option through
March 31, 1995 upon the payment of $50,000 a month for the period October
through December 1994, and $150,000 a month for the period January through
March 1995. Plaza Associates received the approval of the CCC and made such
payments. On March 6, 1995, Trump, Chemical and ACFH entered into an amendment
to the Second Amended Chemical Option Agreement (the "Third Amended Chemical
Option Agreement") or the Trump World's Fair Purchase Option. On June 12,
1995, Trump exercised the Trump World's Fair Purchase Option for $58,150,000
($60 million less $1,850,000 in option payments which were available as of
that date to offset the original exercise price), and title to Trump World's
Fair was transferred via directed deed from ACFH to Plaza Associates. In
connection with the exercise of the Trump World's Fair Purchase Option, the
Trump Note was canceled. Plaza Associates is currently in the process of
renovating and integrating Trump World's Fair into Trump Plaza. See
"Business--Atlantic City Properties--Trump Plaza--The Trump Plaza Expansion."
Trump Plaza East. In 1993, Plaza Associates received the approval of the
CCC, subject to certain conditions, for the expansion of its hotel facilities
at Trump Plaza East. On June 24, 1993, in connection with the 1993 refinancing
of Trump Plaza, (i) Trump transferred title to Trump Plaza East to Missouri
Boardwalk, Inc. ("Boardwalk"), a wholly owned subsidiary of Midlantic Bank,
N.A. ("Midlantic"), in exchange for a reduction in indebtedness to Midlantic
in an amount equal to the sum of fair market value of Trump Plaza East and all
rent payments made to Boardwalk by Trump under the Trump Plaza East Lease (as
defined), (ii) Boardwalk leased Trump Plaza East to Trump (the "Trump Plaza
East Lease") for a term of five years, which expires on June 30, 1998, during
which time Trump was obligated to pay Boardwalk $260,000 per month
107
in lease payments, and (iii) Plaza Associates acquired the Trump Plaza East
Purchase Option. In October 1993, Plaza Associates assumed the Trump Plaza
East Lease and related expenses. In addition, Plaza Associates has the Right
of First Offer upon any proposed sale of all or any portion of the fee
interest in Trump Plaza East during the term of the Trump Plaza East Purchase
Option. Pursuant to the Right of First Offer, Plaza Associates has ten days
after receiving written notice from the grantor of the proposed sale to commit
to exercise the Right of First Offer. If Plaza Associates commits to exercise
the Right of First Offer, it has ten days from the date of commitment to
deposit $3,000,000 with the grantor, to be credited towards the purchase price
or to be retained by the grantor if the closing, through no fault of the
grantor, does not occur within 90 days (or, subject to certain conditions, 120
days) of the date of the commitment. If Plaza Associates determines not to
timely exercise the Right of First Offer, the grantor thereof may sell Trump
Plaza East to a third party, subject, however, to the Trump Plaza East
Purchase Option and the lease associated with Trump Plaza East. Trump,
individually, also has been granted by such lender the Right of First Offer
upon a proposed sale of all or any portion of Trump Plaza East during the term
of the Trump Plaza East Purchase Option. Trump has agreed with Plaza
Associates that his Right of First Offer will be subject to Plaza Associates'
prior exercise of its Right of First Offer (with any decision of Plaza
Associates requiring the approval of the independent directors of Plaza
Funding, acting as the managing general partner of Plaza Associates).
Acquisition of Trump Plaza East by Plaza Associates would under certain
circumstances (provided there are no events of default under the Trump Plaza
East Lease or the Trump Plaza East Purchase Option and provided that certain
other events had not theretofore or do not thereafter occur) discharge Trump's
obligation to Midlantic in full.
TPM Services Agreement. On June 24, 1993, Plaza Associates and TPM entered
into the TPM Services Agreement which amended and restated an earlier services
agreement. Pursuant to the TPM Services Agreement, TPM is required to provide
to Plaza Associates, from time to time when reasonably requested, consulting
services on a non-exclusive basis, relating to marketing, advertising,
promotional and other similar and related services (the "TPM Services") with
respect to the business and operations of Plaza Associates. In addition, the
TPM Services Agreement contains a non-exclusive "license" of the "Trump" name.
TPM is not required to devote any prescribed amount of time to the performance
of its duties. In consideration for the TPM Services, Plaza Associates pays
TPM an annual fee of $1.0 million in equal monthly installments. In addition
to such annual fee, Plaza Associates reimburses TPM on a monthly basis for all
reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under the TPM Services Agreement. Plaza Associates paid TPM
$1,321,000, $1,288,000 and $1,247,000 in 1995, 1994 and 1993, respectively,
for the TPM Services. Pursuant to the TPM Services Agreement, Plaza Associates
agrees to hold TPM, its officers, directors and employees harmless from and
against any loss arising out of or in connection with the performance of the
TPM Services and to hold Trump harmless from and against any loss arising out
of the license of the "Trump" name. The TPM Services Agreement provides that
its term is coextensive with the period during which any Plaza Notes remain
outstanding.
Payments received under the TPM Services Agreement are currently pledged by
TPM to secure lease payments for a helicopter that TPM makes available to
Plaza Associates. Pending approval by the lessor of the helicopter, it is
currently contemplated that the stock of TPM will be transferred by Trump to
THCR Holdings, which will in turn assume the lease and related obligations, as
well as become entitled to all amounts payable under the TPM Services
Agreement.
Indemnification Agreements. In addition to the indemnification provisions
in THCR's and its subsidiaries' employment agreements (see "Management--
Employment Agreements"), certain former and current Directors of Plaza Funding
entered into separate indemnification agreements in May 1992 with Plaza
Associates pursuant to which such persons are afforded the full benefits of
the indemnification provisions of the partnership agreement governing Plaza
Associates. Plaza Associates has also entered into an Indemnification Trust
Agreement in November 1992 (the "Trust Agreement") with Midlantic (the
"Indemnification Trustee") pursuant to which the sum of $100,000 was deposited
by Plaza Associates with the Indemnification Trustee for
108
the benefit of the Directors of Plaza Funding and certain former Directors of
Trump Plaza GP to provide a source for indemnification for such persons if
Plaza Associates, Plaza Funding or Trump Plaza GP, as the case may be, fails
to immediately honor a demand for indemnification by such persons. The
indemnification agreements with the directors of Plaza Funding and Directors
of Trump Plaza GP were amended in June 1993 to provide, among other things,
that Plaza Associates would maintain directors' and officers' insurance
covering such persons during the ten-year term (subject to extension) of the
indemnification agreements; provided, however, that if such insurance would
not be available on a commercially practicable basis, Plaza Associates could,
in lieu of obtaining such insurance, annually deposit an amount in the
Indemnification Trust Fund equal to $500,000 for the benefit of such
directors; provided, however, that deposits relating to the failure to obtain
such insurance shall not exceed $2.5 million.
TAJ ASSOCIATES AND AFFILIATES
On January 8, 1996, as an inducement for Taj Holding, THCR and Merger Sub to
enter into the Merger Agreement, Trump agreed to vote, or cause to be voted,
all shares of Taj Holding Class C Common Stock beneficially owned by Trump in
favor of the approval and adoption of the Merger Agreement.
During the fiscal years ended December 31, 1993, 1994 and 1995, Taj
Associates reimbursed Taj Holding $1,733,000, $2,171,000 and $1,554,000,
respectively, for all amounts necessary to permit TM/GP or Taj Holding (a) to
make payments that TM/GP or Taj Holding was required to make pursuant to the
terms of the TM/GP Certificate of Incorporation and the Taj Holding
Certificate of Incorporation (generally for indemnification of officers and
directors), (b) to pay fees to directors (including fees for serving on a
committee), (c) to pay all other expenses of TM/GP and Taj Holding and (d) to
permit Taj Holding to redeem the Taj Holding Class B Common Stock when
required to make such redemption pursuant to the terms of the Taj Holding
Certificate of Incorporation. Taj Holding did not engage in any other
transactions with its affiliates during the fiscal years ended December 31,
1993, 1994 and 1995.
Taj Funding has not engaged in any transactions with its affiliates, except
for the loan of funds made to Taj Associates in exchange for an intercompany
note secured by a mortgage. Both the note and the mortgage were amended in
1991 pursuant to the 1991 Taj Restructuring.
Taj Associates has entered into a lease with The Trump-Equitable Fifth
Avenue Co., a corporation wholly owned by Trump, for the lease of office space
in The Trump Tower in New York City, which Taj Associates uses as a marketing
office. The monthly payments under the lease had been $1,000, and the premises
were leased at such rent for four months in 1992, the full twelve months in
1993 and 1994 and eight months in 1995. On September 1, 1995, the lease was
renewed for a term of five years with an option for Taj Associates to cancel
the lease on September 1 of each year, upon six months' notice and payment of
six months' rent. Under the renewed lease, the monthly payments are $2,184.
Taj Associates currently leases the Specified Parcels from Realty Corp.,
consisting of land adjacent to the site of the Taj Mahal, which is being used
primarily for a bus terminal, surface parking and the Taj Entertainment
Complex, as well as the Steel Pier, and a warehouse complex. During 1993, 1994
and 1995, lease obligations paid to Realty Corp. for these facilities were
approximately $3.3 million per year. Upon consummation of the Merger
Transaction, Taj Associates will purchase the Specified Parcels from Realty
Corp. See "Prospectus Summary--The Merger Transaction."
In April 1991, Taj Associates purchased from TCA for $1,687,000 two adjacent
parcels of land on the Pleasantville-Egg Harbor Township border, constituting
approximately 10 acres. The first parcel contains two buildings, certain fleet
maintenance facilities and an office building and warehouse facility, portions
of which were leased to Plaza Associates. The lease expired in March 1993 and
Plaza Associates has vacated. Taj Associates currently leases the space to a
commercial tenant. The second parcel is unimproved.
In December 1994, Taj Associates entered into a one-year agreement with TCA
pursuant to which TCA leases to Taj Associates 300 parking spaces (500 parking
spaces during the months of May to September) at a rate of 50 cents per space
per day, to be used for employee parking. The agreement expired in December
1995,
109
however, TCA and Taj Associates are currently negotiating an extension of the
agreement and have agreed to continue the lease on a month-by-month basis.
Taj Associates engages in various transactions with Trump Plaza and Trump's
Castle. These transactions are charged at cost or normal selling price in the
case of retail items and include certain shared payroll costs as well as
complimentary services offered to customers. Expenses incurred by Taj
Associates payable to TCA for the years ended December 31, 1993, 1994 and 1995
were approximately $1,100,000, $1,167,000, and $1,072,000, respectively, of
which all but $69,000, $30,000, and $164,000, respectively, was paid or offset
against amounts owed to Taj Associates by TCA. Expenses incurred by Taj
Associates payable to the Plaza Associates for the years ended December 31,
1993, 1994 and 1995 were approximately $83,000, $149,000 and $445,000,
respectively, all of which were offset against amounts owed to Taj Associates
by Plaza Associates, with exception of $167,000 at December 31, 1995.
On October 4, 1991, Taj Associates entered into the Taj Associates-First
Fidelity Guarantee to guarantee performance by Realty Corp. of its obligations
under the First Fidelity Loan. The Taj Associates-First Fidelity Guarantee is
limited to any deficiency in the amount owed under the First Fidelity Loan
when due, up to a maximum of $30 million. In connection with the purchase of
the Specified Parcels, First Fidelity will, among other things, release Taj
Associates from the Taj Associates-First Fidelity Guarantee.
During 1992 and prior years, Taj Associates had an arrangement with the
Trump Shuttle, Inc. (the "Trump Shuttle"), which at the time was beneficially
owned by Trump, for the provision of airline services to Atlantic City on
behalf of Taj Associates patrons. During 1992, Taj Associates incurred $29,000
in charges from the Trump Shuttle, all of which was paid.
Taj Services Agreement. Taj Associates and Trump have entered into the Taj
Services Agreement, which became effective in April 1991, and which provides
that Trump will render to Taj Associates marketing, advertising, promotional
and related services with respect to the business operations of Taj Associates
through December 31, 1999. In consideration for the services to be rendered,
Taj Associates pays an annual fee (the "Annual Fee") equal to 1 1/2% of Taj
Associates earnings before interest, taxes and depreciation less capital
expenditures for such year, with a minimum base fee of $500,000 per annum. The
base fee is payable monthly with the balance due April 15 of the following
year. During 1993, 1994 and 1995, Trump earned approximately $1,566,000,
$1,353,000 and $1,743,000, respectively, in respect of the Annual Fee,
including amounts paid to a third party pursuant to an assignment agreement.
In addition to the Annual Fee, Taj Associates reimburses Trump on a monthly
basis for all reasonable out-of-pocket expenses up to certain aggregate
amounts incurred by Trump in performing his obligations under the Taj Services
Agreement. During 1993, 1994 and 1995, Taj Associates reimbursed Trump
$232,000, $224,000 and $276,000, respectively, for expenses pursuant to the
Taj Services Agreement, of which $127,000, $148,000 and $174,000,
respectively, was incurred to an affiliate for air transportation. Taj
Associates has agreed to indemnify Trump from and against any licensing fees
arising out of his performance of the Taj Services Agreement, and against any
liability arising out of his performance of the Taj Services Agreement, other
than that due to his gross negligence or willful misconduct. In connection
with the Merger, the Taj Services Agreement will be terminated.
Taj License Agreement. On April 1, 1991, in connection with the Taj Services
Agreement, Taj Associates and Trump entered into an Amended and Restated
License Agreement (the "Taj License Agreement") which amended and restated an
earlier license agreement between the parties. Pursuant to the Taj License
Agreement, Taj Associates has the non-exclusive right to use the name and
likeness of Trump, and the exclusive right to use the name and related marks
and designs of the Trump Taj Mahal Casino Resort (collectively, the "Taj
Marks"), in its advertising, marketing and promotional activities through
December 31, 1999. All uses by Taj Associates of the names, marks, licenses
and designs under the Taj License Agreement are subject to the prior written
approval of Trump. Trump has agreed to indemnify Taj Associates against any
liability for trademark or copyright infringement (in connection with the use
by Taj Associates of the Taj Marks in accordance with the
110
Taj License Agreement) arising solely by reason of any license agreement or
other agreement entered into by Trump with respect to the Taj Marks. Taj
Associates has collaterally assigned its right under the Taj License Agreement
to the Taj Bond Trustee.
Indemnification Agreements. In addition to the indemnification provisions in
Taj Associates employment agreements (see "Management--Employment Agreements--
Taj Associates"), the Merger Agreement provides for indemnification of any
present or former director, officer, employee or agent of Taj Holding and
TM/GP, arising from his services as such, within six years of the Effective
Time. See "Prospectus Summary--The Merger Transaction."
111
DESCRIPTION OF THE FIRST MORTGAGE NOTES
Set forth below is a summary of certain provisions of the First Mortgage
Notes. The First Mortgage Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated as the Effective Time, by and among Trump Plaza
Holding Associates ("AC Holdings"), and THCR Atlantic City Funding, Inc. ("AC
Funding"), as joint and several obligors (the "Issuers"); Trump Taj Mahal
Associates ("Taj Associates"), Trump Plaza Associates ("Plaza Associates") and
The Trump Taj Mahal Corporation ("TTMC"), as guarantors; and First Bank
National Association, as trustee (the "Trustee"), a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
The terms of the Indenture are also governed by certain provisions contained
in the Trust Indenture Act. The following summaries of certain provisions of
the Indenture and related documents are summaries only, do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all of the provisions of the Indenture and exhibits thereto, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the Trust Indenture Act as in effect on the date of
the Indenture. Capitalized terms used herein and not otherwise defined shall
have the respective meanings assigned to them in the Indenture. Wherever
particular provisions of the Indenture or related documents are referred to in
this summary, such provisions are incorporated by reference as a part of the
statements made and such statements are qualified in their entirety by such
reference.
GENERAL
The First Mortgage Notes will be senior obligations of the Issuers, limited
in aggregate principal amount to $1.18 billion and secured as set forth under
"--Security for the First Mortgage Notes" below. The First Mortgage Notes will
be guaranteed on a senior secured basis by Plaza Associates, Taj Associates,
TTMC and each other present and future Subsidiary of AC Holdings (the
"Guarantors"), other than AC Funding, which is one of the Issuers. The term
"Subsidiary," however, does not include Unrestricted Subsidiaries. The First
Mortgage Notes will be issued only in fully registered form, without coupons,
in denominations of $l,000 and integral multiples thereof. The First Mortgage
Notes are non-recourse to the Partners of AC Holdings. See "--No Personal
Liability of Partners, Stockholders, Officers, Directors; Non-recourse" below.
The First Mortgage Notes will mature on , 2006. The First Mortgage Notes
will bear interest at the rate per annum stated on the cover page hereof from
the date of issuance or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semi-annually in arrears on
and of each year, commencing , 1996, to the persons in whose
names such First Mortgage Notes are registered at the close of business on the
or immediately preceding such Interest Payment Date. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
The Trustee will initially act as Paying Agent and Registrar. The Issuers
may change the Paying Agent or Registrar without prior notice to holders of
the First Mortgage Notes. The Issuers or any of their Subsidiaries may act as
Paying Agent or Registrar.
Principal of, premium, if any, and interest on the First Mortgage Notes will
be payable, and the First Mortgage Notes may be presented for registration of
transfer or exchange, at the office or agency of the Issuers maintained for
such purpose, which office or agency shall be maintained in the Borough of
Manhattan, The City of New York. At the option of the Issuers, payment of
interest may be made by check mailed to the Holders of the First Mortgage
Notes at the addresses set forth upon the First Mortgage Note registry books.
No service charge will be made for any registration of transfer, exchange or
redemption of First Mortgage Notes, but the Issuers may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Until otherwise designated by the Issuers, the Issuers'
office or agency will be the corporate trust office of the Trustee presently
located at , New York, New York.
112
SECURITY FOR THE FIRST MORTGAGE NOTES
The obligations of the Issuers with respect to the First Mortgage Notes will
be secured by the Mortgage and assignments of leases and rents and of
operating assets, which encumber Plaza Associates' and Taj Associates'
respective interests in the Casino Hotels, including the Specified Parcels and
certain other facilities owned or leased by Plaza Associates or Taj
Associates, any additions and improvements constructed thereon and the
interest of Plaza Associates and Taj Associates in furniture, furnishings,
fixtures, machinery and equipment at any time forming a part thereof, or used
in connection therewith, and substantially all of the other assets of Plaza
Associates and Taj Associates, except as described below (collectively the
"Collateral"). The Mortgage represents a first lien and security interest on
the Casino Hotels and such other assets (subject to certain Superior
Instruments). See "--The Mortgage" below. Certain of the assets not covered by
the Mortgage have also been assigned to the Trustee as security of the
Mortgage Bonds pursuant to security and other agreements. Subject to certain
limited exceptions, all Equity Interests owned by the Issuers and their
Subsidiaries, including without limitation 100% of the Equity Interests of AC
Funding, TTMC, Plaza Associates and Taj Associates, are required to be pledged
exclusively as security for THCR Holdings' obligations under the Senior
Secured Note Indenture.
The Indenture will contain certain covenants limiting the ability of AC
Holdings and its Subsidiaries to incur Indebtedness. Subject to certain
limitations, the Indenture permits the creation of additional mortgages on the
Casino Hotels in connection with expansions thereof, the liens of which may be
equal in priority to the lien of the Mortgage. See clause (c) of the covenant
"Limitation on Incurrence of Indebtedness and Disqualified Capital Stock"
below. The lien and security interest of the Mortgage will also be
subordinated to security interests in furniture, fixtures and equipment
acquired by Plaza Associates or Taj Associates that may be granted in
connection with the acquisition of such assets. If any such security interest
in respect of acquired furniture, fixtures and equipment prohibits subordinate
liens, the property in question will not be included in the property subject
to the Mortgage. As a result, such assets will be available to pay Obligations
in respect of the First Mortgage Notes, if at all, only after such secured
Indebtedness has been paid in full. Cash and Cash Equivalents held by Plaza
Associates or Taj Associates are generally not included within the Collateral.
In addition, certain of Plaza Associates' and Taj Associates' intangible
assets that may be significant to its operations, such as computer software
licenses, are by their terms not assignable and, accordingly, are not included
in the property subject to the Mortgage.
Following an Event of Default, the Trustee, on behalf of the Holders of the
First Mortgage Notes, in addition to any rights or remedies available to it
under the Indenture, may take such action as it deems advisable to protect and
enforce its rights in the Collateral, including the institution of foreclosure
proceedings. The ability of the Holders of the First Mortgage Notes to
foreclose on the Collateral is subject to (x) restrictions under the Casino
Control Act, including the approval of the CCC and (y) such other restrictions
as may be applicable under the laws of other jurisdictions. See "Regulatory
Matters." If the Trustee takes possession of or otherwise acquires either of
the Casino Hotels, an entity licensed under the Casino Control Act would be
required to be retained to operate such Casino Hotel. Because potential
bidders must satisfy licensing requirements, the number of potential bidders
in a foreclosure sale will be less than in foreclosure of other types of
facilities and such requirements may delay the sale of, and may adversely
affect the sales price for, the Casino Hotels and other Collateral. In
addition, the ability of the holders of First Mortgage Notes to realize upon
the Collateral may be subject to certain bankruptcy law limitations in the
event of a bankruptcy. See "--Certain Bankruptcy Limitations" below.
FIRST MORTGAGE NOTE GUARANTEES
The Issuers' obligations under the First Mortgage Notes, the Indenture and
the Mortgage Documents will be jointly and severally irrevocably and
unconditionally guaranteed by the Guarantors. Each guarantee will be a senior
obligation of the respective Guarantor and secured by any Collateral owned by
such Guarantor, subject to certain exceptions. See "--Security for the First
Mortgage Notes" above. The obligations of each Guarantor under its guarantee
will be limited to the extent necessary under any applicable corporate law to
ensure it does not constitute a fraudulent conveyance under applicable law.
See "--Certain Bankruptcy Limitations" below.
113
The Indenture will provide that no Guarantor shall consolidate or merge with
or into (whether or not such Guarantor is the surviving Person) another Person
unless (i) subject to the provisions of the following paragraph and certain
other provisions of the Indenture, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture and
supplemental Mortgage Documents in form reasonably satisfactory to the Trustee
pursuant to which such Person shall unconditionally guarantee, on a senior
secured basis, all of such Guarantor's obligations under such Guarantor's
guarantee, the Indenture and the Mortgage Documents on the terms set forth in
the Indenture; (ii) immediately before and immediately after giving effect to
such transaction on a pro forma basis, no Default or Event of Default shall
have occurred or be continuing; and (iii) immediately after such transaction,
the surviving Person holds all Permits required for operation of the business
of, and such entity is controlled by a Person or entity (or has retained a
Person or entity which is) experienced in, operating casino hotels or
otherwise holds all Permits (including those required from Gaming Authorities)
to operate its business.
The Indenture will further provide that in the event of a sale or other
disposition of all of the Equity Interests of any Guarantor (including
pursuant to a merger or consolidation) to any person other than a Subsidiary,
then such Guarantor may be released and relieved of any obligation under its
guarantee; provided, that (x) immediately after giving effect to such
transaction, no Default or Event of Default shall haver occurred and be
continuing and (y) such Asset Sale and the application of the Net Cash
Proceeds therefrom are in accordance with the applicable provisions of the
Indenture, including without limitation the covenants "Limitation on Sale of
Assets and Subsidiary Stock; Event of Loss" and "Limitation on Merger, Sale or
Consolidation."
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee to foreclose on the Collateral upon the occurrence
of an Event of Default will likely be significantly impaired if a bankruptcy
case under Title 11 of the United States Code (the "Bankruptcy Code") is
commenced by or against any of the Issuers or Guarantors prior to such
foreclosure. Once such a case is commenced, the Bankruptcy Code prohibits a
secured creditor, such as the Trustee, from foreclosing on its collateral
without bankruptcy court approval. Moreover, the bankruptcy court may decline
to grant such approval, even if the debtor is in default under the applicable
debt instruments, if it concludes that there exists or that the debtor can
provide "adequate protection" for the interest of such secured creditor. The
meaning of the term "adequate protection" may vary according to circumstances,
but it is intended in general to protect the value of the secured creditor's
interest in the collateral, as of the commencement of the case, and may
include cash payments or the granting of additional security, if and at such
times as the court in its discretion determines, for any diminution in the
value of the collateral as a result of the stay of foreclosure during the
pendency of the bankruptcy case. In view of the lack of a precise definition
of the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict, in the event of the bankruptcy
of an Issuer or Guarantor, whether and for how long payments under the First
Mortgage Notes would be delayed, whether or when the Trustee would be
permitted to foreclose on the Collateral or whether or to what extent holders
of the First Mortgage Notes would be compensated for any delay in payment or
loss of value of the Collateral through the requirement of "adequate
protection." See "Risk Factors--Certain Bankruptcy Limitations."
Each of the Issuers is a holding company, conducting all of its business
through Subsidiaries, which have guaranteed or will guarantee the Issuers'
Obligations with respect to the First Mortgage Notes. See "Risk Factors."
Holders of the First Mortgage Notes will be direct creditors of each Guarantor
by virtue of its guarantee. Nonetheless, in the event of the bankruptcy or
financial difficulty of a Guarantor, such Guarantor's obligations under its
guarantee, and any security interest granted to secure such guarantee, may be
subject to review and avoidance under state or federal fraudulent transfer
laws. Among other things, such obligations may be avoided if a court concludes
that such obligations were incurred and such security interests granted for
less than reasonably equivalent value or fair consideration at a time when the
Guarantor was insolvent, was rendered insolvent, or was left with inadequate
capital to conduct its business. A court would likely conclude that a
114
Guarantor did not receive reasonably equivalent value or fair consideration to
the extent that the aggregate amount of its liability on its guarantee exceeds
the economic benefits it realizes in the Merger Transaction. See "Risk
Factors--Fraudulent Transfer Considerations."
If the obligations of a Guarantor under its guarantee and the security
interests granted to secure such guarantee are avoided, Holders of First
Mortgage Notes would have to look to the assets of any remaining Guarantors
for payment. There can be no assurance in that event that such assets would
suffice to pay the outstanding principal and interest on the First Mortgage
Notes.
OPTIONAL REDEMPTION
Except as indicated in the next succeeding paragraph, the Issuers will not
have the right to redeem any First Mortgage Notes prior to , 2001. The
First Mortgage Notes will be redeemable at the option of the Issuers, in whole
or in part, at any time on or after , 2001, upon not less than 30 nor
more than 60 days' notice, in amounts of $1,000 or an integral multiple of
$1,000, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period commencing of
the years indicated below, in each case (subject to the right of Holders of
record on a Record Date to receive interest due on an Interest Payment Date
that is on or prior to such Redemption Date) together with accrued and unpaid
interest thereon to the Redemption Date:
REDEMPTION
12-MONTH PERIOD BEGINNING PRICE
------------------------- ----------
2001........................................................... %
2002........................................................... %
2003........................................................... %
2004 and thereafter............................................ 100.000%
The First Mortgage Notes will also be redeemable, in whole or in part, at
any time upon not less than 30 nor more than 60 days' prior notice (or such
earlier date as may be required by any Gaming Authority) at 100% of the
principal amount thereof, together with accrued and unpaid interest through
the redemption date, pursuant to a Required Regulatory Redemption. See "Gaming
Laws."
In the event of a redemption of less than all of the First Mortgage Notes
issued pursuant to the Indenture (other than a Required Regulatory
Redemption), First Mortgage Notes will be chosen for redemption by the Trustee
as provided in the Indenture, but, in general, pro rata or by lot. On and
after the redemption date, interest ceases to accrue on such First Mortgage
Notes or portions thereof called for redemption. If a First Mortgage Note is
redeemed subsequent to an interest record date but on or prior to the related
interest payment date, then any accrued interest will be paid to the person in
whose name such First Mortgage Note is registered at the close of business on
such record date.
The First Mortgage Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the Holder
of each First Mortgage Note to be redeemed to such Holder's last address as
then shown upon the registry books of the Registrar. Any notice which relates
to a First Mortgage Note to be redeemed in part only must state the portion of
the principal amount equal to the unredeemed portion thereof and must state
that on and after the date of redemption, upon surrender of such First
Mortgage Note, a new First Mortgage Note or Notes in a principal amount equal
to the unredeemed portion thereof will be issued. On and after the date of
redemption, interest will cease to accrue on the First Mortgage Notes or
portions thereof called for redemption.
115
CERTAIN COVENANTS
REPURCHASE OF FIRST MORTGAGE NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE
OF CONTROL
The Indenture will provide that in the event that a Change of Control has
occurred, each holder of First Mortgage Notes will have the right, at such
holder's option, pursuant to an irrevocable and unconditional offer by the
Issuers (the "Change of Control Offer"), to require the Issuers to repurchase
all or any part of such holder's First Mortgage Notes (provided, that the
principal amount of such First Mortgage Notes must be $1,000 or an integral
multiple thereof) on a date (the "Change of Control Purchase Date") that is no
later than 75 days after the occurrence of such Change of Control, at a Cash
price (the "Change of Control Purchase Price") equal to 101% of the principal
amount thereof, together with accrued interest to the Change of Control
Purchase Date. The Change of Control Offer shall be made within 30 days
following a Change of Control and shall remain open for 20 Business Days
following its commencement (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Issuers shall purchase
all First Mortgage Notes properly tendered in response to the Change of
Control Offer. If required by applicable law, the Change of Control Purchase
Date and the Change of Control Offer Period may be extended as so required;
however, if so extended, it shall nevertheless constitute an Event of Default
if the Change of Control Purchase Date does not occur within 90 days of the
Change of Control.
As used herein, a "Change of Control" means any of the following events:
(i) THCR Holdings ceases to be the "beneficial owner," directly or
indirectly, of 100% of the Equity Interests of AC Holdings;
(ii) any sale, transfer or other conveyance, whether direct or indirect,
of all or substantially all of the assets of THCR Holdings or THCR, on a
consolidated basis, in one transaction or a series of related transactions,
if, immediately after giving effect to such transaction, (A) any "person"
or "group" (as such terms are used for purposes of Sections 13(d) and 14(d)
of the Exchange Act, whether or not applicable), other than the Permitted
Holder, or if applicable in the case of THCR Holdings, THCR, becomes the
"beneficial owner," directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the transferee and (B) the Permitted
Holder "beneficially owns" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the transferee than such other person or group and does not have the
right or ability by voting power, contract or otherwise to elect or
designate a majority of the Board of Directors;
(iii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than the Permitted Holder, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and l3d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of THCR, or any successor thereto by merger, consolidation or otherwise,
unless the Permitted Holder "beneficially owns" (as so defined), directly
or indirectly, in the aggregate a greater percentage of the total voting
power of the Voting Stock of THCR than such other person or group and still
has the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors (for purposes
of this definition, such other person shall be deemed to beneficially own
any Voting Stock of a specified corporation held by a parent corporation,
if such other person "beneficially owns" (as so defined), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holder "beneficially owns" (as so
defined), directly or indirectly, in the aggregate a lesser percentage of
the voting power of the Voting Stock of such parent corporation and does
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of
such parent corporation);
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of THCR
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of THCR is approved by
the Permitted Holder or by a vote of the 66 2/3% of the directors of THCR
then still in office who are either directors at
116
the beginning of such period or whose election or nomination for election
was previously so approved) have ceased for any reason to constitute a
majority of the Board of Directors of THCR then in office; or
(v) a "change of control" or similar event shall occur under the Senior
Notes of THCR Holdings or any Indebtedness of the Issuers or any of their
Subsidiaries in an aggregate principal amount which exceeds $ million.
On or before the Change of Control Purchase Date, AC Funding or AC Holdings
will (i) accept for payment First Mortgage Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent cash sufficient to pay the Change of Control Purchase Price (together
with accrued and unpaid interest) of all First Mortgage Notes so tendered and
(iii) deliver to the Trustee First Mortgage Notes so accepted together with an
Officers' Certificate listing the First Mortgage Notes or portions thereof
being purchased. The Paying Agent will promptly mail to the Holders of First
Mortgage Notes so accepted payment in an amount equal to the Change of Control
Purchase Price (together with accrued and unpaid interest), and the Trustee
will promptly authenticate and mail or deliver to such Holders a new First
Mortgage Note or Notes equal in principal amount to any unpurchased portion of
the First Mortgage Note or Notes surrendered. Any First Mortgage Notes not so
accepted will be promptly mailed or delivered to the Holder thereof. The
Issuers will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Purchase Date.
The Change of Control purchase feature of the First Mortgage Notes may make
more difficult or discourage a takeover of THCR or THCR Holdings and, thus,
the removal of incumbent management.
The phrase "all or substantially all" of the assets will likely be
interpreted under applicable state law and will be dependent upon particular
facts and circumstances. As a result, there may be a degree of uncertainty in
ascertaining whether a sale or transfer of "all or substantially all" of the
assets of THCR Holdings or THCR has occurred. In addition, no assurances can
be given that the Issuers will have adequate financial resources to acquire
First Mortgage Notes tendered upon the occurrence of a Change of Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
The Indenture will provide that, except as set forth below in this covenant,
AC Holdings will not, and will not permit any of its Subsidiaries to, directly
or indirectly, create, issue, assume, guaranty, incur, become directly or
indirectly liable with respect to (including as a result of an Acquisition),
or otherwise become responsible for, contingently or otherwise (individually
and collectively, to "incur" or, as appropriate, an "incurrence"), any
Indebtedness or any Disqualified Capital Stock (including Acquired
Indebtedness). Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness or Disqualified Capital
Stock and (ii) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of AC Holdings for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro
forma basis to such incurrence of such Indebtedness or Disqualified Capital
Stock and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be at least to 1 for
incurrences on or prior to , 1998 and at least to 1 for incurrences
thereafter (the "Debt Incurrence Ratio"), then AC Holdings may incur such
Indebtedness or Disqualified Capital Stock, provided, that except in the
case of Permitted Indebtedness and Acquired Indebtedness, such Indebtedness
incurred pursuant to this clause (a) has an Average Life to Stated Maturity
that exceeds the remaining Average Life to Stated Maturity of the First
Mortgage Notes and has a Stated Maturity for its final scheduled principal
payment later than the Stated Maturity for the final scheduled principal
payment of the First Mortgage Notes;
117
(b) AC Holdings and the Guarantors may incur Indebtedness evidenced by
the First Mortgage Notes and represented by the Indenture up to the amounts
specified therein as of the date thereof;
(c) AC Holdings may incur Indebtedness not to exceed $ million in
aggregate principal amount outstanding at any time pursuant to this clause
(c) (including any Indebtedness issued to refinance, refund or replace such
Indebtedness), the proceeds of which are used for further acquisitions,
demolitions or constructions of Improvements with respect to, or related
to, the Casino Hotels or the financing of equipment to be used therein,
provided, that no Indebtedness shall be incurred pursuant to this clause
(c) in an aggregate principal amount which exceeds 75% of the cost of the
assets or Improvements, as the case may be, financed thereby, and provided
further, that except in the case of Permitted Indebtedness and Acquired
Indebtedness, such Indebtedness incurred pursuant to this clause (c) has an
Average Life to Stated Maturity that exceeds the remaining Average Life to
Stated Maturity of the First Mortgage Notes and has a Stated Maturity for
its final scheduled principal payment later than the Stated Maturity for
the final scheduled principal payment of the First Mortgage Notes;
(d) Plaza Associates and Taj Associates may incur Indebtedness
represented by F,F&E Financing Agreements and/or Capitalized Lease
Obligations relating to after-acquired gaming or related equipment of (or,
in the case of Capitalized Lease Obligations, leased by) Plaza Associates
or Taj Associates, as applicable, not to exceed (for Plaza Associates and
Taj Associates, collectively) $ million in aggregate principal amount
outstanding at any time pursuant to this clause (d) (including any
Indebtedness issued to refinance, refund or replace such Indebtedness);
(e) the Issuers, Plaza Associates and Taj Associates, as applicable, may
incur Refinancing Indebtedness with respect to any Indebtedness or
Disqualified Capital Stock, as applicable, described in clauses (a), (b)
and (c) of this covenant or which is outstanding on the Issue Date so long
as such Refinancing Indebtedness is secured only by the assets (if any)
that secured the Indebtedness so refinanced;
(f) AC Holdings, Plaza Associates, Taj Associates and their Subsidiaries
may incur Permitted Indebtedness;
(g) Plaza Associates, Taj Associates and their Subsidiaries may incur
Indebtedness pursuant to the Working Capital Facility up to an aggregate
amount outstanding (including any Indebtedness issued to refinance, refund
or replace such Indebtedness) at any time (for Plaza Associates and Taj
Associates, collectively) of $ million; and
(h) AC Holdings may incur Indebtedness in an aggregate amount outstanding
at any time (including any Indebtedness issued to refinance, replace, or
refund such Indebtedness) of up to $ million.
Indebtedness of any Person which is outstanding at the time such Person
becomes a Subsidiary of AC Holdings or is merged with or into or consolidated
with AC Holdings or a Subsidiary of AC Holdings shall be deemed to have been
incurred at the time such Person becomes such a Subsidiary of AC Holdings or
is merged with or into or consolidated with AC Holdings or a Subsidiary of AC
Holdings, as applicable.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture will provide that AC Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment if, after giving effect to such Restricted Payment on a pro forma
basis, (1) a Default or an Event of Default shall have occurred and be
continuing, (2) AC Holdings is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in paragraph (a)
of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," or (3) the aggregate amount of all Restricted
Payments made by AC Holdings and its Subsidiaries, including after giving
effect to such proposed Restricted Payment, from and after the Issue Date,
would exceed the sum of (a) $ million, plus (b) 50% of the aggregate
Consolidated Net Income of AC Holdings and its Consolidated Subsidiaries for
the period (taken as one accounting period), commencing on the first day of
the first full fiscal
118
quarter commencing after the Issue Date, to and including the last day of the
fiscal quarter ended immediately prior to the date of each such calculation
(or, in the event Consolidated Net Income for such period is a deficit, then
minus 100% of such deficit), plus (c) the aggregate Net Cash Proceeds received
by AC Holdings after the Issue Date and on or prior to the date of such
proposed Restricted Payment from (1) the sale of its Qualified Equity
Interests (other than (i) to a Subsidiary of AC Holdings and (ii) to the
extent applied in connection with a Qualified Exchange).
The foregoing clauses (2) and (3) of the immediately preceding paragraph,
however, will not prohibit (v) (I) distributions by AC Holdings pursuant to
the terms of the Partnership Agreement as in effect on the Issue Date to THCR
Holdings to the extent promptly distributed to and applied by THCR (A) to pay
reasonable general and administrative expenses, including directors' fees and
premiums for directors' and officers' liability insurance, not to exceed $
million in any consecutive four-quarter period, (B) to make up to % of any
indemnification payments as required by the Certificate of Incorporation of
THCR as in effect on the Issue Date or (C) to effect up to % of any
redemption of any Equity Interest of THCR if (x) counsel to THCR delivers an
opinion that failure to so redeem would subject THCR to an adverse action by a
Gaming Authority (or, if applicable, a failure to act by a Gaming Authority
that is adverse to THCR) and (y) THCR determines (as evidenced by a resolution
of its Board of Directors delivered to the Trustee) that such adverse action
(or, if applicable, such failure to act) would be likely to have a material
adverse effect on THCR, and (II) distributions by AC Holdings to THCR Holdings
to the extent promptly distributed to and applied by THCR to pay any tax
liability resulting from the distributions provided for in (I) above, as
required by the Partnership Agreement, (w) distributions by AC Holdings of an
amount not to exceed the THCR Senior Note Service Amount, (x) a Qualified
Exchange, (y) for so long as AC Holdings is a partnership or substantially
similar pass-through entity for Federal income tax purposes, Cash
distributions may be made by AC Holdings to its Partners from time to time in
amounts not to exceed the Permitted Tax Distributions, so long as the payments
are made at the time permitted by the second sentence of the definition of
Permitted Tax Distributions contained herein, or (z) the payment of any
dividend within 60 days after the date of its declaration if such dividend
could have been made on the date of such declaration in compliance with the
foregoing provisions. The full amount of any Restricted Payment made pursuant
to the foregoing clauses (v), (w), (y) and (z) (but not pursuant to clause
(x)) of the immediately preceding sentence, however, will be deducted in the
calculation of the aggregate amount of Restricted Payments available to be
made referred to in clause (3) of the immediately preceding paragraph.
MANDATORY DISTRIBUTIONS
To the extent permitted by clause (w) of the second paragraph of the
covenant "Limitation on Restricted Payments," AC Holdings shall make a
distribution to THCR Holdings of the THCR Senior Note Service Amount within
five Business Days of receiving notice from THCR Holdings setting forth the
amount of the THCR Senior Note Service Amount and stating the date of the next
scheduled interest payment on its Senior Notes (which interest payment date
shall not be more than seven Business Days from the date of such notice).
LIMITATION ON LEASES
The Indenture will provide that AC Holdings will not, nor will any of its
Subsidiaries be permitted to, lease as tenant or subtenant real or personal
property (except Permitted Leases), unless AC Holdings' Consolidated Coverage
Ratio for the four full fiscal quarters immediately preceding such event,
taken as one period (and also after giving pro forma effect to any such lease
as if such lease was entered into at the beginning of such four-quarter
period), would have been at least equal to the ratios set forth below for the
applicable period during which such determination is being made:
PERIOD RATIO
------ --------
First 24 months from and including the Issuance Date............. to 1
Thereafter....................................................... to 1
119
In giving effect to the lease as of such four full fiscal quarters, it will be
assumed that the rent for such prior four fiscal quarters was the greater of
the (i) average annualized rent over the term of such lease and (ii) rent
payable for the first four fiscal quarters of such lease.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that AC Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, assume or
otherwise cause or suffer to exist any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary of AC Holdings to pay dividends
or make other distributions to or on behalf of, or to pay any obligation to or
on behalf of, or otherwise to transfer assets or property to or on behalf of,
or make or pay loans or advances to or on behalf of, AC Holdings or any
Subsidiary of AC Holdings, except (a) any restrictions, with respect to a
Subsidiary that is not a Subsidiary on the date of the Indenture, in existence
at the time such Person becomes a Subsidiary of AC Holdings (but not created
in connection with or in contemplation of such Person becoming a Subsidiary
and not applicable to any Person, or property, asset or business, other than
the Person, property, asset or business so acquired), (b) any restrictions
with respect to a Subsidiary imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary (which restrictions shall be for
the benefit of the purchaser thereof and no other Person and apply only to the
assets of the Subsidiary to be sold), (c) restrictions imposed by a Permitted
Lien on the transfer of the respective assets subject thereto, (d)
restrictions contained in the Indenture and the Mortgage Documents, as the
same may be amended from time to time in accordance with the terms thereof and
(e) any restrictions existing under any agreement which refinances or replaces
the agreements containing the restrictions in clause (a), provided, that the
terms and conditions of any such agreement are not more restrictive than those
under or pursuant to the agreement evidencing the Indebtedness refinanced.
LIMITATION ON LIENS
The Indenture will provide that AC Holdings will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
of any kind, other than Permitted Liens, upon any of their respective assets
now owned or acquired after the date of the Indenture or upon any income or
profits therefrom.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK; EVENT OF LOSS
The Indenture will provide that AC Holdings will not, and will not permit
any of its Subsidiaries to, in one or a series of related transactions,
convey, sell, transfer, assign or otherwise dispose of, directly or
indirectly, any of its property, business or assets, including, without
limitation, upon any sale or other transfer or issuance of any Equity
Interests of any Subsidiary or any sale and leaseback transaction, whether by
AC Holdings or a Subsidiary of AC Holdings or through the issuance, sale or
transfer of Equity Interests by a Subsidiary of AC Holdings (an "Asset Sale"),
unless (1)(a) within 210 days after the date of such Asset Sale, the Net Cash
Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the optional
redemption of the First Mortgage Notes in accordance with the terms of the
Indenture or to the repurchase of the First Mortgage Notes pursuant to an
irrevocable, unconditional Cash offer by AC Funding (the "Asset Sale Offer")
to repurchase First Mortgage Notes at a purchase price (the "Asset Sale Offer
Price") of 100% of principal amount, plus accrued interest to the date of
payment, made within 180 days of such Asset Sale and/or (b) within 180 days
following such Asset Sale, the Asset Sale Offer Amount (less that portion of
the Asset Sale Offer Amount applied as provided in clause (a) above) is
reinvested by AC Holdings or its Subsidiaries to make replacements,
improvements or additions to existing properties or new properties directly
related to a Related Business and such reinvestment is made or committed to be
made (such commitment to be established by (A) the purchase of a new property,
the ground-breaking or the commencement of construction, in each case within
180 days of such Asset Sale or (B) promptly placing the Net Cash Proceeds in a
Restricted Funds Account, provided, that such Net Cash Proceeds are invested
as aforesaid in existing properties or new properties within 365 days of being
placed in such Restricted Funds Account) within 180 days, and provided
further, that in the case of any
120
Asset Sale involving all or substantially all of the assets of either Casino
Hotel (a "Casino Sale"), such Net Cash Proceeds must be applied to an Asset
Sale Offer in accordance with clause 1(a), and not reinvested under clause
1(b), (2) with respect to any Asset Sale or related series of Asset Sales
involving securities, property or assets with an aggregate fair market value
in excess of $5.0 million, at least 75% (or 90%, in the case of a Casino Sale)
of the consideration for such Asset Sale or series of related Asset Sales
consists of Cash or Cash Equivalents (treating for this purpose as Cash or
Cash Equivalents (A) property that promptly after such Asset Sale is converted
into Cash or Cash Equivalents and (B) except in the case of a Casino Sale, any
senior Indebtedness that secured the subject assets that are assumed by the
transferee in such Asset Sale), (3) no Default or Event of Default shall have
occurred and be continuing at the time of, or would occur after giving effect,
on a pro forma basis, to, such Asset Sale, and (4) AC Holdings determines in
good faith that AC Holdings or such Subsidiary, as applicable, receives fair
market value for such Asset Sale. For purposes of this covenant with respect
to the application of the Net Cash Proceeds thereof, the receipt by AC
Holdings or any of its Subsidiaries of proceeds due to an Event of Loss shall
constitute an Asset Sale. All Net Cash Proceeds from an Event of Loss shall be
reinvested or used to repurchase First Mortgage Notes, all within the period
and as otherwise provided above in clause (1)(a) of the first paragraph of
this covenant.
The Indenture will provide that an Asset Sale Offer may be deferred until
the accumulated Net Cash Proceeds from Asset Sales not applied to the uses set
forth in (1) above (the "Excess Proceeds") exceeds $15.0 million and that each
Asset Sale Offer shall remain open for 20 Business Days following its
commencement and no longer, except to the extent that a longer period is
required by applicable law (the "Asset Sale Offer Period"). Upon expiration of
the Asset Sale Offer Period, AC Funding shall apply the Asset Sale Offer
Amount plus an amount equal to accrued interest to the purchase of all First
Mortgage Notes tendered (on a pro rata basis if the Asset Sale Offer Amount is
insufficient to purchase all First Mortgage Notes so tendered) at the Asset
Sale Offer Price (together with accrued interest).
Notwithstanding the foregoing, if an Asset Sale Offer is commenced and
securities of AC Holdings ranking pari passu in right of payment with the
First Mortgage Notes and incurred pursuant to clause (c) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock" are outstanding at the date of commencement thereof, the terms of which
provide that a substantially similar offer must be made with respect thereto,
then the Asset Sale Offer shall be made concurrently with such other offer,
and securities of each issue which the holders of securities of such issue
elect to have purchased will be accepted pro rata in proportion to the
aggregate principal amount thereof, provided, that in so repurchasing such
other securities AC Holdings is in compliance with the provisions of
"Limitation on Restricted Payments."
Notwithstanding the foregoing:
(i) AC Holdings and its Subsidiaries may, in the ordinary course of
business for the casino industry, convey, sell, lease, transfer, assign or
otherwise dispose of assets acquired and held for resale in the ordinary
course of business;
(ii) AC Holdings and its Subsidiaries may convey, sell, lease, transfer,
assign or otherwise dispose of assets pursuant to and in accordance with
the limitation on mergers, sales or consolidations provisions in the
Indenture;
(iii) AC Holdings and its Subsidiaries may sell or dispose of damaged,
worn out or other obsolete property in the ordinary course of business so
long as such property is no longer necessary for the proper conduct of the
business of such Person; and
(iv) Subsidiaries of AC Holdings may convey, sell, transfer, assign or
otherwise dispose of assets to AC Holdings or any Wholly-owned Subsidiaries
of AC Holdings.
Notwithstanding the foregoing, AC Holdings will not, and will not permit any
Subsidiary to, directly or indirectly make any Asset Sale of any of the Equity
Interests of such Subsidiary except pursuant to an Asset Sale of all the
Equity Interests of such Subsidiary.
121
In addition, if the amount required to acquire all First Mortgage Notes
tendered by holders pursuant to the Asset Sale Offer (the "Acceptance Amount")
is less than the Asset Sale Offer Amount, the excess of the Asset Sale Offer
Amount over the Acceptance Amount may be used by AC Holdings and its
Subsidiaries for general corporate or partnership purposes without
restriction, other than dividends, repurchases or other distributions in
respect of Equity Interests, and unless otherwise restricted by the other
provisions of the Indenture. Upon consummation of any Asset Sale Offer, the
Asset Sale Offer Amount will be reduced to zero.
Any Asset Sale Offer will be made in compliance with all applicable laws,
rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture will provide that AC Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into or suffer to
exist any contract, agreement, arrangement, understanding or transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any
Affiliate of AC Holdings (other than a Wholly-owned Subsidiary) of AC Holdings
unless (a) such transaction or series of related transactions is on terms that
are no less favorable to AC Holdings or such Subsidiary, as the case may be,
than would be available at the time of such transaction or transactions in a
comparable transaction in arm's-length dealings with an unaffiliated third
party and, with respect to a transaction or series of related transactions
involving aggregate payments equal to or greater than (x) $2.0 million, such
transaction or series of related transactions is approved by a majority of the
Independent Directors of the Board of Directors of AC Funding, or (y) $10.0
million, prior to the consummation of such transaction or series of related
transactions, AC Holdings also obtains a written favorable opinion as to the
fairness thereof to AC Holdings from a financial point of view from an
independent investment banking firm of national reputation, and (b) AC
Holdings delivers an officers' certificate to the Trustee certifying that such
transaction or transactions comply with clause (a) above. The foregoing
restriction will not apply to (1) pro rata dividends or distributions paid in
cash on any class of Equity Interests and not prohibited under "Limitation on
Restricted Payments," (2) the Partnership Agreement as in effect on the Issue
Date or (3) the Affiliated Ground Leases as in effect on the Issue Date.
AC Funding will maintain at least two Independent Directors on its Board of
Directors.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture will provide that neither of the Issuers may consolidate with,
merge with or into any other Person or sell, assign, convey, transfer, lease
or otherwise dispose of all or substantially all of its properties and assets
(as an entirety or substantially as an entirety in one transaction or series
of related transactions) to any Person or group of affiliated Persons or
permit any of AC Holdings' Subsidiaries to enter into any such transaction or
transactions if such transaction or transactions, in the aggregate, would
result in a transfer of all or substantially all of the assets of AC Holdings
on a Consolidated basis or AC Funding, as applicable, to any other Person,
unless, among other things: (a) AC Holdings or AC Funding, as applicable,
shall be the continuing Person, or the Person (if other than AC Holdings or AC
Funding) formed by such consolidation or into which AC Holdings or AC Funding
is merged or to which the properties and assets of AC Holdings or AC Funding
are transferred (the "Surviving Entity") shall be a partnership or
corporation, as applicable, duly organized and validly existing under the laws
of the United States or any state thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, all of the obligations of
AC Holdings or AC Funding under the First Mortgage Notes and the Indenture,
and the Indenture shall remain in full force and effect; (b) immediately
before and immediately after giving effect to such transaction on a pro forma
basis, no Event of Default or Default shall have occurred and be continuing;
(c) immediately after giving effect to such transaction on a pro forma basis,
the Consolidated Net Worth of AC Holdings or the Surviving Entity, as
applicable, is at least equal to thea Consolidated Net Worth of AC Holdings
immediately prior to such transaction or series of transactions; (d)
immediately before and after giving effect to such transaction on a pro forma
basis, AC Holdings or the
122
Surviving Entity, as the case may be, could incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio set forth in paragraph (a)
of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock"; and (e) immediately after such transaction, such
Issuer or the Surviving Entity, as applicable, holds all Permits required for
operation of the business of, and such entity is controlled by a Person or
entity (or has retained a Person or entity which is) experienced in, operating
casino hotels or otherwise holds all Permits (including those required from
Gaming Authorities) to operate its business. AC Funding shall also deliver to
the Trustee an officers' certificate and an opinion of counsel, each stating
that (a) such consolidation, merger, sale, assignment, conveyance, transfer,
lease or disposition and such supplemental indenture comply with the Indenture
and (b) the transaction shall not impair the rights and powers of the Trustee
and holders of the First Mortgage Notes thereunder.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which AC Holdings or AC Funding, as applicable, is not the continuing Person,
the successor Person formed or remaining shall succeed to, and be substituted
for, and may exercise every right and power of, provisions of AC Holdings or
AC Funding, as applicable, and AC Holdings or AC Funding shall in such case be
discharged from all obligations and covenants under the Indenture, the First
Mortgage Notes and the Mortgage Documents.
LIMITATION ON LINES OF BUSINESS
The Indenture will provide that neither AC Holdings nor any of its
Subsidiaries shall directly or indirectly engage to any substantial extent in
any line or lines of business activity other than that which, in the
reasonable good faith judgment of the Board of Directors of AC Funding is a
Related Business.
LIMITATION ON ACTIVITIES OF AC FUNDING.
AC Funding will not conduct any business (including having any Subsidiary)
whatsoever, other than to comply with its obligations under the Indenture and
the First Mortgage Notes. AC Funding will not incur or otherwise become liable
for any Indebtedness (other than the First Mortgage Notes and any renewal,
extension, substitution, refunding, refinancing or replacement thereof in
accordance with the Indenture) or make any Restricted Payments.
RESTRICTION ON CERTAIN AGREEMENTS
The Indenture will provide that other than employment agreements in the
ordinary course of business consistent with industry practice and approved by
the compensation committee of AC Funding, AC Holdings will not, and will not
permit any of its Subsidiaries to, enter into any management, services or
consulting agreement with Donald J. Trump or any Affiliate of Donald J. Trump,
other than the TPM Services Agreement; provided, that no Services Fee
thereunder shall be paid (i) to any person other than AC Holdings or a
Subsidiary if the TPM Services Agreement is assigned or transferred by Trump
Plaza Management Corp. and (ii) to Trump Plaza Management Corp. after
expiration of the Super Puma Helicopter Lease (as defined). AC Holdings will
not, and will not permit its Subsidiaries to, pay any Services Fee under the
TPM Services Agreement to Trump Plaza Management Corp. or pay or reimburse any
expenses relating thereto if a Default or Event of Default has occurred and is
continuing. The terms of the TPM Services Agreement shall not be amended to
increase the amounts to be paid thereunder in the aggregate or on any
particular date, or in any other manner which would be adverse to AC Holdings
or its Subsidiaries.
MAINTENANCE OF INSURANCE
The Indenture will provide that, from and at all times after Issue Date
until the First Mortgage Notes have been paid in full, AC Holdings will, and
will cause its Subsidiaries to, have and maintain in effect (a) [describe
closing date title insurance requirements] and (b) such additional insurance
with responsible carriers against such risks and in such amounts as is
customarily carried by similar businesses with such deductibles, retentions,
self
123
insured amounts and coinsurance provisions as are customarily carried by
similar businesses of similar size, including, without limitation, property
and casualty, and, with respect to insurance on the Collateral, shall have
provided insurance certificates evidencing such insurance to the Trustee prior
to the Issue Date and shall thereafter provide such certificates prior to the
anniversary or renewal date of each such policy referred to in this clause
(b), which certificate shall expressly state the expiration date for each
policy listed. All insurance with respect to the Collateral required under the
Indenture (except worker's compensation) shall name the Issuers and the
Trustee as additional insureds or loss payees, as the case may be, with losses
in excess of $[10.0] million payable jointly to the Issuers and the Trustee
(unless a Default or Event of Default has occurred and is then continuing, in
which case all losses are payable solely to the Trustee), with no recourse
against the Trustee for the payment of premiums, deductibles, commissions or
club calls, and for at least 30 days notice of cancellation. All such
insurance policies will be issued by carriers having an A.M. Best & Company,
Inc. rating of A- or higher and a financial size category of not less than X,
or if such carrier is not rated by A.M. Best & Company, Inc., having the
financial stability and size deemed appropriate by an opinion from a reputable
insurance broker. The Indenture will provide that the Issuers will deliver to
the Trustee on the Issue Date and each anniversary thereafter a certificate of
an insurance agent stating the insurance policies obtained by AC Holdings and
its Subsidiaries comply with this provision and the related applicable
provisions of the Mortgage Documents.
RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK
The Indenture will provide that AC Holdings will not sell, and will not
permit any of its Subsidiaries to issue or sell, any shares of Equity
Interests of any Subsidiary of AC Holdings to any Person other than AC
Holdings or a Wholly-owned Subsidiary of AC Holdings, except that all of the
Equity Interests of a Guarantor may be sold if such Asset Sale complies with
the other provisions of the Indenture, including the covenants "Limitation on
Sale of Assets and Subsidiary Stock; Event of Loss" and "Limitation on Merger,
Sale or Consolidation," in which case that Guarantor may be released from its
guarantee. See "--First Mortgage Note Guarantees" above.
FUTURE SUBSIDIARY GUARANTORS
The Indenture will provide that all present and future Subsidiaries of AC
Holdings (other than AC Funding, which is one of the Issuers) jointly and
severally will guaranty irrevocably and unconditionally all principal,
premium, if any, and interest on the First Mortgage Notes on a senior basis.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture will prohibit AC Holdings and its Subsidiaries from being
required to register as an "investment company (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming
subject to regulation under the Investment Company Act.
REPORTS
The Indenture will provide that whether or not AC Holdings or AC Funding is
subject to the reporting requirements of Section 13(a) or 15(d) of the
Exchange Act, each of AC Holdings and AC Funding will, to the extent permitted
under the Exchange Act, file with the SEC the annual reports, quarterly
reports and other documents which each such Person would have been required to
file with the SEC (to the extent permitted by applicable law) pursuant to such
Section 13(a) or 15(d) if such Person were so subject, such documents to be
filed with the SEC on or prior to the respective dates (the "Required Filing
Dates") by which such Person would have been required so to file such
documents if such Person were so subject. Each such Person will also in any
event (x) within 15 days of each Required Filing Date (i) transmit by mail to
all Holders, as their names and addresses appear in the First Mortgage Note
Register, without cost to such Holders and (ii) file with the Trustee copies
of the annual reports, quarterly reports and other documents which each such
Person would have been required to file with the SEC pursuant to Section 13(a)
or 15(d) of the Exchange Act if such Person were subject to such Sections and
(y) if filing such documents by such Person with the SEC is not permitted,
promptly upon
124
written request, supply copies of such documents to any Holder or prospective
holder of the First Mortgage Notes at AC Holdings' cost.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will define an Event of Default as (i) the failure by the
Issuers to pay any installment of interest on the First Mortgage Notes as and
when the same becomes due and payable and the continuance of any such failure
for 30 days, (ii) the failure by the Issuers to pay all or any part of the
principal, or premium, if any, on the First Mortgage Notes when and as the
same becomes due and payable at maturity, redemption, by acceleration or
otherwise, including, without limitation, payment of the Change of Control
Purchase Price or the Asset Sale Offer Price, or otherwise, (iii) the failure
by the Issuers or any Subsidiary to observe or perform any other covenant or
agreement contained in the First Mortgage Notes or the Indenture and, subject
to certain exceptions, the continuance of such failure for a period of 30 days
after written notice is given to AC Funding by the Trustee or to AC Funding
and the Trustee by the Holders of at least 25% in aggregate principal amount
of the First Mortgage Notes outstanding, (iv) certain events of bankruptcy,
insolvency or reorganization in respect of either or both of the Issuers or
any of their Significant Subsidiaries, (v) a default in Indebtedness of either
or both of the Issuers or any of their Subsidiaries with an aggregate
principal amount in excess of $10.0 million, (vi) final unsatisfied judgments
not covered by insurance aggregating in excess of $10.0 million, at any one
time rendered against either or both of the Issuers or any of their
Subsidiaries and not stayed, bonded or discharged within 60 days, (vii) the
revocation, suspension or involuntary loss of any Permit which results in the
cessation of a substantial portion of the operations of either Casino Hotel
for a period of more than 90 consecutive days, (viii) except as permitted by
the Indenture and the First Mortgage Notes, the cessation of effectiveness of
any guarantee of the Obligations in any material respect or the finding by any
judicial proceeding that any such guarantee is unenforceable or invalid in any
material respect or the denial or disaffirmation by any Guarantor in writing
of its obligations under its guarantee or (ix) an event of default under any
of the Mortgage Documents. The Indenture provides that if a Default occurs and
is continuing, the Trustee must, within 90 days after the occurrence of such
default, give to the Holders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above), then in every such case, unless the
principal of all of the First Mortgage Notes shall have already become due and
payable, either the Trustee or the Holders of 25% in aggregate principal
amount of the First Mortgage Notes then outstanding, by notice in writing to
AC Funding (and to the Trustee if given by Holders) (an "Acceleration
Notice"), may declare all principal, determined as set forth below, and
accrued interest thereon to be due and payable immediately. If an Event of
Default specified in clause (iv), above, occurs, all principal and accrued
interest thereon will be immediately due and payable on all outstanding First
Mortgage Notes without any declaration or other act on the part of Trustee or
the Holders. The Holders of a majority in aggregate principal amount of First
Mortgage Notes (or such higher percentage as would be required to amend such
provision) generally are authorized to rescind such acceleration if all
existing Events of Default, other than the non-payment of the principal of,
premium, if any, and interest on the First Mortgage Notes which have become
due solely by such acceleration.
Prior to the declaration of acceleration of the maturity of the First
Mortgage Notes, the Holders of not less than specified percentages in
aggregate principal amount of the First Mortgage Notes at the time outstanding
may waive on behalf of all the Holders any default, except a default in the
payment of principal of or interest on any Note not yet cured or a default
with respect to any covenant or provision which cannot be modified or amended
without the consent of the Holder of each outstanding Note affected. Subject
to the provisions of the Indenture relating to the duties of the Trustee, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request, order or direction of any of the Holders,
unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Indenture and applicable law, the
Holders of not less than a majority in aggregate principal amount of the First
Mortgage Notes at the time outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
125
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
in other transactions, provided, that if it acquires any conflicting interest
it must eliminate such conflict upon the occurrence of an Event of Default or
else resign.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will provide that the Issuers may, at their option and at any
time within one year of the Stated Maturity of the First Mortgage Notes, elect
to have their Obligations and the Obligations of the Guarantors discharged
with respect to the outstanding First Mortgage Notes ("Legal Defeasance").
Such Legal Defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented, and the Indenture shall cease
to be of further effect as to all outstanding First Mortgage Notes and
guarantees thereof, except as to (i) rights of Holders to receive payments in
respect of the principal of, premium, if any, and interest on such First
Mortgage Notes when such payments are due from the trust funds; (ii) the
Issuers' obligations with respect to such First Mortgage Notes concerning
issuing temporary First Mortgage Notes, registration of First Mortgage Notes,
mutilated, destroyed, lost or stolen First Mortgage Notes, and the maintenance
of an office or agency for payment and money for security payments held in
trust; (iii) the rights, powers, trust, duties, and immunities of the Trustee,
and the Issuers' obligations in connection therewith; and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Issuers may, at their
option and at any time, elect to have the Obligations of the Issuers and the
Guarantors released with respect to certain covenants that are described in
the Indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the First Mortgage Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the First Mortgage
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the First Mortgage Notes, U.S. legal tender, non-callable
government securities or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
such First Mortgage Notes on the stated date for payment thereof or on the
redemption date of such principal or installment of principal of, premium, if
any, or interest on such First Mortgage Notes, and the holders of First
Mortgage Notes must have a valid, perfected, exclusive security interest in
such trust; (ii) in the case of the Legal Defeasance, the Issuers shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to Trustee confirming that (A) the Issuers have received from, or
there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the holders of such First Mortgage
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Issuers shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that the holders of such First Mortgage Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which AC Holdings or any of its
Subsidiaries is a party or by which AC Holdings or any of its Subsidiaries is
bound; (vi) shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuers with the
126
intent of preferring the holders of such First Mortgage Notes over any other
creditors of AC Holdings or any of its Subsidiaries or with the intent of
defeating, hindering, delaying or defrauding any other creditors of AC
Holdings, its Subsidiaries or others; and (vii) the Issuers shall have
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that the conditions precedent provided for in, in the case of the
officers' certificate, (i) through (vi) and, in the case of the opinion of
counsel, clauses (i), (with respect to the validity and perfection of the
security interest) (ii), (iii) and (v) of this paragraph have been complied
with.
If the funds deposited with the Trustee to effect the defeasance or covenant
defeasance are insufficient to pay the principal of, premium, if any, and
interest on the First Mortgage Notes when due, then the obligations of the
Issuers under the Indenture will be revived, and no such Legal Defeasance or
Covenant Defeasance will be deemed to have occurred.
AMENDMENTS AND SUPPLEMENTS
The Indenture will contain provisions permitting the Issuers, the Guarantors
and the Trustee to enter into a supplemental indenture for certain limited
purposes without the consent of the Holders. With the consent of the Holders
of not less than a majority in aggregate principal amount of the First
Mortgage Notes at the time outstanding, the Issuers, the Guarantors and the
Trustee are permitted to amend or supplement the Indenture or any supplemental
indenture or modify the rights of the Holders; provided, that no such
modification may, without the consent of each Holder affected thereby: (i)
change the Stated Maturity on any First Mortgage Note, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any First Mortgage
Note or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or reduce the Change of Control Purchase Price or the Asset Sale Offer
Price or alter the redemption provisions in a manner adverse to the Holders,
or (ii) reduce the percentage in principal amount of the outstanding First
Mortgage Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding
First Mortgage Note affected thereby. Only the Holders of not less than two-
thirds in aggregate principal amount of the outstanding First Mortgage Notes
affected thereby (except as set forth in the immediately preceding sentence)
may: (i) modify the obligations of the Issuers to make and consummate a Change
of Control Offer or modify any of the provisions or definitions with respect
thereto, or (ii) release any Collateral from the Liens created by the Mortgage
Documents, except in accordance with the Indenture and such documents.
The Holders of the percentages of aggregate principal amount of the First
Mortgage Notes outstanding specified in the preceding paragraph may waive
compliance with certain restrictive covenants and provisions of the Indenture
and the Mortgage Documents.
GAMING LAWS
In certain circumstances, holders of the First Mortgage Notes may be
required to qualify under the Casino Control Act as a financial source to
Plaza Associates or Taj Associates and as holders of securities of the
Issuers. See "Regulatory Matters." The Indenture provides that if the CCC
requires that a First Mortgage Noteholder (whether the record or beneficial
owner) qualify under the Casino Control Act and if such holder does not so
qualify, then such Holder must dispose of his interest in the First Mortgage
Notes within 30 days after receipt of notice of such finding, or within such
earlier time as the CCC may require, or the Issuers may redeem such First
Mortgage Notes. If any Holder is found unqualified by the CCC, it is unlawful
for the Holder (i) to receive any interest upon the First Mortgage Notes, (ii)
to exercise, directly or through any trustee or nominee, any right conferred
by the First Mortgage Notes, or (iii) to receive any remuneration, in any form
from any "Regulated Company" (including the Issuers, the Guarantors or the
Trustee) for services rendered or otherwise. See "--Optional Redemption."
127
The Indenture further requires the Trustee to report the names of all record
holders of the First Mortgage Notes to certain Gaming Authorities promptly
after the initial issuance of the First Mortgage Notes and prior to the
scheduled expiration date of the applicable casino license. The Indenture also
requires the Trustee to provide to such Gaming Authorities copies of all
written communications from the Trustee to the Holders, notice of any default
under the First Mortgage Notes, certain other information concerning the
Trustee's enforcement of rights under the Indenture, and other matters
respecting the security for the First Mortgage Notes.
TRUSTEE
The Trustee will be First Bank National Association, a national banking
association. First Bank National Association also serves as trustee for the
respective indentures governing the THCR Holdings Senior Notes and the Plaza
Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such of the rights and powers vested in it under the
Indenture and will use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS; NON-
RECOURSE
The Indenture will provide that no direct or indirect stockholder, partner,
employee, officer or director, as such, past, present or future of the
Issuers, any Guarantor or any successor entity shall have any personal
liability in respect of the obligations of the Issuers or any Guarantor under
the Indenture or the First Mortgage Notes by reason of his or its status as
such stockholder, partner, employee, officer or director.
THE MORTGAGE
GENERAL
The First Mortgage Notes will be secured by the Mortgage in favor of the
Trustee for the benefit of the Holders of the First Mortgage Notes. The
Mortgage shall encumber Plaza Associates' and Taj Associates' (Taj Associates
and Plaza Associates collectively, "Mortgagor") respective fee and leasehold
interests in the Casino Hotels, including the Specified Parcels and certain
other facilities owned or leased by Plaza Associates or Taj Associates, any
additions and improvements constructed thereon and the interest of Plaza
Associates and Taj Associates in furniture, furnishings, fixtures, machinery
and equipment at any time forming a part thereof, or used in connection
therewith, and substantially all of the other assets of Plaza Associates and
Taj Associates, except as described herein. The Mortgagor will have the right
to obtain the release from the Lien of the Mortgage Documents certain tangible
personal property which has become obsolete or unfit for use or which is no
longer necessary in the conduct of its businesses or the operation of the
Collateral.
EVENTS OF DEFAULT
The following events will be defined in the Mortgage as "Events of Default":
(a) default in the payment of any interest on the Mortgage Notes when
such interest becomes due and payable and the continuance of such default
for a period of 30 days; or
(b) default in the payment of all or a portion of the principal of (or
premium, if any, on) the Mortgage Notes when the same becomes due and
payable at stated maturity, upon acceleration, optional redemption,
required repurchase, scheduled principal payment or otherwise; or
(c) default in the payment of any other sum due under the Mortgage Notes
or under the Mortgage, and the continuance of such default for a period of
30 days after there has been given to Plaza Associates and Taj Associates a
written notice from the Trustee specifying such default and requiring it to
be remedied and stating that such notice is a "Notice of Default" under the
Mortgage; or
128
(d) default in the performance, or breach, of any covenant of Plaza
Associates and Taj Associates in the Mortgage (other than a covenant, a
default in the performance or breach of which is elsewhere in this section
of Events of Default specifically dealt with), and continuance of such
default or breach for a period of 30 days after there has been given to
Plaza Associates and Taj Associates a written notice from the Trustee
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Mortgage,
unless (i) the default or breach is of such a nature that is curable but
not susceptible of being cured with due diligence within such 30-day period
(for reasons other than the lack of funds), (ii) Plaza Associates and Taj
Associates deliver an officers' certificate to the Trustee within such 30-
day period stating (A) the applicability of the provisions of clause (i) to
such default or breach, (B) the Mortgagor's intention to remedy such
default or breach with reasonable diligence and (C) the steps which the
Mortgagor has undertaken or intends to undertake to remedy such default or
breach and (iii) Mortgagor delivers to the Trustee additional officers'
certificates every 30 days thereafter updating the information contained in
the certificate described in clause (ii), in which case such 30-day period
shall be extended for such further period of time (but in no event more
than 60 days after the last day of such 30-day period) as may reasonably be
required to cure the same, provided that Mortgagor is then proceeding and
thereafter continues to proceed to cure the same with reasonable diligence;
or
(e) an Event of Default shall occur and be continuing.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any Person (a) existing at the time such person becomes a Subsidiary of AC
Holdings or is merged or consolidated into or with AC Holdings or one of its
Subsidiaries or (b) assumed in connection with the acquisition of assets from
such Person, in each case, other than Indebtedness incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition, consolidation or merger. Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary or the date of such merger
or consolidation, as applicable.
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person
that owns, directly or indirectly, 5% or more of such Person's Equity
Interests or any officer or director of any such Person or other person or
with respect to any natural Person, any person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Affiliated Ground Leases" means the TSA Lease and the SFA Lease.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of (a)
the product of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of
such security or instrument and (b) the amount of each such respective
principal (or redemption) payment by (ii) the sum of all such principal (or
redemption) payments.
129
"Beneficial Owner" for purposes of the definition of Change of Control has
the meaning attributed to it in Rules l3d-3 and l3d-5 under the Exchange Act
(as in effect on the Issue Date), whether or not applicable, except that a
"person" shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" of any Person means any obligation of such
Person or its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as
a capitalized lease obligation.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Cash Equivalent" means (a) any evidence of Indebtedness, maturing not more
than one year after the date of acquisition, issued by the United States of
America, or an instrumentality or agency thereof and guaranteed fully as to
principal, premium, if any, and interest by the United States of America, (b)
any certificate of deposit, maturing net more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital
and surplus and undivided profits of not less than $300.0 million whose debt
has a rating, at the time as of which any investment therein is made, of "P-1"
(or higher) according to Moody's Investors Service, Inc. or any successor
rating agency, or "A-1" (or higher) according to Standard & Poor's Corporation
or any successor rating agency, (c) commercial paper, maturing not more than
one year after the date of acquisition, issued by a corporation (other than an
Affiliate or Subsidiary of Holding Associates) organized and existing under
the laws of the United States of America with a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to
Moody's Investors Service, Inc. or any successor rating agency, or "A-1" (or
higher) according to Standard & Poor's Corporation or any successor rating
agency, and (d) any money market deposit accounts issued or offered by a
domestic commercial bank having capital and surplus in excess of $300.0
million.
"Casino Hotels" means the respective casino and hotel complexes currently
known as the "Trump Plaza Hotel and Casino" (including Trump Plaza East and
Trump World's Fair) and the "Taj Mahal Casino Resort" in Atlantic City, New
Jersey and ancillary structures and facilities and all furniture, fixtures and
equipment at any time contained therein, in each case owned by or leased to
Plaza Associates or Taj Associates, respectively.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such person's Consolidated Fixed Charges
subsequent to the Transaction Date) during the Reference Period; provided,
that for purposes of such calculation, (i) Acquisitions which occurred during
the Reference Period or subsequent to the Reference Period and on or prior to
the Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (iii) the incurrence of any Indebtedness or issuance
of any Disqualified Capital Stock during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date (and the
application of the proceeds therefrom to the extent used to refinance or
retire other
130
Indebtedness) shall be assumed to have occurred on the first day of such
Reference Period, and (iv) the Consolidated Fixed Charges of such person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a pro forma basis as if the average rate in effect from the beginning of
the Reference Period to the Transaction Date had been the applicable rate for
the entire period, unless such Person or any of its Subsidiaries is a party to
an Interest Swap and Hedging Obligation (which shall remain in effect for the
12-month period immediately following the Transaction Date) that has the
effect of fixing the interest rate on the date of computation, in which case
such rate (whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period (determined, for
purposes of this definition only, without taking into effect clause (x) of the
last sentence of the definition thereof) adjusted to add thereto (to the
extent deducted from net revenues in determining Consolidated Net Income),
without duplication, the sum of (i) Consolidated income tax expense, (ii)
Consolidated depreciation and amortization expense, provided, that
consolidated depreciation and amortization of a Subsidiary that is a less than
Wholly-owned Subsidiary shall only be added to the extent of the equity
interest of such person in such Subsidiary and (iii) Consolidated Fixed
Charges, less the amount of all cash payments made by such person or any of
its Subsidiaries during such period to the extent such payments relate to non-
cash charges that were added back in determining Consolidated EBITDA for such
period or any prior period.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease Obligations) of
such person and its Consolidated Subsidiaries during such period, including
(i) original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations,
and (iii) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, (b) one-third of Consolidated Rental Payments for
such period attributable to operating leases of such person and its
Consolidated Subsidiaries, and (c) the amount of dividends accrued or payable
by such person or any of its Consolidated Subsidiaries in respect of Preferred
Stock (other than by Subsidiaries of such person to such person or such
person's wholly owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Issuers to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (y)
interest expense attributable to any Indebtedness represented by the guaranty
by such person or a Subsidiary of such person of an obligation of another
person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not losses) which are
either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any capital stock), less all fees and expenses relating thereto, (b) the
net income, if positive, of any person, other than a Consolidated Wholly-owned
Subsidiary, in which such person or any of its Consolidated Subsidiaries has
an interest, except to the extent of the amount of any dividends or
distributions actually paid in cash to such person or a wholly owned
Consolidated Subsidiary of such person during such period, but in any case not
in excess of such person's pro rata share of such person's net income for such
period, (c) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition,
(d) the net income, if positive, of any of such person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms
of its charter or bylaws or any other agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Consolidated
131
Subsidiary. To the extent not already reduced thereby, Consolidated Net Income
of AC Holdings for any period shall be reduced by the aggregate amount of (x)
all Permitted Tax Distributions made during, or distributable in respect of,
such period and (y) all payments made during such period pursuant to the TPM
Services Agreement.
"Consolidated Net Worth" of any person at any date means, in the case of a
partnership, the partners' capital and, in the case of a corporation, the
aggregate Consolidated stockholders' equity of such person (plus amounts of
equity attributable to preferred stock) and its Consolidated Subsidiaries, as
would be shown on the consolidated balance sheet of such person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity), (a) the amount of any such stockholders' equity
attributable to Disqualified Capital Stock or treasury stock of such person
and its Consolidated Subsidiaries, (b) all upward revaluations and other
write-ups in the book value of any asset of such person or a Consolidated
Subsidiary of such person subsequent to the Issue Date, and (c) all
investments in Subsidiaries that are not Consolidated Subsidiaries and in
persons that are not Subsidiaries.
"Consolidated Rental Payments" of any Person means, in the case of a
partnership, the partners' capital and, in the case of a corporation, for any
period, the aggregate rental obligations of such Person and its Consolidated
Subsidiaries (not including taxes, insurance, maintenance and similar expenses
that the lessee is obligated to pay under the terms of the relevant leases),
determined on a Consolidated basis in conformity with GAAP, payable in respect
of such period under leases of real or personal property (net of income from
subleases thereof, not including taxes, insurance, maintenance and similar
expenses that the sublessee is obligated to pay under the terms of such
sublease), whether or not such obligations are reflected as liabilities or
commitments on a Consolidated balance sheet of such Person and its
Subsidiaries or in the notes thereto, excluding, however, in any event, that
portion of Consolidated Fixed Charges of such Person representing payments by
such Person or any of its Consolidated Subsidiaries in respect of Capitalized
Lease Obligations.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its Subsidiaries if and to the extent the
accounts of such Person and each of its Subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP
consistently applied. The term "Consolidated" shall have a similar meaning.
"CRDA" means the New Jersey Casino Reinvestment Development Authority or any
successor entity thereto.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any person, an Equity
Interest of such person that, by its terms or by the terms of any security
into which it is convertible, exercisable or exchangeable, is, or upon the
happening of an event (other than the disqualification of the holder thereof
by a Gaming Authority) or the passage of time would be, required to be
redeemed or repurchased (including at the option of the holder thereof) in
whole or in part, on or prior to the Stated Maturity of the First Mortgage
Notes.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall
in any event include any Capital Stock issued by, or partnership interests in,
such Person.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset, or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
132
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"F, F&E Financing Agreement" means an agreement which creates a Lien upon
any after-acquired tangible personal property and/or other items constituting
operating assets, which are financed, purchased or leased for the purpose of
engaging in or developing gaming activities permitted under the Indenture.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy and, with respect to any redemption
of First Mortgage Notes pursuant to the applicable gaming laws, means (a) the
last sales price regular way on the last trading day prior to the date of
determination of such value on the largest national securities exchange (or,
if said security is not listed on a national securities exchange, on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ")) on which such First Mortgage Notes
shall have traded on such trading day, or (b) if no such sales of such First
Mortgage Notes occurred on such trading day, the mean between the "bid" and
"asked" prices on such national securities exchange or as quoted on the
National Market System of NASDAQ, as the case may be, on such last trading
day, or (c) if the First Mortgage Notes are not listed or quoted on any
national securities exchange or the National Market System of NASDAQ, the
average of the closing bid and asked prices on such day in the over-the-
counter market as reported by NASDAQ or, if bid and asked prices for the First
Mortgage Notes have not been reported through NASDAQ, the average of the bid
and asked prices on such day as furnished by any New York Stock Exchange
member firm regularly making a market in the First Mortgage Notes, selected
for such purpose by AC Funding, or (d) if none of clauses (a) through (c) are
applicable, the fair market value of such First Mortgage Notes as of the date
of determination as determined in such manner as shall be satisfactory to AC
Funding, which shall be entitled to rely for such purpose on the advice of any
firm of investment bankers or securities dealers having familiarity with the
First Mortgage Notes.
"Gaming Authority" means the New Jersey Casino Control Commission, New
Jersey Division of Gaming Enforcement or any other governmental agency which
regulates gaming in a jurisdiction in which AC Holdings or any of its
Subsidiaries conducts gaming activities.
"Gaming Licenses" means every material license, material franchise, or other
material authorization required to own, lease, operate or otherwise conduct or
manage riverboat, dockside or land-based gaming in any state or jurisdiction
where AC Holdings or any of its Subsidiaries conduct business, and any
applicable liquor licenses.
"Generally Accepted Accounting Principles" or "GAAP" means United States
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as approved by a significant segment of the accounting profession as in
effect on the Issue Date.
"Ground Leases" means the ground leases, as amended or supplemented in
accordance with the Mortgage Documents, each of which expires on December 31,
2078, pursuant to which Plaza Associates is the current lessee, and each of
Trump Seashore Associates (the "TSA Lease"), Seashore Four Associates (the
"SFA Lease") and Plaza Hotel Management Company is the current respective
lessor.
"Guaranteed Debt" of any Person means, without duplication, all indebtedness
of any other Person referred to in the definition of Indebtedness contained in
this section guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement (a) to pay or purchase such Indebtedness or to advance or supply
funds for the payment or purchase of such Indebtedness, (b) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (c) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for
133
property or services without requiring that such property be received or such
services be rendered), (d) to maintain working capital or equity capital of
the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (e) otherwise to assure a creditor
against loss; provided, that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course
of business, and provided, further, that the obligations of Plaza Associates
pursuant to the TPM Services Agreement or the Ground Leases, in each case in
effect on the Issue Date or as amended pursuant to terms substantially similar
to the terms in effect on the Issue Date, shall not be deemed to be Guaranteed
Debt of Plaza Associates.
"Improvements" shall mean, with respect to either or both of the Casino
Hotels, all improvements thereto, including any alteration thereof and the
construction of any additions related thereto or renovations thereof,
including without limitation the construction or renovation of additional
gaming space or facilities, hotel and restaurant facilities and parking
facilities, with all landscaping and other off-and on-site work related
thereto.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities and obligations, contingent and otherwise, of such Person for
borrowed money or representing the balance deferred and unpaid of the purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person
in connection with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities or in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Equity Interest of such Person, or any warrants, rights or
options to acquire such Equity Interest, now or hereafter outstanding, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) every obligation of such Person issued as payment in
consideration of the purchase by such Person or an Affiliate of such Person of
the Equity Interest or substantially all of the assets of another Person or in
consideration for the merger or consolidation with respect to which such
Person or an Affiliate of such Person was a party, (d) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade payables and other accrued current liabilities arising in the ordinary
course of business, (e) all obligations under Interest Swap and Hedging
Obligations of such Person, (f) all Capitalized Lease Obligations of such
Person, (g) all Indebtedness referred to in clauses (a) through (f) above of
other Persons and all dividends of other Persons, the payment of which are
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien, upon or in
property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness, (h) all Guaranteed Debt of such Person and
(i) all Disqualified Capital Stock of such Person (valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends). For purposes hereof, the "maximum fixed repurchase price"
of any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Disqualified Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer (or managing
general partner of the issuer) of such Disqualified Capital Stock.
"Independent Directors" shall mean directors who are not officers or
employees of THCR or any of its Subsidiaries and who are not Affiliates of
Donald J. Trump or any of his Affiliates.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or
134
floating rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or floating rate
of interest on the same notional amount.
"Investment" means, with respect to any Person, directly or indirectly, (a)
any advance, loan or other extension of credit or capital contribution (as
defined) to any other Person (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), (b) any purchase or other acquisition by such Person of any
Equity Interest, bonds, notes, debentures or other securities issued or owned
by, any other Person or (c) other than guarantees of Indebtedness of the
Issuers or any Subsidiary to the extent permitted by the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock," the
entering into by such Person of any guarantee of, or other credit support or
contingent obligation with respect to, Indebtedness or other liability of any
other Person.
"Issue Date" means the date of first issuance of the First Mortgage Notes
under the Indenture.
"Legal Requirements" shall mean all applicable laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of all
governments, departments, commissions, boards, courts, authorities, agencies,
officials and officers, of governments, federal, state and municipal.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Mortgage Documents" shall have the meaning provided in the Indenture as in
effect on the Issue Date.
"Net Cash Proceeds" (x) of an issuance of Indebtedness or Equity Interests
means the cash proceeds of such issuance, net of attorneys' fees, accountants'
fees, brokerage, consultant, underwriting and other fees and expenses actually
incurred in connection with such issuance, sale, conversion or exchange and
net of any taxes paid or payable as a result thereof by the entity making such
sale and (y) of an Asset Sale means the aggregate amount of Cash and Cash
Equivalents received by AC Holdings and its Subsidiaries in respect of such
Asset Sale less the sum of all fees, commissions and other expenses incurred
in connection with such Asset Sale less, in the case of an Asset Sale only,
the amount (estimated reasonably and in good faith by AC Holdings) of income,
franchise, sales and other applicable taxes required to be paid by AC Holdings
(or by its Partners or Upper Tier Owners as a result thereof) or any of its
Subsidiaries in connection with such Asset Sale.
"Net Proceeds" means the aggregate Net Cash Proceeds and fair market value
of property and assets (valued at the fair market value thereof at the time of
receipt in good faith by AC Holdings).
"Obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by the Issuers under the terms of the First Mortgage
Notes or the Indenture.
"Partners" shall mean each of THCR Holdings and Plaza Holding Inc. or any
additional or substitute partners admitted under the Partnership Agreement so
long as (i) each is a partner under the Partnership Agreement, unless removed
as a partner in accordance with the Partnership Agreement and (ii) no Default
or Event of Default occurs as a result thereof.
"Partnership Agreement" shall mean the Amended and Restated Agreement of
General Partnership of AC Holdings, dated the Issue Date, as amended from time
to time in accordance with its terms and the terms of the Indenture.
"Permit" means any license (including, without limitation, all Gaming
Licenses), franchise, authorization, statement of compliance, certificate of
operation, certificate of occupancy and permit required for the lawful
ownership, occupancy, operation and use of all or a material portion of either
of the Casino Hotels, whether held by Plaza Associates, Taj Associates or any
other Person (which may be temporary or permanent) (including,
135
without limitation, those required for the use of either of the Casino Hotels
as a licensed casino facility), in accordance with all applicable Legal
Requirements.
"Permitted Holder" means Donald J. Trump and the spouse and descendants of
Donald J. Trump (including any related grantor trusts controlled by, and
established and maintained for the sole benefit of, Donald J. Trump or such
spouse or descendants), and the estate of any of the foregoing, but no other
Person.
"Permitted Indebtedness" means any of the following:
(a) Plaza Associates and Taj Associates may incur Indebtedness solely in
respect of bankers acceptances, letters of credit and performance bonds (to
the extent that such incurrence does not result in the incurrence of any
obligation to repay any obligation relating to borrowed money of others),
all in the ordinary course of business in accordance with customary
industry practices, in amounts and for the purposes customary in a Related
Business; provided, that the aggregate principal amount outstanding of such
Indebtedness (including any Indebtedness issued to refinance, refund or
replace such Indebtedness) shall at no time exceed $ (in the case of
Plaza Associates) and $ (in the case of Taj Associates);
(b) AC Holdings may incur Indebtedness to any Wholly-owned Subsidiary,
and any Wholly-owned Subsidiary may incur Indebtedness to any other Wholly-
owned Subsidiary of AC Holdings or to AC Holdings, provided, that, in the
case of Indebtedness of AC Holdings such obligations shall be unsecured and
expressly subordinated in right of payment to AC Holdings' Obligations
pursuant to the First Mortgage Notes, and that the date of any event that
causes such Subsidiary to no longer be a Wholly-owned Subsidiary shall be
an Incurrence Date; and
(c) the Super Puma Helicopter Lease (as defined), but only to the extent
no Services Fees are thereafter paid under the TPM Services Agreement.
"Permitted Investment" means (a) Investments in any of the First Mortgage
Notes; (b) Cash Equivalents; (c) intercompany notes to the extent permitted
under clause (b) of the definition of "Permitted Indebtedness"; (d) loans,
advances or investments in existence on the Issue Date; (e) any Investment in
any Wholly-owned Subsidiary; and (f) any Investment consisting of the
extension of gaming credit to customers consistent with industry practice in
the ordinary course of business.
"Permitted Leases" means the following:
(a) any Capital Lease Obligation of AC Holdings or any Subsidiary
incurred in accordance with the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock";
(b) any lease of Plaza Associates or Taj Associates, as tenant or
subtenant, existing on the date of the Indenture and listed on a schedule
thereto, including any modifications, amendments, renewals or supplements
thereof, provided, that the aggregate annual rent and other costs
thereunder are not increased thereby, except as such rent or costs may be
increased during any renewed lease term pursuant to the terms of such
leases as they exist on the date of the Indenture;
(c) any operating leases of AC Holdings or any of its Subsidiaries, other
than the leases set forth above, provided, that the aggregate average
annual rent and other payments required thereunder over the terms of such
leases shall not exceed $ .
"Permitted Lien" means
(a) Liens existing on the Issue Date;
(b) the Lien of the Trustee as provided for in the Indenture and the
Mortgage Documents;
(c) Indebtedness incurred in accordance with clause (d) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock" may be secured by the assets acquired pursuant to the
respective capital lease (in the case of Capitalized Lease Obligations) or
with the proceeds of the respective F, F&E Financing Agreements, so long as
such Liens do not extend to any other assets;
136
(d) Indebtedness of Plaza Associates or Taj Associates incurred pursuant
to clause (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" (and refinancings thereof
pursuant to clause (e) of such covenant) may be secured by the assets of
Plaza Associates or Taj Associates, as applicable, provided, that the
Mortgage Notes are secured by the assets securing such Indebtedness on a
senior or an equal and ratable basis;
(e) any Lien arising by reason of (i) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (ii) security for payment of workmen's compensation or other
insurance; (iii) good faith deposits in connection with tenders, leases,
contracts (other than contracts for the payment of money); and (iv)
deposits to secure public or statutory obligations, or in lieu of surety or
appeal bonds;
(f) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith and by appropriate
proceedings by the AC Holdings or any of its Subsidiaries if adequate
reserves with respect thereto are maintained on the books of the AC
Holdings or any Subsidiary, as the case may be, in accordance with GAAP;
(g) statutory Liens of carriers, warehousemen, mechanics, landlords,
laborers, materialmen, repairmen or other like Liens arising by operation
of law in the ordinary course of business and consistent with industry
practices and Liens on deposits made to obtain the release of such Liens if
(i) the underlying obligations are not overdue for a period of more than 60
days or (ii) such Liens are being contested in good faith and by
appropriate proceedings by AC Holdings or any of its Subsidiaries and
adequate reserves with respect thereto are maintained on the books of AC
Holdings or any of its Subsidiaries, as the case may be, in accordance with
GAAP;
(h) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary course of
business and consistent with industry practices which, in the aggregate,
are not substantial in amount, and which do not in any case materially
detract from the value of the property subject thereto (as such property is
used or proposed to be used by AC Holdings or any of its Subsidiaries) or
interfere with the ordinary conduct of the business of AC Holdings or any
of its Subsidiaries; provided, that any such Liens are not incurred in
connection with any borrowing of money or any commitment to loan any money
or to extend any credit;
(i) Liens that secure Acquired Indebtedness, provided, in each case, that
such Liens do not secure any other property or assets than the property or
asset so acquired and were not put in place in connection with or in
anticipation of such acquisition, merger or consolidation;
(j) leases or subleases granted to other persons in the ordinary course
of business not materially interfering with the conduct of the business of
AC Holdings or any of its Subsidiaries or materially detracting from the
value of the relative assets of AC Holdings or such Subsidiary; and
(k) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by AC Holdings or
any of its Subsidiaries in the ordinary course of business.
"Permitted Tax Distributions" means for each tax year that AC Holdings
qualifies as a partnership or substantially similar pass-through entity under
the Code or any similar provision of state or local law, distributions of Tax
Amounts in respect of the jurisdictions in which AC Holdings so qualifies as a
partnership or substantially similar pass-through entity; provided, that (A)
prior to any Permitted Tax Distribution a knowledgeable and duly authorized
officer of AC Holdings shall certify, and counsel reasonably acceptable to the
Trustee shall opine, that AC Holdings qualifies as a partnership or
substantially similar pass-through entity for Federal income tax purposes and
under similar laws of the states in respect of which such distributions are
being made and (B) at the time of such distributions, the most recent audited
financial statements of AC Holdings provide that AC Holdings was treated as a
partnership for Federal income tax purposes for the period of such financial
statements. Distributions of Tax Amounts may be made between the tenth and
twentieth day of each
137
January (provided, that payments in respect of estimated state or local taxes
due in January may instead, at the option of AC Holdings, be paid during the
last five days of the immediately preceding December), April, June and
September, based upon the minimum estimated tax payments in respect of Tax
Amounts which would then be due and payable, and during the tenth through
twentieth day of April or within ten days of the reconciliation described in
the immediately succeeding sentence, with respect to any additional tax
payments owing in respect of the prior fiscal year. Within sixty days of AC
Holdings' filing of the Internal Revenue Service Form 1065 for the applicable
tax year, a reconciliation shall be made of the Permitted Tax Distributions
actually paid versus the amount permitted to be paid as Permitted Tax
Distributions based upon the final results of the applicable tax year. In
addition, prior to any Permitted Tax Distributions, each Partner shall have
entered into a binding agreement promptly to reimburse AC Holdings for any
positive difference between the distributed amount and the Tax Amount as
finally determined; provided, that, if the Partners of AC Holdings do not
promptly reimburse AC Holdings for any positive difference between the
distributed amount and the Tax Amount, then the Permitted Tax Distributions
during the year in which such reimbursement should have been made shall be
reduced by the unreimbursed amount until the Permitted Tax Distributions for
such year are zero and, thereafter, Permitted Tax Distributions shall be
reduced in the succeeding years until the unreimbursed amount not used to
reduce Permitted Tax Distributions is zero.
"Person" or "person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Qualified Capital Stock" means any Equity Interest of AC Holdings that is
not Disqualified Capital Stock.
"Qualified Exchange" means (a) any repurchase, redemption or other
acquisition or retirement of any shares of any class of Equity Interests of AC
Holdings on or after the Issue Date in exchange for (including any such
exchange pursuant to the exercise of a conversion right or privilege in
connection with which cash is paid in lieu of the issuance of fractional
shares, interests or scrip), or out of the Net Cash Proceeds of a
substantially concurrent issuance and sale (other than to a Subsidiary of AC
Holdings) of, Qualified Equity Interests of AC Holdings; or (b) the
redemption, repayment, defeasance, repurchase or other acquisition or
retirement for value of any Indebtedness of, or guaranteed by, AC Holdings on
or after the Issue Date in exchange for or out of the Net Cash Proceeds of a
substantially concurrent issuance and sale of Qualified Equity Interests of AC
Holdings.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination
is to be made pursuant to the terms of the First Mortgage Notes or the
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of (i) the principal amount or, in
the case of Disqualified Capital Stock, liquidation preference, of the
Indebtedness or Disqualified Capital Stock so Refinanced and (ii) if such
Indebtedness being Refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, that (A) such Refinancing Indebtedness of any
Subsidiary shall only be used to Refinance outstanding Indebtedness or
Disqualified Capital Stock of such Subsidiary, (B) Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness or
Disqualified Capital Stock to be so refinanced at the time of such Refinancing
and (y) in all respects, be no less subordinated or junior, if applicable, to
the rights of Holders of the First Mortgage Notes than was the Indebtedness or
Disqualified Capital Stock to be so refinanced, (C) such Refinancing
Indebtedness shall be secured only by the assets (if any) security the
Indebtedness to be so refinanced and (D) such Refinancing Indebtedness shall
have no installment of principal (or redemption payment) scheduled to come due
earlier than
138
the scheduled maturity of any installment of principal of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity.
"Related Business" means the business conducted (or proposed to be
conducted) by Plaza Associates or Taj Associates as of the Issue Date in
connection with the Casino Hotels and any and all businesses that in the good
faith judgment of the Board of Directors of AC Funding are materially related
businesses in connection with the Casino Hotels.
"Required Regulatory Redemption" means a redemption by the Issuers of any of
such Holder's First Mortgage Notes pursuant to, and in accordance with, any
order of any Governmental Authority with appropriate jurisdiction and
authority relating to a Gaming License, or to the extent necessary in the
reasonable, good faith judgment of the Issuers to prevent the loss, failure to
obtain or material impairment or to secure the reinstatement of, any material
Gaming License, where such redemption or acquisition is required because the
Holder or beneficial owner of such First Mortgage Note is required to be found
suitable or to otherwise qualify under any gaming laws and is not found
suitable or so qualified within a reasonable period of time.
"Restricted Funds Account" means a segregated bank under the control of AC
Holdings or any of its Subsidiaries, the proceeds of which are invested in
Cash or Cash Equivalents pending any use pursuant to the covenant "Limitation
on the Sale of Assets and Subsidiary Stock; Event of Loss."
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than investments in Cash Equivalents.
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity
Interests of such person or any parent of such person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for
value of Equity Interests of such person or any parent of such person, (c) any
purchase, redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance of, any
Indebtedness of, or guaranteed by, such Person, any parent of such Person or
any Subsidiary prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case may be, of such
Indebtedness (including any payment in respect of any amendment of the terms
of any such Indebtedness, which amendment is sought in connection with any
such acquisition of such Indebtedness or seeks to shorten any such due date),
(d) in connection with the designation of a Person as an Unrestricted
Subsidiary, a Restricted Payment shall be deemed to exist in the amount
provided in the definition of Unrestricted Subsidiary contained herein and (e)
any Restricted Investment by such person; provided, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other payment on
or with respect to Equity Interests of an issuer to the extent payable solely
in shares of Qualified Capital Stock of such issuer; or (ii) any dividend,
distribution or other payment to AC Holdings or to any of its Wholly-owned
Subsidiaries.
"Services Fee" means, for any period, the amount of the fee payable by Plaza
Associates under the TPM Services Agreement for such period.
"Significant Subsidiary" shall have the meaning provided under Regulation S-
X of the Securities Act, as in effect on the Issue Date.
"Stated Maturity," when used with respect to any First Mortgage Note, means
, 2006, and when used with respect to any other Indebtedness or any
installment of interest thereon means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of AC Holdings or a Guarantor
that is subordinated in right of payment to the First Mortgage Notes or such
guarantee.
139
"Subsidiary" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, (ii) any other Person (other than a corporation)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the
date of determination thereof has a majority ownership interest, or (iii) a
partnership in which such Person or a Subsidiary of such Person is, at the
time, a general partner and has a majority ownership interest. Notwithstanding
the foregoing, no Unrestricted Subsidiary shall be considered a Subsidiary of
AC Holdings or any of its other Subsidiaries for purposes of the First
Mortgage Notes and the Indenture. Unless the context otherwise requires, all
references herein to "Subsidiaries" shall be to Subsidiaries of AC Holdings
for purposes of the First Mortgage Notes and the Indenture.
"Superior Mortgages" means [to come].
"Tax Amounts" with respect to any year shall not exceed an amount equal to
(a) the higher of (i) the product of (A) the taxable income of AC Holdings for
such year as determined in good faith by the Board of Directors of AC Funding
and (B) the Tax Percentage and (ii) the product of (A) the alternative minimum
taxable income attributable to AC Holdings for such year as determined in good
faith by Board of Directors of AC Funding and (B) the Tax Percentage, reduced
by (b) to the extent not previously taken into account, any income tax benefit
attributable to AC Holdings which could be realized (without regard to the
actual realization) by its Partners in the current or any prior taxable year,
or portion thereof, commencing on or after the Issue Date (including any tax
losses or tax credits), computed at the applicable Tax Percentage for the year
that such benefit is taken into account for purposes of this computation. Any
part of the Tax Amount not distributed in respect of a tax period for which it
is calculated shall be available for distribution in subsequent tax periods.
"Tax Percentage" is the highest, aggregate effective marginal rate of
Federal, state and local income tax or, when applicable, alternative minimum
tax, to which any Partner of AC Holdings would be subject in the relevant year
of determination (as certified to the Trustee by a nationally recognized tax
accounting firm); provided, that in no event shall the Tax Percentage be
greater than the sum of (x) the highest, aggregate effective marginal rate of
Federal, state, and local income tax or, when applicable, alternative minimum
tax, to which AC Holdings would have been subject if it were a C corporation,
for Federal income tax purposes, and (y) 5 percentage points. If any Partner
or Upper Tier Owner of AC Holdings is an S corporation, partnership or similar
pass-through entity for Federal income tax purposes, the Tax Percentage shall
be computed based upon the tax rates applicable to the shareholder or partner
of such Partner or Upper Tier Owner, as the case may be.
"THCR Senior Note Service Amount" means [to come].
"TPM Services Agreement" shall mean the Amended and Restated Services
Agreement, dated June 24, 1993, between Plaza Associates and Trump Plaza
Management Corp.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means any Subsidiary of AC Holdings that, at the
time of determination, shall be an Unrestricted Subsidiary (as designated by
AC Holdings, as provided below) provided that such Subsidiary does not and
shall not engage, to any substantial extent, in any line or lines of business
activity other than a Related Business. AC Holdings may designate any Person
(other than Plaza Associates, Taj Associates, TTMC, AC Funding and any direct
or indirect holder of Equity Interest therein) to be an Unrestricted
Subsidiary if (a) no Default or Event of Default is existing or will occur as
a consequence thereof, (b) either (x) such Subsidiary, at the time of
designation thereof, has no assets, (y) such Subsidiary is designated an
"Unrestricted Subsidiary" at the time of acquisition by AC Holdings, in the
case of Subsidiaries acquired after the Issue Date or (z) immediately after
giving effect to such designation, on a pro forma basis, AC Holdings could
incur at least $1.00 of additional Indebtedness pursuant to the Debt
Incurrence Ratio in paragraph (a) of the covenants "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock" and (c) such
Subsidiary does not own any Equity Interests in, or own or hold any Lien on
any property of, AC Holdings or any other Subsidiary
140
(excluding other Unrestricted Subsidiaries). Any such designation also
constitutes a Restricted Payment in an amount equal to the sum of (x) net
assets of such Subsidiary at the time of the designation, unless in the case
of this clause (x) the designation is made pursuant to clause (b)(y) of the
first sentence of this definition, in which case the amount of consideration
paid by AC Holdings and its Subsidiaries to effect such Acquisition (excluding
Qualified Equity Interests of THCR issued in connection therewith and (y) the
maximum amount of Guaranteed Debt of AC Holdings and its Subsidiaries in
respect of the designated Subsidiary which is to be outstanding immediately
after such designation, in each case for purposes of the covenant "Limitation
on Restricted Payments." Subject to the foregoing, AC Holdings may designate
any Unrestricted Subsidiary to be a Subsidiary, provided, that (i) no Default
or Event of Default is existing or will occur as a consequence thereof and
(ii) immediately after giving effect to such designation, on a pro forma
basis, AC Holdings could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio test in paragraph (a) of the covenants "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock." Each
such designation shall be evidenced by filing with the Trustee a certified
copy of the resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
conditions.
"Upper Tier Owner" means (i) if a Partner is an S corporation, partnership
or similar pass-through entity for Federal income tax purposes, any
shareholder or partner of such Partner and (ii) if an Upper Tier Owner is an S
corporation, partnership or similar pass-through entity for Federal income tax
purposes, any shareholder or partner of such Upper Tier Owner.
"Voting Stock" with respect to any Person means all classes of Equity
Interests of such Person then outstanding and normally entitled to vote in
elections of directors of such Person.
"Wholly-owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by AC Holdings or another Wholly-owned Subsidiary of AC
Holdings.
"Working Capital Facility" means [to come].
141
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1995 (without giving
effect to the transactions contemplated by the Merger Transaction), certain
information regarding the beneficial ownership of 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 Common Stock and (iv)
all officers and directors of THCR as a group. Such information is based, in
part, upon information provided by certain stockholders of THCR. In the case
of persons other than members of the officers and directors of THCR, such
information is based solely on a review of Schedules 13G filed with the SEC.
BENEFICIAL
OWNERSHIP
----------------------
NAME NUMBER PERCENT
---- --------- -------
Donald J. Trump.......................................... 6,666,917(/1/) 39.8%
Nicholas L. Ribis........................................ 66,667(/2/) *
John P. Burke............................................ 300(/3/) *
Robert M. Pickus......................................... 200 *
Wallace B. Askins........................................ 3,000 *
Don M. Thomas............................................ 200 *
Peter M. Ryan............................................ -- --
Hellman, Jordan Management Co., Inc. .................... 882,700 8.8
The Capital Group Companies, Inc. ....................... 1,064,000(/5/) 10.6
State Street Research & Management Company............... 1,193,600(/6/) 11.9
Oppenheimer Group, Inc. ................................. 1,227,200(/7/) 12.2
All officers and directors of THCR (7 persons)........... 6,737,284 40.2
The above persons have sole voting and investment power, unless otherwise
indicated.
- ---------------------
* Less than 1%.
(1) These shares include 6,666,667 shares of Common Stock, into which Trump's
limited partnership interest in THCR Holdings is convertible, subject to
certain adjustments. See "Description of the THCR Holdings Partnership
Agreement." These shares do not include 300 shares of Common Stock held by
his wife, Mrs. Marla M. Trump, of which shares Trump disclaims beneficial
ownership. Trump is also the beneficial owner of the outstanding shares of
the Class B Common Stock (1,000 shares). The Class B Common Stock has
voting power equivalent to the voting power of the Common Stock into which
Trump's limited partnership interest is convertible. Upon conversion of
all or any portion of the THCR Holdings limited partnership interest into
shares of Common Stock, the corresponding voting power of the Class B
Common Stock will be proportionately diminished. See "Description of
Capital Stock."
(2) Represents the vested portion of a stock bonus awarded to the President of
THCR pursuant to the 1995 Stock Plan. See "Management--Executive
Compensation." These shares do not include 3,081 shares and 2,739 shares
held by Mr. Ribis as custodian for his son, Nicholas L. Ribis, Jr., and
his daughter, Alexandria Ribis, respectively, of which shares Mr. Ribis
disclaims beneficial ownership.
(3) Mr. Burke shares voting and dispositive power of 100 of these shares with
his wife. The number in the table does not include 100 shares beneficially
owned solely by his wife, of which shares Mr. Burke disclaims beneficial
ownership.
(4) 75 State Street, Suite 2420, Boston, Massachusetts 02109. Hellman, Jordan
Management Co., Inc. ("Hellman") is an investment adviser who has sole
dispositive power over all of these shares and sole voting power over
817,700 of these shares. Hellman's clients have the power to revoke
Hellman's dispositive power upon thirty-days written notice.
(5) 333 South Hope Street, Los Angeles, California 90071. The Capital Group
Companies, Inc. ("Capital Group") has sole dispositive power over these
shares and sole voting power over 256,000 of these shares. These shares
include 410,000 and 654,000 shares beneficially owned by Capital Research
and Management Company ("Capital Research") and Capital Guardian Trust
Company ("Capital Guardian"), respectively. Capital Group is the parent
holding company of Capital Research and Capital Guardian. Capital Group,
Capital Research and Capital Guardian disclaim beneficial ownership of
these shares.
(6) One Financial Center, 30th Floor, Boston, Massachusetts 02111. State
Street Research and Management Company ("State Street") is an investment
adviser and disclaims beneficial ownership of these shares. Metropolitan
Life Indurance Company, One Madison Avenue, New York, New York 10010, is
the parent holding company of State Street.
(7) 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 1,029,300 shares
beneficially owned by Oppenheimer Capital, an investment adviser, of which
Oppenheimer is the parent holding company.
142
DESCRIPTION OF THE AC HOLDINGS PARTNERSHIP AGREEMENT
The following summary of the General Partnership Agreement of AC Holdings,
as amended to date (the "AC Holdings Partnership Agreement"), and the
description of certain provisions set forth elsewhere in this Prospectus, are
qualified in their entirety by reference to such partnership agreement, which
is filed as an exhibit to the Registration Statement of which this Prospectus
is a part. AC Holdings was formed on February 17, 1993 under the laws of the
State of New Jersey. The partners of AC Holdings (each, a "Partner") amended
the AC Holdings Partnership Agreement on , 1996 to change the name of the
partnership from Trump Plaza Holding Associates to THCR Atlantic City
Holdings.
DISTRIBUTIONS AND ALLOCATIONS OF PROFITS AND LOSSES
The Partners are entitled to receive a share of the profits, losses and
distributions of cash or property at such times as determined by the unanimous
consent of the partners as follows: (i) 99% to THCR Holdings and (ii) 1% to
Plaza Holding Inc.
TERM
The term of AC Holdings' partnership continues until December 31, 2030. A
Partner may terminate his membership in AC Holdings (a "Withdrawing Partner")
only upon the written consent of all the other Partners in AC Holdings. The
distribution of the interest of the Withdrawing Partner will be determined by
the unanimous consent of all the other Partners at the time of the withdrawal
of the Withdrawing Partner. AC Holdings shall be dissolved and its affairs
wound up only upon the unanimous consent of all the Partners or as otherwise
required by law.
MANAGEMENT
All decisions affecting the business and affairs of AC Holdings, including,
but not limited to the financing, refinancing, sale, management or leasing of
any partnership property, or any part thereof, the acquisition, development,
financing, sale or leasing of other property, and all matters arising under
the AC Holdings Partnership Agreement shall be decided by Plaza Holding Inc.,
the Managing General Partner of AC Holdings.
PARTNER CONTRIBUTIONS
The contributions of all Partners to AC Holdings shall be returned only upon
dissolution or termination of AC Holdings and after payment of all debts of AC
Holdings and only out of net assets or net proceeds remaining thereafter.
ADMISSION OF THCR HOLDINGS
In connection with the June 1995 Offerings, the Partners amended the AC
Holdings Partnership Agreement to provide for (i) Trump's desire (A) to
contribute his 99% general partnership interest in AC Holdings to THCR
Holdings, and (B) to withdraw as a general partner of AC Holdings, and (ii)
THCR Holdings' desire to be admitted as a 99% general partner in AC Holdings.
The amendment provides that AC Holdings shall indemnify Trump for all expenses
incurred in connection with any threatened, pending or completed action, suit
or proceeding in connection with the business or internal affairs of AC
Holdings or any act of omission of Trump as a general partner of Plaza Holding
(as predecessor to AC Holdings).
143
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain federal income tax
consequences of acquiring, owning, and disposing of the First Mortgage Notes.
This discussion is based upon the provisions of the federal income tax law now
in effect which is subject to change, possibly with retroactive effect. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular investor in the First Mortgage Notes in light of his
personal investment circumstances or to certain types of investors subject to
special treatment under the federal income tax laws (for example, banks,
insurance companies, tax-exempt organizations, dealers in securities or
currencies, and except to the extent described below, foreign investors) and
does not discuss any aspect of state, local or foreign taxation. This
discussion is limited to those initial investors who will hold the First
Mortgage Notes as "capital assets" (generally, property held for investment)
within the meaning of the Internal Revenue Code.
No rulings have been or will be requested from the Internal Revenue Service
with respect to the federal income tax consequences of the First Mortgage Note
Offering. However, Willkie Farr & Gallagher, counsel to the Issuers, has
rendered an opinion that, subject to the foregoing, under current law, the
material federal income tax consequences to a holder of First Mortgage Notes
will generally be as described below. Each prospective investor is urged to
consult his or its own tax advisor regarding the federal, state, local and
other tax consequences attendant upon the acquisition, ownership and
disposition of the First Mortgage Notes.
INTEREST
A holder of the First Mortgage Notes will be required to include in ordinary
income, for federal income tax purposes, stated interest received or accrued
on the First Mortgage Notes in accordance with the holder's regular method of
accounting.
SALE, EXCHANGE OR REDEMPTION OF THE FIRST MORTGAGE NOTES
The sale, exchange or redemption of the First Mortgage Notes will result in
capital gain or loss equal to the difference between the amount realized
(other than an amount attributable to accrued and unpaid interest) and the
holder's adjusted tax basis in the First Mortgage Notes immediately before
such disposition. Such gain or loss will generally be long-term if the holding
period for the First Mortgage Notes is more than one year.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS APPLICABLE TO FOREIGN HOLDERS
The following discussion summarizes certain United States federal tax
consequences of the acquisition, ownership and disposition of First Mortgage
Notes by an initial purchaser of First Mortgage Notes that, for United States
federal income tax purposes, is not a "United States person" (a "Non-United
States Holder"). For purposes of this discussion, a "United States person"
means a citizen or resident of the United States; a corporation, partnership,
or other entity created or organized in the United States or under the laws of
the United States or of any political subdivision thereof; or an estate or
trust whose income is includible in gross income for United States federal
income tax purposes regardless of its source. This discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-United States Holder. Prospective investors are urged to consult their tax
advisors regarding the United States federal tax consequences of acquiring,
holding, and disposing of First Mortgage Notes, as well as any tax
consequences that may arise under the laws of any foreign, state, local, or
other taxing jurisdiction.
Interest
Interest paid by the Issuers to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and (i) the Non-United States
Holder does not actually or constructively own a 10% or more interest in Taj
Funding and is not a controlled foreign corporation with respect to which the
Issuers are a "related person" within the meaning of the United States
Internal Revenue Code and (ii) the beneficial owner of the First Mortgage
Notes certifies, under penalties of perjury, that the beneficial owner is not
a United States person and provides the beneficial owner's name and address.
144
Gain on Disposition
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption, or other
disposition of a First Mortgage Note unless (i) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-United States Holder or (ii) in the case of a Non-United States Holder
who is a nonresident alien individual and holds the First Mortgage Note as a
capital asset, such holder is present in the United States for 183 or more
days in the taxable year and certain other requirements are met.
Federal Estate Taxes
If interest on the First Mortgage Notes is exempt from withholding of United
States federal income tax under the rules described above, the First Mortgage
Notes will not be included in the estate of a deceased Non-United States
Holder for United States federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Issuers will, where required, report to the holders of First Mortgage
Notes and the Internal Revenue Service the amount of any interest paid on the
First Mortgage Notes in each calendar year and the amounts of tax withheld, if
any, with respect to such payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or
an exemption has otherwise been established; provided that neither the Issuers
nor their payment agent has actual knowledge that the holder is a United
States person or that the conditions of any other exemption are not in fact
satisfied. Under temporary Treasury regulations, these information reporting
and backup withholding requirements will apply, however, to the gross proceeds
paid to a Non-United States Holder on the disposition of the First Mortgage
Notes by or through a United States office of a United States or foreign
broker, unless the holder certifies to the broker under penalties of perjury
as to its name, address and status as a foreign person or the holder otherwise
establishes an exemption. Information reporting requirements, but not backup
withholding, will also apply to a payment of the proceeds of a disposition of
the First Mortgage Notes by or through a foreign office of a United States
broker or foreign brokers with certain types of relationships to the United
States. Neither information reporting nor backup withholding generally will
apply to a payment of the proceeds of a disposition of the First Mortgage
Notes by or through a foreign office of a foreign broker not subject to the
preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
These information reporting and backup withholding rules are under review by
the United States Treasury and their application to the First Mortgage Notes
could be changed by future regulations.
145
UNDERWRITING
Subject to certain conditions contained in the Underwriting Agreement,
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Salomon Brothers
Inc and BT Securities Corporation ("BT Securities") (together with DLJ and BT
Securities, the "Underwriters") have severally agreed to purchase from the
Issuers and the Guarantors $1,180,000,000 aggregate principal amount of First
Mortgage Notes. The principal amount of First Mortgage Notes that each
Underwriter has agreed to purchase is set forth opposite its name below.
PRINCIPAL AMOUNT
OF FIRST MORTGAGE
UNDERWRITERS NOTES
------------ -----------------
Donaldson, Lufkin & Jenrette Securities Corporation........
Salomon Brothers Inc ......................................
BT Securities Corporation..................................
--------------
Total.................................................... $1,180,000,000
==============
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of First Mortgage
Notes offered hereby are subject to approval of certain legal matters by
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all the First Mortgage Notes offered hereby if any are taken.
The Underwriters have advised the Issuers and the Guarantors that the
Underwriters propose to offer the First Mortgage Notes directly to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of % of the principal amount. Any Underwriter may allow, and such
dealers may reallow, a discount not in excess of % of the principal amount to
any other Underwriter and to certain other dealers. After the initial public
offering of the First Mortgage Notes, the public offering price and other
selling terms may be changed by the Underwriters.
Prior to this offering, there has been no public market for the First
Mortgage Notes. The Issuers do not intend to list any of the First Mortgage
Notes on a national securities exchange or to seek the admission thereof for
trading in the National Association of Securities Dealers Automated Quotation
System. The Underwriters have advised the Issuers that they currently intend
to make a market in the First Mortgage Notes, but are not obligated to do so
and may discontinue any such market making at any time without notice.
Accordingly, there can be no assurance as to the liquidity of, or that an
active trading market will develop for, the First Mortgage Notes.
AC Holdings and its subsidiaries have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act or
to contribute to payments the Underwriters may be required to make in respect
thereof.
Each of the Underwriters from time to time performs investment banking and
other financial services for THCR and its affiliates for which they receive
advisory or transaction fees, as applicable, plus out-of-pocket expenses, of
the nature and in amounts customary in the industry for such services. The
Underwriters are also acting as lead underwriters for the Stock Offering. In
addition, DLJ has acted as THCR's financial advisor in connection with the
Merger Transaction, for which services THCR has agreed to pay DLJ a customary
fee for rendering a fairness opinion and a fee upon consummation of the
Merger. Bankers Trust, an affiliate of BT Securities, is a significant secured
creditor of Trump and certain of his affiliates other than THCR. See "Risk
Factors--Conflicts of Interest." Bankers Trust held a $500,000 unsecured
demand note owed by Trump Indiana, a subsidiary of THCR Holdings. Following
demand by that lender, such amount was paid in full by Trump on June 6, 1995,
and is now owed by Trump Indiana to Trump. In connection with the Merger
Transaction, Bankers Trust will receive $10 million in respect of certain of
the Bankers Trust Indebtedness. In exchange for such payment Bankers Trust
will consent to the Merger Transaction and release certain liens on Trump's
direct and indirect equity interests in Taj Associates and related guarantees
and the pledge of TTMI Note.
146
LEGAL MATTERS
Certain legal matters, including certain tax matters, in connection with the
securities offered hereby are being passed upon for the Issuers by Willkie
Farr & Gallagher, New York, New York. Certain legal matters in connection with
the securities offered hereby are being passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California.
The statements as to matters of law and legal conclusions concerning New
Jersey gaming laws included under the captions "Risk Factors--Strict
Regulation by Gaming Authorities," and "Regulatory Matters" (other than the
subcaption "Other Laws and Regulations") have been prepared by Sterns &
Weinroth, Trenton, New Jersey, gaming counsel for the Issuers. Sterns &
Weinroth offers no opinion and does not purport to opine on the application of
federal securities laws and regulations or the securities laws and regulations
of any state with respect to the securities offered hereby.
EXPERTS
The audited financial statements and schedules of Trump Plaza Holding
Associates and Trump Plaza Associates, Trump Taj Mahal Associates and
Subsidiary, and THCR Atlantic City Funding, Inc. included in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports.
AVAILABLE INFORMATION
AC Holdings, AC Funding and Plaza Associates have filed with the office of
the SEC in Washington, DC a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act, with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC. Such
additional information can be inspected at, and obtained from, the SEC in the
manner set forth below. For further information pertaining to the securities
offered hereby and to AC Holdings, AC Funding, Plaza Associates and Taj
Associates, reference is made to the Registration Statement, including the
exhibits filed as parts thereof.
THCR, THCR Holdings, AC Holdings, AC Funding, Plaza Associates, Taj Holding,
Taj Funding and Taj Associates are subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, accordingly, have filed reports and other information with the
SEC. Reports, proxy statements and other information of THCR, THCR Holdings,
AC Holdings, AC Funding, Plaza Associates, Taj Holding, Taj Funding and Taj
Associates filed with the SEC, as well as the Registration Statement, are
available for inspection and copying at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, DC
20549 and at certain regional offices of the SEC located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-
2511 and 7 World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, DC 20549 at prescribed rates. It is expected
that upon consummation of the Merger Transaction, Plaza Associates, Taj
Holding, Taj Funding and Taj Associates will not be subject to the
informational reporting requirements of the Exchange Act. Until the
consummation of the Merger, units, each of which consists of $1,000 principal
amount of Taj Bonds and one share of Taj Holding Class B Common Stock, will be
listed on the American Stock Exchange, and reports and other information
concerning Taj Holding, Taj Funding and Taj Associates can be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006.
147
INDEX TO FINANCIAL STATEMENTS
PAGE
THCR Atlantic City Funding, Inc.
Report of Independent Accountants....................................... F-
Balance Sheet as of January 30, 1996.................................... F-
Notes to Balance Sheet (unaudited)...................................... F-
Trump Plaza Holding Associates and Trump Plaza Associates
Report of Independent Public Accountants................................ F-9
Consolidated Balance Sheet as of December 31, 1993 and 1994............. F-10
Consolidated Statements of Operations for the years ended December 31,
1992, 1993
and 1994............................................................... F-11
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1992, 1993
and 1994............................................................... F-12
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993
and 1994............................................................... F-13
Notes to Financial Statements........................................... F-14
Trump Plaza Holding Associates and Trump Plaza Associates
Condensed Consolidated Balance Sheet as of December 31, 1994 and
September 30, 1995 (unaudited)......................................... F-35
Condensed Consolidated Statements of Operations for the Nine Months
Ended September 30, 1994 and 1995 (unaudited).......................... F-36
Condensed Consolidated Statement of Capital (Deficit) for the Nine
Months Ended September 30, 1995 (unaudited)............................ F-37
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1994 and 1995 (unaudited).......................... F-38
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-39
Trump Taj Mahal Associates and Subsidiary
Report of Independent Public Accountants................................ F-42
Consolidated Balance Sheet as of December 31, 1993 and 1994............. F-43
Consolidated Statements of Operations for the years ended December 31,
1992, 1993 and 1994.................................................... F-44
Consolidated Statements of Capital (Deficit) for the years ended Decem-
ber 31, 1992, 1993
and 1994............................................................... F-45
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993
and 1994............................................................... F-46
Notes to Consolidated Financial Statements.............................. F-47
Trump Taj Mahal Associates and Subsidiary
Condensed Consolidated Balance Sheet as of December 31, 1994 and Septem-
ber 30, 1995 (unaudited)............................................... F-64
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1994 and 1995 (unaudited).......................... F-65
Condensed Consolidated Statement of Capital (Deficit) for the nine
months ended September 30, 1995 (unaudited)............................ F-66
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1994 and 1995 (unaudited).......................... F-67
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-68
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Holding Associates and
Trump Plaza Associates:
We have audited the accompanying consolidated balance sheets of Trump Plaza
Holding Associates (a New Jersey general partnership) and Trump Plaza
Associates (a New Jersey general partnership) as of December 31, 1993 and 1994,
and the related consolidated statements of operations, capital (deficit) and
cash flows for each of the three years in the period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
management of Trump Plaza Holding Associates and Trump Plaza Associates. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trump Plaza Holding Associates
and Trump Plaza Associates as of December 31, 1993 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey
February 18, 1995 (except with
respect to the matters discussed
in Note 10, as to which the date
is January 31, 1996)
F-2
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
1993 1994
ASSETS ------------- -------------
Current Assets:
Cash and cash equivalents...................... $ 14,393,000 $ 11,144,000
Trade receivables, net of allowances for
doubtful accounts of $10,616,000 and
$8,493,000, respectively...................... 6,759,000 6,685,000
Accounts receivable, other..................... 198,000 112,000
Inventories.................................... 3,566,000 3,657,000
Prepaid expenses and other current assets...... 2,701,000 4,280,000
------------- -------------
Total current assets......................... 27,617,000 25,878,000
------------- -------------
Property and Equipment (Notes 4, 6 and 8):
Land and land improvements..................... 35,613,000 36,463,000
Buildings and building improvements............ 295,617,000 297,573,000
Furniture, fixtures and equipment.............. 78,173,000 84,709,000
Leasehold improvements......................... 2,404,000 2,404,000
Construction in progress....................... 3,784,000 14,864,000
------------- -------------
415,591,000 436,013,000
Less--Accumulated depreciation and amortiza-
tion.......................................... (122,450,000) (137,659,000)
------------- -------------
Net property and equipment................... 293,141,000 298,354,000
------------- -------------
Land Rights, net of accumulated amortization of
$3,410,000 and $3,780,000, respectively......... 30,058,000 29,688,000
------------- -------------
Other Assets:
Deferred bond issuance costs, net of
accumulated amortization of $1,088,000 and
$3,270,000, respectively (Note 3)............. 16,254,000 14,125,000
Other Assets................................... 7,428,000 7,598,000
------------- -------------
Total other assets........................... 23,682,000 21,723,000
------------- -------------
Total assets................................. $ 374,498,000 $ 375,643,000
============= =============
LIABILITIES AND CAPITAL
Current Liabilities:
Current maturities of long-term debt (Note 3).. $ 1,633,000 $ 2,969,000
Accounts payable............................... 6,309,000 9,156,000
Accrued payroll................................ 5,806,000 4,026,000
Accrued interest payable (Note 3).............. 1,829,000 1,871,000
Due to affiliates, net (Note 8)................ 97,000 206,000
Other accrued expenses......................... 7,109,000 8,998,000
Other current liabilities...................... 5,330,000 4,602,000
Distribution payable to Trump Plaza Funding,
Inc........................................... 974,000 --
------------- -------------
Total current liabilities.................... 29,087,000 31,828,000
------------- -------------
Non-Current Liabilities:
Long-term debt, net of current maturities (Note
3)............................................ 395,948,000 403,214,000
Distribution payable to Trump Plaza Funding,
Inc........................................... 2,949,000 3,822,000
Deferred state income taxes.................... 1,224,000 359,000
------------- -------------
Total non-current liabilities................ 400,121,000 407,395,000
------------- -------------
Total liabilities............................ 429,208,000 439,223,000
------------- -------------
Commitments and Contingencies (Notes 4 and 6).... -- --
Capital (Deficit):
Partner's Deficit.............................. (78,772,000) (78,772,000)
Retained Earnings.............................. 24,062,000 15,192,000
------------- -------------
Total Capital (Deficit)...................... (54,710,000) (63,580,000)
------------- -------------
Total liabilities and capital................ $ 374,498,000 $ 375,643,000
============= =============
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-3
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
1992 1993 1994
------------ ------------ ------------
Revenues:
Gaming............................. $265,448,000 $264,081,000 $261,451,000
Rooms.............................. 18,369,000 18,324,000 18,312,000
Food and Beverage.................. 43,889,000 41,941,000 40,149,000
Other.............................. 11,012,000 8,938,000 8,408,000
Trump Regency...................... 9,465,000 -- --
------------ ------------ ------------
Gross Revenues................... 348,183,000 333,284,000 328,320,000
Less-Promotional allowances........ 34,865,000 32,793,000 33,257,000
------------ ------------ ------------
Net Revenues..................... 313,318,000 300,491,000 295,063,000
------------ ------------ ------------
Costs and expenses:
Gaming............................. 146,328,000 136,895,000 139,540,000
Rooms.............................. 2,614,000 2,831,000 2,715,000
Food and Beverage.................. 18,103,000 18,093,000 17,050,000
General and Administrative......... 75,459,000 71,624,000 73,075,000
Depreciation and Amortization...... 15,842,000 17,554,000 15,653,000
Restructuring costs................ 5,177,000 -- --
Trump Regency...................... 11,839,000 -- --
Other.............................. 2,953,000 3,854,000 3,615,000
------------ ------------ ------------
278,315,000 250,851,000 251,648,000
------------ ------------ ------------
Income from operations........... 35,003,000 49,640,000 43,415,000
------------ ------------ ------------
Non-operating income (expense):
Interest income.................... 487,000 546,000 842,000
Interest expense (Note 3).......... (31,843,000) (40,435,000) (49,061,000)
Other non-operating expense (Note
5)................................ (1,462,000) (3,873,000) (4,931,000)
------------ ------------ ------------
Non-operating expense, net....... (32,818,000) (43,762,000) (53,150,000)
------------ ------------ ------------
Income (loss) before state income
taxes and extraordinary items... 2,185,000 5,878,000 (9,735,000)
Provision (benefit) for state income
taxes............................... (233,000) 660,000 (865,000)
------------ ------------ ------------
Income (loss) before extraordinary
items............................... 2,418,000 5,218,000 (8,870,000)
Extraordinary gain (loss) (Note 5)... (38,205,000) 4,120,000 --
------------ ------------ ------------
Net income (loss).................... $(35,787,000) $ 9,338,000 $ (8,870,000)
============ ============ ============
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-4
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
PARTNERS' RETAINED
CAPITAL EARNINGS TOTAL
------------ ------------ ------------
Balance, December 31, 1991........... $ 40,502,000 $ 13,541,000 $ 54,043,000
Net Loss............................. -- (35,787,000) (35,787,000)
Preferred Plaza Associates Interest
Distribution, Net................... (43,864,000) 36,970,000 (6,894,000)
------------ ------------ ------------
Balance, December 31, 1992........... (3,362,000) 14,724,000 11,362,000
Net Income........................... -- 9,338,000 9,338,000
Preferred Plaza Associates Interest
Distribution........................ (6,317,000) -- (6,317,000)
Distribution to Donald J. Trump to
repay certain personal indebtedness. (52,500,000) -- (52,500,000)
Distribution to Donald J. Trump to
redeem Trump Plaza Funding, Inc.
Preferred Stock Units............... (35,000,000) -- (35,000,000)
Conversion of Preferred Plaza Associ-
ates Interest into General Plaza As-
sociates Interest................... 18,407,000 -- 18,407,000
------------ ------------ ------------
Balance, December 31, 1993........... (78,772,000) 24,062,000 (54,710,000)
Net Loss............................. -- (8,870,000) (8,870,000)
------------ ------------ ------------
Balance, December 31, 1994........... $(78,772,000) $ 15,192,000 $(63,580,000)
============ ============ ============
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-5
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
1992 1993 1994
------------- ------------- ------------
Cash flow from operating activities:
Net Income (loss)................... $ (35,787,000) $ 9,338,000 $ (8,870,000)
Adjustments to reconcile net income
(loss) to net cash flows provided
by operating activities:
Noncash charges:
Extraordinary loss (gain)........ 38,205,000 (4,120,000) --
Depreciation and amortization of
property and equipment.......... 15,211,000 17,177,000 15,276,000
Accretion of discount on
indebtedness.................... -- 862,000 1,916,000
Amortization of other assets..... 631,000 377,000 377,000
Provision for losses on
receivables..................... 4,675,000 90,000 396,000
Deferred state income taxes...... (233,000) 729,000 (865,000)
Utilization of CRDA credits and
donations....................... 1,358,000 -- 1,062,000
Valuation allowance of CRDA
investments..................... 645,000 1,047,000 394,000
------------- ------------- ------------
24,705,000 25,500,000 9,686,000
Decrease (increase) in
receivables..................... 99,000 823,000 (236,000)
Increase in inventories.......... (167,000) (498,000) (91,000)
Increase in prepaid expenses and
other current assets............ (580,000) (199,000) (1,385,000)
(Increase) decrease in other
assets.......................... (828,000) 2,530,000 1,504,000
Increase in amounts due to
affiliates...................... 374,000 188,000 109,000
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities....... 2,588,000 (6,524,000) 10,464,000
Decrease in distribution payable
to Trump Plaza Funding, Inc..... -- -- (101,000)
------------- ------------- ------------
Net cash flows provided by
operating activities............ $ 26,191,000 $21,820,000 $19,950,000
------------- ------------- ------------
Cash flows from investing
activities:
Purchases of property and
equipment........................ $ (8,643,000) $ (10,052,000) $(20,489,000)
Purchases of CRDA investments..... (1,853,000) (2,823,000) (2,525,000)
Cash refund of CRDA deposits...... -- 196,000 1,323,000
------------- ------------- ------------
Net cash flows used in investing
activities....................... (10,496,000) (12,679,000) (21,691,000)
------------- ------------- ------------
Cash flows from financing
activities:
Deferred financing costs.......... -- (17,342,000) --
Distributions to Donald J. Trump.. -- (87,500,000) --
Distributions to Plaza Funding.... -- (40,000,000) --
Preferred Plaza Associates
Interest Distribution............ (2,324,000) (6,282,000) --
Borrowings........................ 251,575,000 386,147,000 375,000
Payments and current maturities of
long-term debt................... (256,618,000) (248,573,000) (1,883,000)
------------- ------------- ------------
Net cash flows used in financing
activities....................... (7,367,000) (13,550,000) (1,508,000)
------------- ------------- ------------
Net increase (decrease) in cash
and cash equivalents........... 8,328,000 (4,409,000) (3,249,000)
Cash and cash equivalents at
beginning of year.................. 10,474,000 18,802,000 14,393,000
------------- ------------- ------------
Cash and cash equivalents at end of
year............................... $ 18,802,000 $ 14,393,000 $ 11,144,000
============= ============= ============
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-6
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
The accompanying financial statements include those of Trump Plaza Holding
Associates ("AC Holdings"), a New Jersey general partnership, and its 99% owned
subsidiary, Trump Plaza Associates ("Plaza Associates"), a New Jersey general
partnership, which owns and operates Trump Plaza Hotel and Casino ("Trump
Plaza") located in Atlantic City, New Jersey. Trump Plaza Funding, Inc. ("Plaza
Funding"), a New Jersey corporation, owns the remaining 1% interest in Plaza
Associates. AC Holdings' sole source of liquidity is distributions in respect
of its interest in Plaza Associates.
All significant intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements. The minority interest in
Plaza Associates has not been separately reflected in the consolidated
financial statements of AC Holdings since it is not material.
Plaza Funding was incorporated on March 14, 1986 and was originally formed
solely to raise funds through the issuance and sale of its debt securities for
the benefit of Plaza Associates. As part of a Prepackaged Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code consummated on
May 29, 1992, Plaza Funding became a partner of Plaza Associates and issued
approximately three million Stock Units, each comprised of one share of
Preferred Stock and one share of Common Stock of Plaza Funding. On June 25,
1993, the Stock Units were redeemed with a portion of the proceeds of Plaza
Funding's 10 7/8% First Mortgage Notes due 2001 (the "Plaza Notes") as well as
AC Holdings' Stock Units.
AC Holdings was formed in February, 1993 for the purpose of raising funds for
Plaza Associates. On June 25, 1993, Plaza Holding completed the sale of 12,000
Units (the "Units"), each Unit consisting of $5,000 principal amount of 12 1/2%
Pay-In-Kind Notes, due 2003 (the "PIK Notes"), and one PIK Note Warrant (the
"PIK Note Warrant") to acquire $1,000 principal amount of PIK Notes. The PIK
Notes and the PIK Note Warrants are separately transferable. AC Holdings has no
other assets or business other than its 99% equity interest in Plaza
Associates.
Plaza Associates was organized in June 1982. Prior to the date of the
consummation of the Offerings, Plaza Associates three partners were TP/GP Inc.
("Trump Plaza/GP"), the managing general partner of Plaza Associates, Plaza
Funding and Donald J. Trump ("Trump"). On June 25, 1993, Trump contributed his
interest in Trump Plaza/GP to Plaza Funding and Trump Plaza/GP merged with and
into Plaza Funding. Plaza Funding then became the managing general partner of
Plaza Associates. In addition, Trump contributed his interest in Plaza
Associates to AC Holdings, and Plaza Funding and AC Holdings, each of which are
wholly owned by Trump, became the sole partners of Plaza Associates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GAMING REVENUES AND PROMOTIONAL ALLOWANCES
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. The retail value
of accommodations, food, beverage and other services provided to customers
without charge is included in gross revenue and deducted as promotional
allowances. The estimated departmental costs of providing such promotional
allowance are included in gaming costs and expenses as follows:
YEAR ENDED DECEMBER 31,
-----------------------
(IN THOUSANDS)
1992 1993 1994
------- ------- -------
Rooms............................................. $ 4,804 $ 4,190 $ 4,311
Food and Beverage................................. 14,982 14,726 15,373
Other............................................. 3,884 3,688 4,169
------- ------- -------
$23,670 $22,604 $23,853
======= ======= =======
F-7
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During 1992 and 1994, certain Progressive Slot Jackpot Programs were
discontinued which resulted in $4,100,000 and $585,000, respectively, of
related accruals being taken into income.
INVENTORIES
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and is depreciated on the straight-
line method using rates based on the following estimated useful lives:
Buildings and building improvements........................... 40 years
Furniture, fixtures and equipment............................. 3-10 years
Leasehold improvements........................................ 10-40 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.
LAND RIGHTS
Land rights represent the fair value of such rights, at the time of
contribution to Plaza Associates by the Trump Plaza Corporation, an affiliate
of Plaza Associates. These rights are being amortized over the period of the
underlying operating leases which extend through 2078.
INCOME TAXES
Plaza Funding, AC Holdings and Plaza Associates adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"), effective January 1, 1993. Adoption of this new standard did not
have a significant impact on the respective statements of financial condition
or results of operations. SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method deferred tax liabilities and assets are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
The accompanying consolidated financial statements of AC Holdings and Plaza
Associates do not include a provision for Federal income taxes since any income
or losses allocated to its partners are reportable for Federal income tax
purposes by the partners.
Under the New Jersey Casino Control Commission regulations, Plaza Associates
is required to file a New Jersey corporation business tax return. Accordingly,
a provision (benefit) for state income taxes has been reflected in the
accompanying consolidated financial statements of AC Holdings and Plaza
Associates.
Plaza Associates deferred state income taxes result primarily from
differences in the timing of reporting depreciation for tax and financial
statement purposes.
F-8
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Plaza Funding, AC Holdings and
Plaza Associates consider all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The following
supplemental disclosures are made to the statements of cash flows.
1992 1993 1994
----------- ----------- -----------
Cash paid during the year for interest.. $25,310,000 $41,118,000 $36,538,000
=========== =========== ===========
Cash paid for state and Federal income
taxes.................................. $ -- $ 81,000 $ --
=========== =========== ===========
Issuance of debt in exchange for accrued
interest............................... $ -- $ 3,562,000 $ 8,194,000
=========== =========== ===========
(3) LONG-TERM DEBT
Long-term debt consists of the following:
AC HOLDINGS AND PLAZA ASSOCIATES:
PLAZA ASSOCIATES:
Plaza Associates Note (10 7/8% Mortgage Notes,
due 2001 net of unamortized discount of
$4,141,000 and $3,766,000, respectively) (A).. $325,859,000 $326,234,000
Mortgage notes payable (C)..................... 6,410,000 5,494,000
Other notes payable............................ 1,060,000 468,000
------------ ------------
333,329,000 332,196,000
Less--Current maturities....................... 1,633,000 2,969,000
------------ ------------
331,696,000 329,227,000
AC HOLDINGS:
PIK Notes (12 1/2% Notes, due 2003 net of dis-
count of $11,310,000 and $9,769,000, respec-
tively) (B)................................... 64,252,000 73,987,000
------------ ------------
$395,948,000 $403,214,000
============ ============
- ---------------------
(A) On June 25, 1993 Plaza Funding issued $330,000,000 principal amount of 10
7/8% Mortgage Notes, due 2001, net of discount of $4,313,000. Net proceeds
of the offering were used to redeem all of Plaza Funding's outstanding
$225,000,000 principal amount 12% Mortgage Bonds, due 2002 and together
with other funds (see (B) Pay-In-Kind Notes) to redeem all of Plaza
Funding's Stock Units, comprised of $75,000,000 liquidation preference
participating cumulative redeemable Preferred Stock with associated shares
of Common Stock, to repay $17,500,000 principal amount 9.14% Regency Note
due 2003, to make a portion of a distribution to Trump to pay certain
personal indebtedness, and to pay transaction expenses.
F-9
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Plaza Notes mature on June 15, 2001 and are redeemable at any time on
or after June 15, 1998, at the option of Plaza Funding or Plaza
Associates, in whole or in part, at the principal amount plus a premium
which declines ratably each year to zero in the year of maturity. The
Plaza Notes bear interest at the stated rate of 10 7/8% per annum from the
date of issuance, payable semi-annually on each June 15 and December 15,
commencing December 15, 1993 and are secured by substantially all of Plaza
Associates assets. The accompanying consolidated financial statements
reflect interest expense at the effective interest rate of 11.12% per
annum.
The Indenture governing the Plaza Notes (the "Plaza Note Indenture")
contains certain covenants limiting the ability of Plaza Associates to
incur indebtedness, including indebtedness secured by liens on Trump
Plaza. In addition, Plaza Associates may, under certain circumstances,
incur up to $25.0 million of indebtedness to finance the expansion of its
facilities, which indebtedness may be secured by a lien on the hotel
facilities of Plaza Associates ("Trump Plaza East") (see Note 6
Commitments And Contingencies) senior to the liens of one of the Plaza
Mortgages (the "Plaza Note Mortgage") and another of the Plaza Mortgages
(the "Plaza Guarantee Mortgage") thereon. The Plaza Notes represent the
senior indebtedness of Plaza Funding. The note from Plaza Associates to
Plaza Funding in the same principal amount of the Plaza Notes (the "Plaza
Associates Note") and the guarantee of the Plaza Notes (the "Plaza
Guarantee") rank pari passu in right of payment with all existing and
future senior indebtedness of Plaza Associates.
The Plaza Notes, the Plaza Associates Note, the Plaza Note Mortgage, the
Plaza Guarantee and the Plaza Guarantee Mortgage are non-recourse to the
partners of Plaza Associates, to the shareholders of Plaza Funding and to
all other persons and entities (other than Plaza Funding and Plaza
Associates), including Trump. Upon an event of default, holders of the
Plaza Notes would have recourse only to the assets of Plaza Funding and
Plaza Associates.
(B) On June 25, 1993 AC Holdings issued $60,000,000 principal amount of 12 1/2%
PIK Notes, due 2003, together with PIK Note Warrants to acquire an
additional $12,000,000 of PIK Notes at no additional cost. The PIK Note
Warrants are exercisable following the earlier of certain triggering events
or June 15, 1996.
The PIK Notes mature on June 15, 2003 and bear interest at the rate of 12
1/2% per annum from the date of issuance, payable semi-annually on each
June 15 and December 15, commencing December 15, 1993. At the option of AC
Holdings, interest is payable in whole or in part, in cash or, in lieu of
cash, through the issuance of additional PIK Notes valued at 100% of their
principal amount. The ability of Plaza Holding to pay interest in cash on
the PIK Notes is entirely dependent on the ability of Plaza Associates to
distribute available cash, as defined, to AC Holdings for such purpose.
As of December 31, 1994 Plaza Associates has elected to issue in lieu of
cash a total of $11,756,000 in PIK Notes to satisfy its semi-annual PIK
Note interest obligation.
The PIK Notes are structurally subordinate to Plaza Funding's Mortgage
Notes and any other indebtedness of Plaza Associates and are secured by a
pledge of AC Holdings' 99% equity interest in Plaza Associates. The
indenture to which the PIK Notes were issued (the "PIK Note Indenture")
contains covenants prohibiting AC Holdings from incurring additional
indebtedness and engaging in other activities, and other covenants
restricting the activities of Plaza Associates substantially similar to
those set forth in the Plaza Note Indenture. The PIK Notes and the PIK
Note Warrants are non-recourse to the Partners of AC Holdings, including
Trump, and to all other persons and entities (other than Plaza Holding).
Upon an event of default, holders of PIK Notes or PIK Note Warrants will
have recourse only to the assets of Plaza Holding which consist solely of
its equity interest in Plaza Associates.
(C) Interest on these notes is payable with interest rates ranging from 10.0%
to 11.0%. The notes are due at various dates between 1995 and 1998 and are
secured by real property.
F-10
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt in each of the years subsequent
to 1994 are:
1995......................................................... $ 2,969,000
1996......................................................... 548,000
1997......................................................... 2,012,000
1998......................................................... 433,000
1999......................................................... --
Thereafter................................................... 400,221,000
------------
$406,183,000
============
(4) LEASES
Plaza Associates leases property (primarily land), certain parking space, and
various equipment under operating leases. Rent expense for the years ended
December 31, 1992, 1993, and 1994 was $4,361,000, $4,338,000 and $3,613,000,
respectively, of which $2,127,000, $2,513,000 and $1,900,000, respectively,
relates to affiliates of Plaza Associates.
Future minimum lease payments under the noncancelable operating leases are
as follows:
AMOUNTS
RELATING TO
TOTAL AFFILIATES
------------ ------------
1995............................................ $ 6,445,000 $ 2,125,000
1996............................................ 6,670,000 2,350,000
1997............................................ 6,670,000 2,350,000
1998............................................ 5,110,000 2,350,000
1999............................................ 3,550,000 2,350,000
Thereafter...................................... 270,633,000 191,250,000
------------ ------------
$299,078,000 $202,775,000
============ ============
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms. At December 31, 1994, the aggregate
option price for these leases was approximately $58,000,000.
In October 1993, Plaza Associates assumed the lease of Trump Plaza East to
Donald J. Trump ("Trump") (the "Trump Plaza East Lease") and related expenses
which are included in the above lease commitment amounts. In connection with
the offering and sale of Common Stock of Trump Hotels & Casino Resorts, Inc.
(THCR) for gross proceeds of $150 million and 140 million of Senior Secured
Notes (the "June 1995 Offerings"), Plaza Associates acquired a five-year option
to purchase Trump Plaza East. See Note 6--"Commitments and Contingencies Future
Expansion."
(5) EXTRAORDINARY GAIN (LOSS) AND NON-OPERATING EXPENSE
The excess of the carrying value of a note obligation over the amount of the
settlement payment net of related prepaid expenses in the amount of $4,120,000
has been reported as an extraordinary gain for the year ended December 31,
1993.
The extraordinary loss for the year ended December 31, 1992 consists of the
effect of stating the PIK Notes and Plaza Funding's Preferred Stock issued at
fair value as compared to the carrying value of these securities and the write
off of certain deferred financing charges and costs.
F-11
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Non-operating expense in 1992 included $1,462,000 of legal expenses relating
to litigation associated with Trump Plaza East. In 1993 and 1994 these costs
included $3,873,000 and $4,931,000, respectively, in costs associated with
Trump Plaza East (see Note 6--Commitments and Contingencies Future Expansion),
net of miscellaneous non-operating credits which amounts included $2,322,000
and $798,000 for 1993 and 1994, respectively, representing real estate taxes
applicable for the period prior to June 24, 1993.
(6) COMMITMENTS AND CONTINGENCIES
CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act"), Plaza Associates is
required to maintain certain licenses.
In April 1993, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates license to operate Trump Plaza. This license must be renewed in June
1995, is not transferable and will include a review of the financial stability
of Plaza Associates. Upon revocation, suspension for more than 120 days, or
failure to renew the casino license, the Casino Control Act provides for the
mandatory appointment of a conservator to take possession of the hotel and
casino's business and property, subject to all valid liens, claims and
encumbrances.
LEGAL PROCEEDINGS
Plaza Associates, its Partners, certain members of its former Executive
Committee, and certain of its employees, have been involved in various legal
proceedings. In general, Plaza Associates has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, judgements, fines and penalties )
incurred by them in said legal proceedings. Such persons and entities are
vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
Various legal proceedings are now pending against Plaza Associates. Plaza
Associates considers all such proceedings to be ordinary litigation incident to
the character of its business. Plaza Associates believes that the resolution of
these claims will not, individually or in the aggregate, have a material
adverse effect on its financial condition or results of operations.
Plaza Associates is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. Plaza Associates believes that the final outcome of these
proceedings will not, either individually or in the aggregate, have a material
adverse effect on its financial condition, results of operations or on the
ability of Plaza Associates to otherwise retain or renew any casino or other
licenses required under the Casino Control Act for the operation of Trump
Plaza.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY OBLIGATIONS
Pursuant to the provisions of the Casino Control Act, Plaza Associates,
commencing twelve months after the date of opening of Trump Plaza in May 1984,
and continuing for a period of twenty-five years thereafter, must either obtain
investment tax credits (as defined in the Casino Control Act), in an amount
equivalent to 1.25% of its gross casino revenues, or pay an alternative tax of
2.5% of its gross casino revenues, (as defined in the Casino Control Act).
Investment tax credits may be obtained by making qualified investments or by
the purchase of bonds at below market interest rates from the Casino
Reinvestment Development Authority ("CRDA"). Plaza Associates is required to
make quarterly deposits with the CRDA based on 1.25% of its
F-12
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
gross revenue. For the years ended December 31, 1992, 1993 and 1994, Plaza
Associates charged to operations $645,000, $1,047,000 and $838,000,
respectively, to give effect to the below market interest rates associated with
CRDA bonds that have either been issued or are expected to be issued from funds
deposited.
In connection with Trump Plaza East (see below), the CRDA has approved the
use of up to $1,519,000 in deposits made by Plaza Associates for site
improvements. Such deposits are being capitalized as part of property and
equipment as funds are appropriated by the CRDA.
CONCENTRATIONS OF CREDIT RISKS
In accordance with casino industry practice, Plaza Associates extends credit
to a limited number of casino patrons, after extensive background checks and
investigations of credit worthiness. At December 31, 1994 approximately 28% of
Plaza Associates casino receivables (before allowances) were from customers
whose primary residence is outside the United States, with no significant
concentration in any one foreign country.
TRUMP PLAZA EAST
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of Trump Plaza East. On June 24, 1993,
Trump transferred title of Trump Plaza East to a lender in exchange for a
reduction in indebtedness to such lender in an amount equal to the sum of the
fair market value of Trump Plaza East and all rent payments to be made to such
lender by Trump under Trump Plaza East Lease. At that time, the lender leased
Trump Plaza East to Trump for a term of five years, which expires on June 30,
1998, during which time Trump is obligated to pay the lender $260,000 per month
in lease payments. In October 1993, Plaza Associates assumed the Trump Plaza
East Lease and related expenses.
On June 25, 1993, Plaza Associates acquired a five-year option to purchase
Trump Plaza East (the "Trump Plaza East Purchase Option"). In addition, Plaza
Associates has a right of first refusal (the "Right of First Offer") upon any
proposed sale of all or any portion of Trump Plaza East during the term of the
Trump Plaza East Purchase Option. Until such time as the Trump Plaza East
Purchase Option is exercised or expires, Plaza Associates will be obligated,
from and after the date it entered into the Trump Plaza East Purchase Option,
to pay the net expenses associated with Trump Plaza East. During 1994, Plaza
Associates incurred $4,900,000 of such expenses. The CCC has required that
Plaza Associates exercise the Trump Plaza East Purchase Option or its Right of
First Offer no later than July 1, 1996. Plaza Associates has petitioned the CCC
to extend such date to July 1, 1996; however, no assurance can be given that
such waiver will be granted or that any condition imposed by the CCC would be
acceptable to Plaza Associates. If Plaza Associates defaults in making payments
due under the Trump Plaza East Purchase Option, Plaza Associates would be
liable to the lender for the sum of (a) the present value of all remaining
payments to be made by Plaza Associates pursuant to the Trump Plaza East
Purchase Option during the term thereof and (b) the cost of demolition of all
improvements then located on Trump Plaza East. In order for Plaza Associates to
exercise the Trump Plaza East Purchase Option it would be required to pay
$27,000,000 through June 30, 1995, increasing by $1,000,000 annually thereafter
until expiration on June 30, 1998. If Plaza Associates is unable to exercise
the option, it would be required to expense any capitalized costs associated
with Trump Plaza East.
As of December 31, 1994, Plaza Associates had capitalized approximately
$11,700,000 in construction costs related to Trump Plaza East including a
$1,000,000 consulting fee paid to Trump (Note 8). Plaza Associates might have
to close all or a portion of the expanded casino in order to comply with
regulatory requirements, which could have a material adverse effect on the
results of operations and financial condition of the Plaza Associates. Plaza
Associates ability to acquire Trump Plaza East pursuant to the Trump Plaza
F-13
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
East Purchase Option is dependent upon its ability to obtain financing to
acquire the property. The ability to incur such indebtedness is restricted by
the Plaza Note Indenture and the PIK Note Indenture and requires the consent of
certain of Trump's personal creditors. Plaza Associates ability to develop
Trump Plaza East is dependent upon its ability to use existing cash on hand and
generate cash flow from operations sufficient to fund development costs. No
assurance can be given that such cash on hand will be available to Plaza
Associates for such purposes or that it will be able to generate sufficient
cash flow from operations. In addition, exercise of the Trump Plaza East
Purchase Option or the Right of First Offer requires the consent of certain of
Trump's personal creditors, and there can be no assurance that such consent
will be obtained at the time Plaza Associates desires to exercise the Trump
Plaza East Purchase Option or such right.
The accompanying consolidated financial statements do not include any
adjustments that may be necessary should Plaza Associates be unable to exercise
the Trump Plaza East Purchase Option.
(7) EMPLOYEE BENEFIT PLANS
Plaza Associates has a retirement savings plan (the "Plan") for its nonunion
employees under Section 401(k) of the Internal Revenue Code. Employees are
eligible to contribute up to 15% of their earnings to the Plan and Plaza
Associates will match 50% of an eligible employee's contributions up to a
maximum of 4% of the employee's earnings. Plaza Associates recorded charges of
$699,000, $765,000 and $848,000 for matching contributions for the years ended
December 31, 1992, 1993 and 1994, respectively.
Plaza Associates provides no other material post-retirement or post-
employment benefits.
(8) TRANSACTIONS WITH AFFILIATES
DUE TO/FROM AFFILIATES
Amounts due to affiliates was $97,000 and $206,000 as of December 31, 1993
and 1994, respectively. Plaza Associates leases warehouse facility space to
Trump's Castle Associates. Lease payments of $14,000, $15,000 and $6,000 were
received from Trump's Castle Associates in 1992, 1993 and 1994, respectively.
Plaza Associates leased office space from Trump Taj Mahal Associates, which
terminated on March 19, 1993. Lease payments of $138,000 and $30,000 were paid
to Trump Taj Mahal Associates in 1992 and 1993, respectively.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1992, 1993 and
1994, Plaza Associates paid $900,000, $900,000 and $900,000, respectively, to
Seashore Four Associates, and paid $1,000,000, $1,000,000 and $1,000,000 in
1992, 1993 and 1994, respectively, to Trump Seashore Associates.
SERVICES AGREEMENT
Pursuant to the terms of a Services Agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Donald J. Trump, in
consideration for services provided, Plaza Associates pays TPM each year an
annual fee of $1.0 million in equal monthly installments, and reimburses TPM on
a monthly basis for all reasonable out-of-pocket expenses incurred by TPM in
performing its obligations under the Services Agreement, up to certain amounts.
Under this Services Agreement, approximately $708,000, $1.2 million and $1.3
million was charged to expense for the years ended December 31, 1992, 1993, and
1994, respectively.
F-14
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
TRUMP PLAZA WEST OPTION
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical Bank ("Chemical") and ACFH Inc.
("ACFH") a wholly owned subsidiary of Chemical. The Original Chemical Option
Agreement granted to Trump an option to purchase (i) the Trump Regency Hotel
(including the land, improvements and personal property used in the operation
of the hotel) ("Trump World's Fair") and (ii) certain promissory notes made by
Trump and/or certain of his affiliates and payable to Chemical (the "Chemical
Notes") which are secured by certain real estate assets located in New York,
unrelated to Plaza Associates.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $60 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option by
January 5, 1994. In addition, the Original Chemical Option Agreement provided
for an expiration of the option on May 6, 1994, subject to an extension until
June 30, 1994 upon payment of an additional $250,000 on or prior to May 6,
1994. The Original Chemical Option Agreement did not allocate the purchase
price among the assets subject to the option or permit the option to be
exercised for some, but not all of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Trump agreed with Plaza Associates that, if Trump is able to acquire Trump
World's Fair pursuant to the exercise of the option, he would make Trump
World's Fair available for the sole benefit of Plaza Associates on a basis
consistent with Plaza Associates contractual obligations and requirements.
Trump further agreed that Plaza Associates would not be required to pay any
additional consideration to Trump in connection with any assignment of the
option to purchase Trump World's Fair. On January 5, 1994, Plaza Associates
obtained the approval of the CCC to make the $1 million payment, which was made
on that date.
On June 16, 1994, Trump, Chemical and ACFH entered into, amended and restated
the Original Chemical Option Agreement, (the "First Amended Chemical Option
Agreement"). The First Amended Chemical Option Agreement provided for an
extension of the expiration of the Option through September 30, 1994, upon
payment of $250,000. Such payment was made on June 27, 1994. The First Amended
Chemical Option Agreement also provided for a $60 million option price for
Trump World's Fair and one of the Chemical Notes. On August 30, 1994, Trump,
Chemical and ACFH entered into an amendment to the First Amended Chemical
Option Agreement (the "Second Amended Chemical Option Agreement"). The Second
Amended Chemical Option Agreement provides for an extension of the expiration
of the option through March 31, 1995 upon the payment of $50,000 a month for
the period October through December 1994, and $150,000 a month for the period
January through March 1995. Plaza Associates received the approval of the CCC
and has made such payments.
As of December 31, 1994, $1,550,000, representing option payments, is
included in other assets in the accompanying consolidated balance sheet. If the
option is exercised, these amounts are available to offset the $60 million
option price.
OTHER PAYMENTS TO DONALD J. TRUMP
During 1994, Plaza Associates paid to Trump $1,000,000 under a Construction
Management Service Agreement. The payment was made for construction management
services rendered by Trump with respect to Trump Plaza East. This payment was
approved prior to disbursement by the CCC and has been classified in
construction in process in the accompanying consolidated balance sheet as of
December 31, 1994.
F-15
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During 1994, Plaza Associates also paid Trump a commission of approximately
$572,000 for securing a retail lease at Trump Plaza. The commission has been
capitalized and is being amortized to expense over the 10-year term of the
lease.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of Plaza Funding,
AC Holdings and Plaza Associates approximates fair value, as follows: (a) cash
and cash equivalents, accrued interest receivables and payables are based on
the short term nature of these financial instruments, (b) CRDA bonds and
deposits are based on the allowances to give effect to the below market
interest rates.
The estimated fair values of other financial instruments are as follows:
DECEMBER 31, 1994
----------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ------------
12 1/2% PIK Notes............................. $ 73,987,000 $ 51,791,000
10 7/8% Mortgage Notes........................ $326,234,000 $247,122,000
The fair values of the PIK and Mortgage Notes are based on quoted market
prices obtained by Plaza Associates from its investment advisor.
There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
(10) SUBSEQUENT EVENTS
On June 12, 1995 three newly formed entities owned by Trump--THCR, Trump
Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings") and Trump Hotels &
Casino Resorts Funding, Inc.--completed the offering and sale of $155,000,000
of Senior Secured Notes and $140,000,000 of equity, the June 1995 Offerings.
In connection with the June 1995 Offerings, Trump contributed all of his
beneficial interest in Plaza Associates (consisting of all of the outstanding
capital stock of Plaza Funding, a 99% equity interest in AC Holdings and all of
the outstanding capital stock of Trump Plaza Holding, Inc.) to THCR Holdings.
Trump also contributed all of his existing interests and rights to new gaming
activities in both emerging and established gaming jurisdictions to THCR
Holdings.
The net proceeds of the June 1995 Offerings were used to repurchase or redeem
the PIK Notes and PIK Note Warrants (Note 3), finance the expansion of Trump
Plaza (Notes 6 and 8) as well as to fund casino development costs in certain
jurisdictions outside of Atlantic City.
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by the Amendment to Agreement and Plan of Merger dated as of January
31, 1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with
and into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding ("Taj Holding Class A
Common Stock") will be converted into the right to receive, at each holder's
election, either (a) $30.00 in cash or (b) that number of shares of Common
Stock of THCR (the "Common Stock") as shall have a market value equal to
$30.00. The Merger Agreement also contemplates the following transactions
occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) and the consummation of
F-16
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the offering by AC Holdings and its wholly owned subsidiary THCR Atlantic
City Funding, Inc. of up to $1,180,000,000 aggregate principal amount of
mortgage notes, the aggregate proceeds of which will be used, together with
available cash, to (i) pay cash to those holders of Taj Holding Class A
Common Stock electing to receive cash in the Merger, (ii) redeem Trump Taj
Mahal Funding, Inc.'s ("Taj Funding") outstanding 11.35% Mortgage Bonds,
Series A due 1999 (the "Taj Bonds"), (iii) redeem the outstanding shares of
Class B Common Stock, par value $.01 per share, of Taj Holding as required
in connection with the redemption of the Taj Bonds, (iv) retire, by
purchasing and/or defeasing, the outstanding 10 7/8% Mortgage Notes due 2001
of Plaza Funding, (v) satisfy the indebtedness of Trump Taj Mahal Associates
("Taj Associates"), the owner and operator of the Trump Taj Mahal Casino
Resort (the "Taj Mahal"), under Taj Associates' loan agreement with National
Westminster Bank U.S.A., (vi) purchase certain real property used in the
operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust to obtain releases of the
liens that Bankers Trust has with respect to Taj Associates and related
guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of AC Holdings (following the consummation
of the Merger Transaction); (ii) the risk in refinancing and repayment of
indebtedness and the need for additional financing; (iii) the restrictions
imposed on certain activities by certain debt instruments; (iv) the recent
results of Trump Plaza and the Taj Mahal; and (v) risks associated with the
Trump Plaza Expansion and the Taj Mahal Expansion. There can be no assurance
that the Trump Plaza Expansion or the Taj Mahal Expansion will be completed or
that any other gaming venture will open or that any of Trump Plaza's or the Taj
Mahal's operations will be successful. See "Risk Factors" included elsewhere in
this Prospectus for a discussion of these and other factors.
F-17
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 11,144 $ 20,079
Receivables, net.................................. 6,797 12,321
Inventories....................................... 2,477 2,598
Advances to affiliates, net....................... -- 403
Other current assets.............................. 4,280 4,765
-------- --------
Total current assets............................ 24,698 40,166
PROPERTY AND EQUIPMENT, net......................... 298,354 376,116
LAND RIGHTS......................................... 29,688 29,412
OTHER ASSETS........................................ 22,903 16,634
-------- --------
Total Assets.................................... $375,643 $462,328
======== ========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt.............. $ 2,969 $ 2,100
Accounts payable and accrued expenses............. 26,782 29,255
Accrued interest payable.......................... 1,871 10,469
Due to affiliate, net............................. 206 --
-------- --------
Total Current Liabilities....................... 31,828 41,824
LONG-TERM DEBT, net of discount and current maturi-
ties............................................... 403,214 331,655
DISTRIBUTION PAYABLE TO TRUMP PLAZA FUNDING, INC.... 3,822 3,822
DEFERRED STATE INCOME TAXES......................... 359 1,351
-------- --------
Total Liabilities............................... 439,223 378,652
-------- --------
CAPITAL:
Partners' Equity (Deficit)........................ (78,772) 68,087
Retained Earnings................................. 15,192 15,589
-------- --------
Total Capital (Deficit)......................... (63,580) 83,676
-------- --------
Total Liabilities and Capital................... $375,643 $462,328
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-18
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
(IN THOUSANDS)
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
------------------
1994 1995
-------- --------
Revenues:
Gaming.................................................... $197,068 $224,499
Rooms..................................................... 14,014 14,671
Food and Beverage......................................... 29,556 33,403
Other..................................................... 6,558 7,187
-------- --------
Gross Revenues.......................................... 247,196 279,760
Less-Promotional Allowances............................... 25,130 28,611
-------- --------
Net Revenues............................................ 222,066 251,149
-------- --------
COSTS AND EXPENSES:
Gaming.................................................... 104,100 121,987
Rooms..................................................... 2,064 1,741
Food and Beverage......................................... 12,501 13,783
General and Administrative................................ 54,928 51,073
Depreciation and Amortization............................. 11,734 11,792
Other..................................................... 2,787 2,556
-------- --------
Total Costs and Expenses.................................... 188,114 202,932
-------- --------
Income from operations.................................. 33,952 48,217
-------- --------
NON-OPERATING EXPENSE (NET):
Interest income........................................... 520 689
Interest expense.......................................... (36,571) (34,419)
Other non-operating expense............................... (3,729) (3,847)
-------- --------
(39,780) (37,577)
-------- --------
Income (loss) before provision (benefit) for state income
taxes and extraordinary loss............................... (5,828) 10,640
PROVISION (BENEFIT) FOR STATE INCOME TAXES.................. (523) 993
-------- --------
Income before extraordinary items........................... (5,305) 9,647
Extraordinary Loss.......................................... -- (9,250)
-------- --------
Net Income (Loss)........................................... $ (5,305) $ 397
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-19
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS)
PARTNERS' RETAINED
CAPITAL EARNINGS TOTAL
--------- -------- --------
Balance, December 31, 1994........................ $(78,772) $15,192 $(63,580)
Net Income........................................ -- 397 397
Contributed Capital--Trump Hotels & Casino Resorts
Holdings, L.P.................................... 146,859 -- 146,859
-------- ------- --------
Balance, September 30, 1995....................... $ 68,087 $15,589 $ 83,676
======== ======= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-20
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
(IN THOUSANDS)
1994 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................ $(5,305) $ 397
Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities--
Noncash charges--
Extraordinary Loss......................................... -- 9,250
Depreciation and amortization.............................. 11,734 11,792
Accretion of discounts on indebtedness..................... 1,412 1,021
Provisions for losses on receivables....................... 357 734
Deferred state income taxes................................ (523) 992
Utilization of CRDA credits and donations.................. 995 445
Valuation allowance of CRDA investments.................... 227 (790)
------- -------
8,897 23,841
Increase in receivables.................................... (437) (6,258)
Decrease in inventories.................................... 10 382
(Increase) decrease in advances to affiliates.............. 375 (609)
Increase in other current assets........................... (2,420) (485)
Decrease in other assets................................... 329 4,470
Increase in accounts payable and accrued expenses.......... 1,961 8,298
Increase in accrued interest payable....................... 11,102 2,773
------- -------
Net cash flows provided by operating activities........... 19,817 32,412
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net...................... (14,611) (86,612)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred partnership interest distribution.................. (233) --
Additional borrowings........................................ 4,348 1,928
Payments of debt............................................. (1,555) (3,906)
Redemption of PIK Notes...................................... -- (81,746)
Contributed Capital-Trump Hotels & Casino Resorts Holdings,
L.P. ....................................................... -- 146,859
------- -------
Net cash flows provided by financing activities........... 2,560 63,135
------- -------
Net increase in cash and cash equivalents..................... 7,766 8,935
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................ 14,393 11,144
------- -------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30,.................... $22,159 $20,079
======= =======
CASH INTEREST PAID............................................ $18,445 $22,848
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-21
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed financial statements include those of Trump Plaza
Funding, Inc. ("Plaza Funding"), a New Jersey corporation as well as those of
Trump Plaza Holding Associates ("AC Holdings") a New Jersey General
Partnership, and its 99% owned subsidiary, Trump Plaza Associates, ("Plaza
Associates") a New Jersey General Partnership, which owns and operates the
Trump Plaza Hotel and Casino located in Atlantic City, New Jersey. Plaza
Funding owns the remaining 1% interest in, and is the managing general partner
of, Plaza Associates. AC Holdings' sole source of liquidity is distributions in
respect of its interest in Plaza Associates.
All significant intercompany balances and transactions have been eliminated
in the condensed consolidated financial statements of AC Holdings.
The accompanying condensed financial statements have been prepared by Plaza
Funding, AC Holdings and Plaza Associates without audit. In the opinion of
Plaza Funding, AC Holdings and Plaza Associates, all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the financial
position, the results of operations and cash flows for the periods presented,
have been made. Certain prior year amounts have been reclassified to conform
with the current period presentation.
The accompanying condensed financial statements have been prepared by Plaza
Funding, AC Holdings and Plaza Associates pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain information and
note disclosures normally included in financial statements prepared in
conformity with generally accepted accounting principles have been condensed or
omitted. These condensed financial statements should be read in conjunction
with the financial statements and notes thereto included elsewhere in this
Prospectus.
The casino industry in Atlantic City is seasonal in nature; therefore,
results of operations for the nine months ended September 30, 1995 are not
necessarily indicative of the operating results for a full year.
(2) PUBLIC OFFERINGS
On June 12, 1995, Trump Hotels & Casino Resorts, Inc., (the "Company")
completed a public offering of 10,000,000 shares of common stock at $14.00 per
share (the "June 1995 Stock Offering") for gross proceeds of $140,000,000.
Concurrently with the June 1995 Stock Offering, Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings") together with its subsidiary, Trump Hotels &
Casino Resorts Funding, Inc. ("THCR Funding") issued 15 1/2% Senior Secured
Notes (the "Senior Notes") for gross proceeds of $155,000,000 (the "June 1995
Note Offering" and, together with the June 1995 Stock Offering, the "June 1995
Offerings"). From the proceeds from the June 1995 Stock Offering, THCR
contributed approximately $126,848,000 to THCR Holdings. THCR Holdings
subsequently contributed $146,859,000 to AC Holdings.
Prior to the June 1995 Offerings, Donald J. Trump ("Trump") was the sole
owner of THCR Holdings. Concurrent with the June 1995 Offerings, Trump
contributed to THCR Holdings all of his beneficial interest in Plaza Associates
(consisting of all of the outstanding capital stock of Plaza Funding, a 99%
equity interest in AC Holdings and all of the outstanding capital stock of
Trump Plaza Holding, Inc. ("Plaza Holding, Inc.") which owns the remaining 1%
equity interest in AC Holdings). Trump also contributed to THCR Holdings all of
his existing interest and rights to new gaming activities in both emerging and
established gaming jurisdictions, including Trump Indiana but excluding his
interests in the Trump Taj Mahal Casino Resort and Trump's Castle Casino Resort
(together, the "Other Trump Casinos").
F-22
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31, SEPTEMBER
1994 30, 1995
------------ ---------
Plaza Funding:
10 7/8% Mortgage Notes, due 2001 net of
unamortized discount of $3,766,000 and
$3,457,000, respectively (A)............... $326,234,000 $326,543,000
============ ============
Plaza Associates:
Partnership Note (10 7/8% Mortgage Notes,
due 2001 net of unamortized discount of
$3,766,000 and $3,457,000, respectively)
(A)........................................ $326,234,000 $326,543,000
Mortgage notes payable...................... 5,494,000 3,055,000
Other notes payable......................... 468,000 4,157,000
------------ ------------
332,196,000 333,755,000
Less--Current maturities.................. 2,969,000 2,100,000
------------ ------------
329,227,000 331,655,000
AC Holdings:
PIK Notes (12 1/2% Notes due 2003 net of
discount of $9,769,000) (B)................ 73,987,000 --
------------ ------------
$403,214,000 $331,655,000
============ ============
(A) On June 25, 1993, Plaza Funding issued $330,000,000 principal amount of 10
7/8% Mortgage Notes, due 2001 (the "Plaza Mortgage Notes"), net of discount
of $4,313,000, and loaned the proceeds to Plaza Associates.
(B) On June 25, 1993 AC Holdings issued $60,000,000 principal amount of 12 1/2%
Pay-In-Kind Notes, due 2003 (the "PIK Notes"), together with Warrants to
acquire an additional $12,000,000 of PIK Notes at no additional cost (the
"PIK Note Warrants"). The PIK Note Warrants were exercised prior to June
12, 1995 and the PIK Notes were repurchased and redeemed on June 12, 1995
from the amounts contributed to Plaza Holding by THCR Holdings (See Note
2). Such repurchase and redemption resulted in the recognition of an
extraordinary loss of $9,250,000 relating to the redemption and the write-
off of unamortized deferred financing costs.
(4) CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act") Plaza Associates is
required to maintain certain licenses.
In June 1995, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates' license to operate Trump Plaza. This license must be renewed in
June 1999, is not transferable, and such renewal of the license will include a
review of the financial stability of Plaza Associates. Upon revocation,
suspension for more than 120 days, or if the CCC fails or refuses to renew such
casino license, the Casino Control Act allows for the appointment of a
conservator to take possession of the hotel and casino's business and property,
subject to all valid liens, claims and encumbrances.
F-23
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(5) TRUMP REGENCY OPTION
On June 12, 1995, Trump exercised its option to purchase the Trump Regency
("Trump World's Fair"). The option price of $60,000,000 was funded with
$58,150,000 from the capital contributed by THCR Holdings (see Note 2), and
$1,850,000 of previous deposits made by Plaza Associates. Plaza Associates
received the property via directed deed.
(6) SUBSEQUENT EVENT
On January 8, 1996, THCR, Taj Holding and THCR Merger Corp. ("Merger Sub")
entered into the Agreement and Plan of Merger, as amended by the Amendment to
Agreement and Plan of Merger dated as of January 31, 1996 (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into Taj Holding
(the "Merger"). The Merger Agreement provides that each outstanding share of
Class A Common Stock of Taj Holding ("Taj Holding Class A Common Stock") will
be converted into the right to receive, at each holder's election, either (a)
$30.00 in cash or (b) that number of shares of Common Stock as shall have a
market value equal to $30.00. The Merger Agreement also contemplates the
following transactions occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) and the consummation of the offering by AC Holdings and
its wholly owned subsidiary THCR Atlantic City Funding, Inc. of up to
$1,180,000,000 aggregate principal amount of mortgage notes, the aggregate
proceeds of which will be used, together with available cash, to (i) pay
cash to those holders of Taj Holding Class A Common Stock electing to
receive cash in the Merger, (ii) redeem Trump Taj Mahal Funding, Inc's ("Taj
Funding") outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Taj
Bonds"), (iii) redeem the outstanding shares of Class B Common Stock, par
value $.01 per share, of Taj Holding as required in connection with the
redemption of the Taj Bonds, (iv) retire, by purchasing and/or defeasing,
the outstanding 10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding,
Inc., (v) satisfy the indebtedness of Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort
(the "Taj Mahal"), under Taj Associates' loan agreement with National
Westminster Bank USA, (vi) purchase certain real property used in the
operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust to obtain releases of the
liens that Bankers Trust has with respect to Taj Associates and related
guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger and contributed to THCR by Trump.
F-24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Taj Mahal Associates and Subsidiary:
We have audited the accompanying consolidated balance sheets of Trump Taj
Mahal Associates (a New Jersey general partnership) and Subsidiary as of
December 31, 1993 and 1994, and the related consolidated statements of
operations, capital (deficit) and cash flows for each of the three years in the
period ended December 31, 1994. These consolidated financial statements are the
responsibility of Trump Taj Mahal Associates management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trump Taj Mahal Associates and
Subsidiary as of December 31, 1993 and 1994 and the result of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
March 22, 1995 (except
with respect to the
matter discussed in Note
10, as to which the date
is January 31, 1996
F-25
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
DECEMBER 31,
--------------------
1993 1994
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash investments.............................. $ 58,044 $ 61,196
Receivables, net of allowance of $4,346 and $4,059 for
doubtful accounts..................................... 13,034 15,443
Inventory.............................................. 4,685 6,431
Prepaid expenses and other current assets.............. 3,986 7,806
--------- ---------
Total Current Assets................................. 79,749 90,876
--------- ---------
PROPERTY AND EQUIPMENT (Notes 1, 2, and 5):
Land................................................... 37,291 37,843
Building............................................... 646,653 656,702
Furniture, fixtures and equipment...................... 148,401 160,372
Leasehold improvements................................. 30,971 31,243
--------- ---------
863,316 886,160
Less: Accumulated depreciation and amortization...... (140,482) (179,375)
--------- ---------
722,834 706,785
--------- ---------
OTHER ASSETS............................................. 8,925 9,951
--------- ---------
Total Assets......................................... $ 811,508 $ 807,612
========= =========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Long-term debt due currently (Note 2).................. $ 805 $ 743
Accounts payable....................................... 3,934 3,256
Accrued interest payable............................... 11,460 8,977
Due to affiliates, net (Note 3)........................ 490 109
Other current liabilities (Note 4)..................... 34,100 37,102
--------- ---------
Total Current Liabilities............................ 50,789 50,187
--------- ---------
OTHER LIABILITIES (Notes 2 and 3)........................ 28,313 32,912
--------- ---------
LONG-TERM DEBT NET OF UNAMORTIZED DISCOUNT OF $172,417
AND $153,597 (Note 2)................................... 625,765 656,701
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 5)
CAPITAL:
Contributed capital.................................... 123,765 123,765
Accumulated deficit.................................... (17,124) (55,953)
--------- ---------
Total Capital........................................ 106,641 67,812
--------- ---------
Total Liabilities and Capital........................ $ 811,508 $ 807,612
========= =========
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-26
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
REVENUES (Note 1):
Gaming...................................... $ 414,045 $ 442,064 $ 461,622
Rooms....................................... 41,044 40,682 41,815
Food and beverage........................... 59,456 55,953 58,029
Other....................................... 16,458 16,656 17,894
--------- --------- ---------
Gross revenues............................ 531,003 555,355 579,360
Less--Promotional allowances (Note 1)....... 61,250 56,444 62,178
--------- --------- ---------
Net revenues.............................. 469,753 498,911 517,182
--------- --------- ---------
COST AND EXPENSES:
Gaming...................................... 227,394 237,566 260,472
Rooms....................................... 15,216 15,525 15,662
Food and beverage........................... 23,909 25,080 25,035
General and administrative.................. 98,819 99,424 99,629
Depreciation and amortization............... 36,388 36,858 39,750
--------- --------- ---------
401,726 414,453 440,548
--------- --------- ---------
Income from operations........................ 68,027 84,458 76,634
Interest income............................... 923 1,382 2,019
Interest expense.............................. (104,049) (108,379) (115,311)
--------- --------- ---------
Net loss...................................... $ (35,099) $ (22,539) $ (36,658)
========= ========= =========
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-27
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
(DOLLARS IN THOUSANDS)
ACCUMULATED TOTAL
CONTRIBUTED SURPLUS CAPITAL
CAPITAL (DEFICIT) (DEFICIT)
----------- ----------- ---------
Balance, January 1, 1992..................... $123,765 $ 44,072 $167,837
Net loss..................................... -- (35,099) (35,099)
Partnership distribution (Note 6)............ -- (1,825) (1,825)
-------- -------- --------
Balance, December 31, 1992................... 123,765 7,148 130,913
Net loss..................................... -- (22,539) (22,539)
Partnership distribution (Note 6)............ -- (1,733) (1,733)
-------- -------- --------
Balance, December 31, 1993................... 123,765 (17,124) 106,641
Net loss..................................... -- (36,658) (36,658)
Partnership distribution (Note 6)............ -- (2,171) (2,171)
-------- -------- --------
Balance, December 31, 1994................... $123,765 $(55,953) $ 67,812
======== ======== ========
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-28
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $(35,099) $(22,539) $(36,658)
Adjustments to reconcile net loss to net cash
flows provided by
operating activities--
Depreciation and amortization.................. 36,388 36,858 39,750
Charges related to lease guarantee............. 1,519 1,763 2,047
Accretion of discount on Bond indebtedness..... 13,172 15,745 18,820
Other adjustments to reduce the carrying value
of non-current
assets........................................ 2,563 2,764 2,134
Utilization of CRDA credits.................... -- -- 1,500
Provision for doubtful accounts................ 6,197 3,472 2,974
-------- -------- --------
24,740 38,063 30,567
Changes in operating assets and liabilities:
Receivables, net............................... (3,349) (2,281) (5,383)
Inventory...................................... (6) (1,612) (1,746)
Other current assets........................... (655) (39) (3,552)
Other assets................................... (225) (766) (392)
Due to affiliates, net......................... 186 98 (381)
Accounts payable............................... 1,717 (2,225) (678)
Accrued interest payable....................... 14,611 14,900 12,537
Other liabilities.............................. (5,233) 2,496 2,450
-------- -------- --------
Net cash flows provided by operating
activities................................... 31,786 48,634 33,422
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............. (12,111) (16,752) (23,030)
Investment in CRDA obligations.................. (5,648) (5,408) (4,201)
-------- -------- --------
Net cash flows used in investing activities... (17,759) (22,160) (27,231)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings........................ 8,000 -- --
Repayments of borrowings........................ (8,675) (759) (868)
Partnership distribution........................ (1,825) (1,733) (2,171)
-------- -------- --------
Net cash flows used in financing activities... (2,500) (2,492) (3,039)
-------- -------- --------
NET INCREASE IN CASH AND CASH INVESTMENTS........ 11,527 23,982 3,152
CASH AND CASH INVESTMENTS BEGINNING OF YEAR...... 22,535 34,062 58,044
-------- -------- --------
CASH AND CASH INVESTMENTS END OF YEAR............ $ 34,062 $ 58,044 $ 61,196
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest.......... $ 74,778 $ 75,972 $ 79,121
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS:
Issuance of PIK bonds in lieu of cash interest.. $ 8,844 $ 14,579 $ 12,249
======== ======== ========
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-29
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump Taj
Mahal Associates ("Taj Associates"), and its wholly owned subsidiary, Trump Taj
Mahal Funding, Inc. ("Taj Funding"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
Taj Associates was formed on June 23, 1988 as a New Jersey limited
partnership. Taj Associates was converted to a general partnership in December
1990. The current partners and their respective ownership interests are Trump
Taj Mahal, Inc. ("TTMI"), 49.995%, The Trump Taj Mahal Corporation ("TTMC"),
.01%, and TM/GP Corporation ("TM/GP"), the managing general partner, and a
wholly owned subsidiary of Taj Mahal Holding Corp. ("Taj Holding"), 49.995%.
Taj Associates was formed for the purpose of acquiring, constructing and
operating the Trump Taj Mahal Casino Resort (the "Taj Mahal"), an Atlantic City
hotel, casino and convention center complex. On April 2, 1990, Taj Associates
opened the Taj Mahal to the public.
Taj Funding was incorporated on June 3, 1988 for the purpose of raising funds
through the issuance of its 14% First Mortgage Bonds, Series A, due 1998 (the
"Old Bonds"), the proceeds of which were loaned to Taj Associates for
construction of the Taj Mahal. During 1991, as a result of a plan of
reorganization (the "1991 Taj Restructuring"), the Old Taj Bonds were
subsequently exchanged for the Taj Funding's 11.35% Mortgage Bonds, Series A,
due 1999 (the "Taj Bonds"). Since Taj Funding has no business operations, its
ability to repay the principal and interest on the Taj Bonds is completely
dependent on the operations of Taj Associates.
Donald J. Trump ("Trump") beneficially owns 50% of Taj Associates and has
pledged his total ownership interest as collateral under various debt
agreements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues from hotel and other
services are recognized at the time the related service is performed.
Promotional Allowances
Gross revenues includes the retail value of complimentary rooms, food,
beverages, and other services furnished to patrons. The retail value of these
promotional allowances is deducted from gross revenues to arrive at net
revenues. The cost of promotional allowances is charged to operations.
Promotional allowances consisted of the following:
YEAR ENDED DECEMBER 31,
-----------------------
1992 1993 1994
------- ------- -------
(IN THOUSANDS)
Rooms................................................ $23,692 $23,079 $25,562
Food and Beverage.................................... 34,403 30,734 32,581
Other................................................ 3,155 2,631 4,035
------- ------- -------
$61,250 $56,444 $62,178
======= ======= =======
F-30
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The accompanying financial statements do not include a provision for Federal
income taxes of Taj Associates, since any income or losses allocated to the
partners are reportable for Federal income tax purposes by the partners.
Under the New Jersey Casino Control Commission regulations, Taj Associates is
required to file a New Jersey corporation business tax return.
Inventories
Inventories are carried at cost on a weighted average basis.
Property and Equipment
Property and equipment is recorded at cost and is depreciated on the
straight-line method over the estimated useful lives of assets. Estimated
useful lives range from three to seven years for furniture, fixtures and
equipment and 40 years for buildings and building improvements. Leasehold
improvements are amortized over the term of the related lease commencing in the
period these assets are placed in service.
The interest expense associated with borrowings used to fund the purchase and
construction of the Taj Mahal has been capitalized and is being amortized over
the estimated useful life of the facility.
Cash and Cash Investments
Cash and cash investments include hotel and casino funds, funds on deposit
with banks and temporary investments having a maturity of three months or less.
(2) LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
1993 1994
--------- ---------
(IN THOUSANDS)
First Mortgage Bonds (a)............................... $ 752,881 $ 765,130
Unamortized discount................................... (172,417) (153,597)
--------- ---------
Net.................................................... 580,464 611,533
Bank term loan (b)..................................... 45,314 45,138
Other.................................................. 792 773
--------- ---------
Total................................................ 626,570 657,444
Less: Current portion................................ (805) (743)
--------- ---------
$ 625,765 $ 656,701
========= =========
- ---------------------
(a) Taj Funding's Bonds bear interest of 11.35% and are due November 15, 1999.
Each Taj Bond, together with one share of Taj Holding's Class B redeemable
common stock, par value $.01 per share, trade together as a unit
("Units"), and may not be transferred separately. Interest on the Taj
Bonds is due semi-annually on each November 15 and May 15. Interest on the
Taj Bonds must be paid in cash on each interest payment date at the rate
of 9.375% per annum (the "Mandatory Cash Interest Amount"). In addition to
the Mandatory Cash Interest Amount, effective May 15, 1992 and annually
thereafter, an additional amount of interest (the "Additional Amount") in
cash or additional Taj Bonds or a combination thereof, is payable equal to
the difference between 11.35% of the outstanding principal amount of the
Taj Bonds and the Mandatory Cash Interest Amount previously paid. To the
extent that there is excess available cash flow ("EACF") of Taj
Associates, as defined in the related indenture, for
F-31
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the immediately preceding calendar year, Taj Funding will pay the Additional
Amount in cash up to 10.28% and the balance thereof may be paid at the
option of Taj Funding in cash or additional Units, provided that an
equivalent amount of cash is used to purchase or redeem Units. Additional
Taj Bonds issued on October 4, 1991 amounted to approximately $7,208,000.
For the period from the issuance of the Taj Bonds, October 4, 1991, through
December 31, 1992, there was no EACF. Accordingly, Taj Funding paid the
Additional Amounts on May 15, 1993 and May 15, 1992 through the issuance of
approximately $14,579,000 and $8,844,000, respectively, in additional Taj
Bonds. Of the $14,870,000 Additional Amount due May 15, 1994, $2,621,000 was
paid in cash and the $12,249,000 balance in Taj Bonds. Of the $15,111,000
Additional Amount due May 15, 1995, Taj Associates expects to satisfy the
obligation through the issuance of Taj Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Bonds is completely dependent on the
operations of Taj Associates. The Taj Bonds are guaranteed as to payment of
principle and interest by Taj Associates and are collateralized by
substantially all Taj Associates property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting
By Entities in Reorganization Under the Bankruptcy Code", the Bonds when
issued were stated at the present value of amounts to be paid, determined
at current interest rates (effective rate of approximately 18%). The
effective interest rate of the Taj Bonds was determined based on the
trading price of the Taj Bonds for a specific period. Stating the debt at
its approximate present value resulted in a reduction of approximately
$204,276,000 in the carrying amount of the Taj Bonds. This gain is being
offset by increased interest costs over the period of the Taj Bonds to
accrete such bonds to their face value at maturity. At December 31, 1994,
the unaccreted balance of this discount approximated $153,597,000. The
current interest rates of other borrowings approximated their stated
interest rates as of the effective date. The accretion amounted to
approximately $13,172,000 in 1992, $15,745,000 in 1993 and $18,820,000 in
1994, and is included in interest expense.
(b) On November 3, 1989, Taj Associates entered into a loan agreement with
National Westminster Bank, U.S.A. (the "NatWest Loan") which provided
financing up to $50,000,000 for certain items of furniture, fixtures and
equipment installed in the Taj Mahal. The terms of the NatWest Loan were
modified in 1991 as part of the 1991 Taj Restructuring. The restructured
NatWest Loan bears interest at 9 3/8% per annum. Principal and interest is
payable monthly in the fixed amount of $373,000 to be applied first to
accrued interest and the balance to the extent available, to principal,
through maturity, November 15, 1999. Additionally, on May 15 of each year
(May 15, 1992 through May 15, 1999), to the extent principal is still
outstanding, NatWest will receive 16.5% of the EACF of the preceding
calendar year in excess of the Additional Amount, to be applied first to
accrued but unpaid interest, and then to principal.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus
any after acquired furniture, fixtures and equipment that replaces such
property, or of the same type, provided, however, that the NatWest Loan may
be subordinated to a lien to secure purchase money financing of such after
acquired property up to 50% of the value of such after acquired property.
In November 1991, Taj Associates obtained a working capital line of credit
in the amount of $25,000,000 with a maturity of five years. In September
1994, Taj Associates extended the maturity to November 1999, in
consideration of modifications of the terms of the facility. Interest on
advances under the line are at prime plus 3% with a minimum of 0.666 per
month. The Agreement provides for a 3/4% annual fee and a 1/2% unused line
fee and contains various covenants. During 1993 and 1994, no amounts were
outstanding under the line. During 1992, $8,000,000 was drawn under the
line and repaid.
F-32
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Aggregate annual maturities of long-term debt at accreted value are as
follows:
1995............................ $ 743,000
1996............................ 423,000
1997............................ 233,000
1998............................ 256,000
1999............................ 809,386,000
Thereafter...................... 0
(3) TRANSACTIONS WITH AFFILIATES
Taj Associates has engaged in certain transactions with Trump and entities
that are wholly or partially owned by Trump. Amounts owed to (receivable from)
at December 31 are as follows:
1993 1994
------- -------
(IN THOUSANDS)
Donald J. Trump (a)......................................... $ 537 $ 253
Trump Taj Mahal Realty Corp. ("Realty Corp.") (b)........... -- --
Trump's Castle Associates (c)............................... 69 30
Trump Plaza Associates (c).................................. (73) (131)
Helicopter Air Services (d)................................. (43) (43)
------ -------
$ 490 $ 109
====== =======
- ---------------------
(a) Taj Associates has entered into a Services Agreement (the "Services
Agreement"), which provides that Trump will render to Taj Associates
marketing, advertising, promotional and related services with respect to
the business operations of Taj Associates. In consideration for the
services to be rendered, Taj Associates will pay an annual fee equal to
1.5% of Taj Associates earnings before interest, taxes and depreciation, as
defined, less capital expenditures and partnership distributions for such
year, with a minimum base fee of $500,000. The services fee is payable
monthly through November 15, 1999, although the agreement provides for
earlier termination under certain events. Portions of the fee have been
assigned to First Fidelity Bank in connection with the Loan to Realty Corp.
which has been guaranteed by Trump. For the years ended December 31, 1992,
1993 and 1994, Taj Associates incurred $1,319,000, $1,566,000 and
$1,353,000, respectively, under the Services Agreement. In addition, during
1993 and 1994, Taj Associates reimbursed Mr. Trump $232,000 and $224,000,
respectively, for expenses pursuant to the Services Agreement, of which
$127,000 and $149,000, respectively, was incurred to an affiliate for air
transportation.
(b) The term of the lease between Taj Associates and Realty Corp. is through
2023 and provides for base rentals payable by Taj Associates, prior to the
time that the NatWest Loan is paid in full, of $2,725,000 per year, plus 3
1/2% of the EACF in excess of the Additional Amount and, upon payment in
full of the NatWest loan, increasing to include the payments to which
NatWest is otherwise entitled under the amended NatWest Agreement (Note 3).
The amended lease was assigned by Realty to First Fidelity Bank ("First
Fidelity"). The first $3,300,000 received by First Fidelity each year will
be applied to the interest due on the Realty Corp. loan (the "Loan"). Any
additional sums paid will also reduce Taj Associates guarantee (see below)
and the principal amount of the Loan. The Loan is secured by a first
mortgage lien on the underlying parcels owned by Realty Corp.
Pursuant to a limited subordinated guarantee Taj Associates will, under
certain circumstances, reimburse First Fidelity for any deficiency in the
amount owed to First Fidelity upon maturity of the Loan, up to a
F-33
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
maximum of $30,000,000, provided that First Fidelity first pursues its
first mortgage lien on the parcels, and provided further that the Taj Bonds
have been paid in full. Inasmuch as Taj Associates lease payments are
Realty Corp's sole source of funds to satisfy the Loan and the amount of
the Loan exceeds the estimated fair market value of the land by more than
$30,000,000, Taj Associates recorded the present value of the maximum
guarantee amount as of October 4, 1991. Discounted at 15%, a reasonable
incremental cost of capital, the obligation amounted to approximately
$9,103,000. This obligation is being accreted as interest expense over the
life of the Taj Bonds and is included in Other Liabilities in the
accompanying consolidated balance sheets. The accretion amounted to
approximately $1,519,000, $1,763,000, and $2,047,000 for the years ended
December 31, 1992, 1993 and 1994, respectively.
(c) Taj Associates engages in various transactions with the two other Atlantic
City hotel/casinos owned by Trump. These transactions are charged at cost
or normal selling price in the case of retail items and include the
utilization of fleet maintenance and limousine services, certain shared
professional fees and payroll costs as well as complimentary services
offered to customers. During 1992, Taj Associates incurred approximately
$622,000 and $93,000 of costs for these services from Trump's Castle Casino
Resort ("Trump's Castle") and Trump Plaza, respectively. In addition, Taj
Associates charged $67,000 and $309,000 to Trump's Castle and Trump Plaza,
respectively, for similar services. During 1993, Taj Associates incurred
approximately $1,100,000 and $83,000 of costs for these services from
Trump's Castle and Trump Plaza, respectively. In addition, Taj Associates
charged $256,000 and $255,000 to Trump's Castle and Trump Plaza,
respectively, for similar services. During 1994, Taj Associates incurred
approximately $1,167,000 and $149,000 of costs for these services from
Trump's Castle and Trump Plaza, respectively. In addition, Taj Associates
charged $235,000 and $361,000 to Trump's Castle and Trump Plaza,
respectively, for similar services.
(d) Helicopter Air Services and the Trump Shuttle, Inc. (the "Trump Shuttle")
provided aircraft charters and travel services to certain patrons of the
Taj Mahal on behalf of Taj Associates. For the years ended December 31,
1992, 1993 and 1994, Taj Associates incurred no charges from Helicopter Air
Services. During 1992, Taj Associates incurred charges of $29,000 from
Trump Shuttle.
(4) OTHER CURRENT LIABILITIES
The components of other current liabilities at December 31 consisted of the
following:
1993 1994
------- -------
(IN THOUSANDS)
Payroll and related costs................................... $11,381 $14,806
Self-insurance reserves..................................... 4,879 4,626
Advertising/Marketing costs................................. 2,387 3,242
Advance deposits............................................ 1,046 3,022
Unredeemed chip liability................................... 3,056 2,725
Accrued taxes............................................... 2,912 912
Progressive jackpot reserves................................ 2,206 582
Other....................................................... 6,233 7,187
------- -------
$34,100 $37,102
======= =======
F-34
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) COMMITMENTS AND CONTINGENCIES
LEASES AND EMPLOYMENT AGREEMENTS
Taj Associates has entered into employment agreements with certain key
employees and lease agreements for land, office and warehouse space under
noncancellable operating leases expiring at various dates through 2023. At
December 31, 1994, minimum commitments under these arrangements are as follows:
1995............................................................. $ 8,186,000
1996............................................................. $ 6,174,000
1997............................................................. $ 4,637,000
1998............................................................. $ 2,750,000
1999............................................................. $ 2,725,000
Thereafter....................................................... $65,400,000
Rent expense was approximately $4,942,000, $4,520,000 and $5,027,000 for the
years ended December 31, 1992, 1993 and 1994, respectively.
Taj Associates leases the pier extending from the Taj Mahal 1,000 feet into
the Atlantic Ocean (the "Steel Pier") from Realty Corp. A condition imposed on
Taj Associates Coastal Area Facilities Review Act ("CAFRA") permit (which, in
turn, is a condition of Taj Associates casino license) initially required that
Taj Associates begin construction of certain improvements on the Steel Pier
which were to be completed within 18 months of commencement. Taj Associates
initially proposed a concept to improve the Steel Pier, the estimated cost of
which was $30,000,000. Such concept was approved by the New Jersey Department
of Environmental Protection, the agency which administers CAFRA. In March 1993,
Taj Associates obtained a modification of its CAFRA permit providing for the
extension of the required commencement and completion dates of the improvements
to the Steel Pier for one year based upon an interim use of the Steel Pier for
an amusement park. In March 1994 and 1995, Taj Associates received an
additional one-year extension of the required commencement and completion dates
of the improvements of the Steel Pier based upon the same interim use of the
Steel Pier as an amusement park.
EMPLOYEE BENEFIT PLAN
Effective January 1, 1989, Taj Associates established the Taj Mahal
Retirement Savings Plan ("the Benefit Plan") for its employees over 21 years of
age who are not covered by a collective bargaining agreement. The Benefit Plan
is structured to qualify for favorable tax treatment under Section 401(k) of
the Internal Revenue Code and allows eligible participants to contribute up to
15% of their salary (certain limits apply, as defined) to the Benefit Plan with
a matching Partnership contribution of 50% of the first 4% of such employee
salary contribution. The funds are invested by a Benefit Plan trustee. Taj
Associates contributions for the years ended December 31, 1992, 1993 and 1994
were $841,000, $870,000 and $938,000, respectively.
CASINO LICENSE RENEWAL
Taj Funding and Taj Associates are subject to regulation and licensing by the
New Jersey Casino Control Commission (the "CCC"). Taj Associates' casino
license must be renewed periodically, is not transferable, is dependent upon
the financial stability of Taj Associates and can be revoked at anytime. Upon
revocation, suspension for more than 120 days, or failure to renew the casino
license due to Taj Associates financial condition or for any other reason, the
Casino Control Act (the "Casino Control Act") provides that the CCC may appoint
a conservator to take possession of and title to the hotel and casino's
business and property,
F-35
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
subject to all valid liens, claims and encumbrances. On March 22, 1995, the CCC
extended Taj Associates' casino license through June 30, 1995 in order to
consolidate Taj Associates license renewal proceedings with Trump's Castle and
the Taj Mahal (the "Other Trump Casinos"), at which time the CCC will conduct a
plenary hearing for renewal of Taj Associates' casino license for a period of
up to four years as provided by law.
LEGAL PROCEEDINGS
Taj Associates, its partners, certain of its employees and Taj Funding are
involved in various legal proceedings incurred in the normal course of
business. In the opinion of management of Taj Associates, the expected
disposition of these proceedings would not have a material adverse affect on
Taj Associates or TTMI's financial condition or results of operations.
INVESTMENT OBLIGATION
The Casino Control Act requires Taj Associates to make qualified investments,
as defined, in New Jersey, or pay an investment alternative tax to the New
Jersey Casino Reinvestment Development Authority ("CRDA"). Commencing in 1991,
and for a period of thirty years thereafter, Taj Associates must either obtain
investment tax credits, as defined, in an amount equivalent to 1.25% of its
gross casino revenues or pay an alternative tax of 2.5% of its gross casino
revenues, as defined. Investment tax credits may be obtained by making
qualified investments, by depositing funds which may be converted to bonds by
the CRDA or by donating previously deposited funds in exchange for future
credits against tax liability. Taj Associates intends to satisfy its investment
obligation primarily by depositing funds and donations of funds deposited.
During 1994, Taj Associates contributed $9,500,000 of previous CRDA deposits,
the carrying value of which was $4,750,000. Of the carrying value, $3,250,000
will become a leasehold improvement upon completion of the improvements during
1995, and $1,500,000 was a donation of previously deposited funds, which became
a credit utilized in 1994 as a reduction of current year obligations. The
deposits and bonds traditionally bear interest at below-market interest rates;
accordingly, Taj Associates has reduced its carrying value of the deposits by
50% and charged operations approximately $2,563,000, $2,764,000 and $2,134,000
in 1992, 1993 and 1994, respectively. Taj Associates is required to satisfy its
obligations to the CRDA through deposits on a quarterly basis. If such deposits
are converted to bonds by the CRDA, such bonds will be accounted for under SFAS
No. 115.
(6) PARTNERSHIP DISTRIBUTION
Taj Associates is obligated to reimburse Taj Holding for its operating
expenses which consist of directors and officers liability insurance, board of
director fees and expenses, and administrative expenses. Total expenses for the
years ended December 31, 1992, 1993 and 1994 approximated $1,825,000,
$1,733,000 and $2,171,000, respectively.
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of Taj Funding and
Taj Associates approximates fair value, as follows: (a) cash and cash
equivalents and accrued interest payable are based on the short term nature of
the financial instruments; and, (b) CRDA deposits are based on the valuation
allowances to give effect to the below market interest rates.
F-36
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The estimated fair values of the other financial instruments are as follows
(Note 3):
DECEMBER 31,
-----------------
1993 1994
-------- --------
(IN THOUSANDS)
11.35% Mortgage Bonds (a)
Carrying Amount......................................... $580,464 $611,533
Fair Value.............................................. 761,350 512,638
- ---------------------
(a) The fair value of the Taj Bonds is based on quoted market prices as of
December 31, 1993 and 1994.
There are no quoted market prices for the Taj Associates-NatWest Loan and
other debt and a reasonable estimate of their value could not be made
without incurring excessive costs.
(8) FINANCIAL INFORMATION--TAJ FUNDING
Financial information relating to Taj Funding as of and for the years ended
December 31, 1993 and 1994 is as follows (in thousands):
1993 1994
-------- --------
Total Assets (including First Mortgage Note Receivable of
$752,881 and $765,130 and related interest receivable)...... $771,018 $783,562
======== ========
Total Liabilities and Capital (including Taj Bonds payable of
$752,881 and $765,130 and related interest payable)......... $771,018 $783,562
======== ========
Interest Income.............................................. $ 84,829 $ 86,322
======== ========
Interest Expense............................................. $ 84,829 $ 86,322
======== ========
Net Income................................................... $ -- $ --
======== ========
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS)
1992
- ----
Net Revenues............................. $104,274 $118,110 $135,203 $112,166
Income from Operations................... 8,134 18,229 25,802 15,862
Net Income (Loss)........................ (17,049) (7,251) 159 (10,958)
1993
- ----
Net Revenues............................. $110,382 $126,364 $141,597 $120,568
Income from Operations................... 13,014 23,181 30,812 17,451
Net Income (Loss)........................ (13,003) (3,192) 4,212 (10,556)
1994
- ----
Net Revenues............................. $111,297 $127,254 $147,987 $130,644
Income from Operations................... 7,902 14,980 31,308 22,444
Net Income (Loss)........................ (20,761) (13,847) 3,286 (5,336)
F-37
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) SUBSEQUENT EVENT
On January 8, 1996, Trump Hotels & Casino Resorts Inc. (the "Company"), Taj
Holding and THCR Merger Corp. ("Merger Sub") entered into the Agreement and
Plan of Merger, as amended by the Amendment to Agreement and Plan of Merger
dated as of January 31, 1996 (the "Merger Agreement"), pursuant to which Merger
Sub will merge with and into Taj Holding (the "Merger"). The Merger Agreement
provides that each outstanding share of Class A Common Stock of Taj Holding
("Taj Holding Class A Common Stock") will be converted into the right to
receive, at each holder's election, either (a) $30.00 in cash or (b) that
number of shares of Common Stock of THCR (Common Stock") as shall have a market
value equal to $30.00. The Merger Agreement also contemplates the following
transactions occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of
Common Stock and the consummation of the offering by Trump Plaza Holding
Associates ("AC Holdings") and its wholly owned subsidiary THCR Atlantic
City Funding, Inc. of up to $1,180,000,000 aggregate principal amount of
mortgage notes, the aggregate proceeds of which will be used, together with
available cash, to (i) pay cash to those holders of Taj Holding Class A
Common Stock electing to receive cash in the Merger, (ii) redeem the Taj
Bonds, (iii) redeem the outstanding shares of Class B Common Stock, par
value $.01 per share, of Taj Holding as required in connection with the
redemption of the Taj Bonds, (iv) retire, by purchasing and/or defeasing,
the outstanding 10 7/8% First Mortgage Notes due 2001 of Trump Plaza
Funding, Inc., (v) satisfy the indebtedness of Taj Associates under the
NatWest Loan, (vi) purchase certain real property used in the operation of
the Taj Mahal that is currently leased from a corporation wholly owned by
Trump, (vii) purchase certain real property used in the operation of Trump
Plaza Hotel and Casino that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust to obtain releases of the
liens and guarantees that Bankers Trust has with respect to Taj Associates,
and related guarantees and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
F-38
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash investments......................... $ 61,196 $108,769
Receivables, net of allowance of $5,354 and $4,059
for doubtful accounts............................ 15,443 15,759
Inventory......................................... 6,431 6,950
Prepaid expenses and other current assets......... 7,806 5,175
-------- --------
Total Current Assets............................ 90,876 136,653
======== ========
Property and Equipment:
Land.............................................. 37,843 37,843
Building ......................................... 656,702 663,284
Furniture, fixtures and equipment................. 160,372 170,047
Leasehold improvements............................ 31,243 31,253
-------- --------
886,160 902,427
Less: Accumulated depreciation and amortization. (179,375) (207,825)
-------- --------
706,785 694,602
-------- --------
Other Assets........................................ 9,951 12,470
-------- --------
Total Assets...................................... $807,612 $843,725
======== ========
LIABILITIES AND CAPITAL
Current Liabilities:
Long-term debt due currently...................... $ 743 $ 868
Accounts payable.................................. 3,256 5,880
Accrued interest payable.......................... 8,977 27,441
Due to affiliates, net............................ 109 547
Other current liabilities......................... 37,102 38,303
-------- --------
Total Current Liabilities....................... 50,187 73,039
-------- --------
Other long term liabilities......................... 32,912 29,644
-------- --------
Long-term debt net of unamortized discount of
$153,597 and $137,108.............................. 656,701 688,143
-------- --------
Commitments and Contingencies
Capital:
Contributed capital............................... 123,765 123,765
Accumulated deficit............................... (55,953) (70,866)
-------- --------
Total Capital................................... 67,812 52,899
-------- --------
Total Liabilities and Capital................... $807,612 $843,725
======== ========
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-39
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FOR THE NINE
MONTHS
ENDED SEPTEMBER
30,
------------------
1994 1995
-------- --------
REVENUES:
Gaming................................................... $345,329 $377,368
Rooms.................................................... 32,159 33,035
Food and beverage........................................ 44,110 42,933
Other.................................................... 13,742 11,479
-------- --------
Gross revenues......................................... 435,340 464,815
Less--Promotional allowances............................. 48,802 47,519
-------- --------
Net revenues........................................... 386,538 417,296
COST AND EXPENSES:
Gaming................................................... 196,412 208,671
Rooms.................................................... 11,491 11,500
Food and beverage........................................ 18,142 18,597
General and administrative............................... 77,359 73,717
Depreciation and amortization............................ 28,944 32,407
-------- --------
332,348 344,892
-------- --------
Income from operations..................................... 54,190 72,404
Interest income............................................ 1,343 2,752
Interest expense........................................... (86,855) (88,864)
-------- --------
Net loss................................................... $(31,322) $(13,708)
======== ========
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-40
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL (DEFICIT)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ACCUMULATED
CONTRIBUTED SURPLUS TOTAL
CAPITAL (DEFICIT) CAPITAL
----------- ----------- -------
Balance, December 31, 1994..................... $123,765 $(55,953) $67,812
Net loss for the nine months ended
September 30, 1995............................ -- (13,708) (13,708)
-------- -------- -------
Partnership distribution....................... -- (1,205) (1,205)
-------- -------- -------
Balance, September 30, 1995.................... $123,765 $(70,866) $52,899
======== ======== =======
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-41
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
------------------
1994 1995
-------- --------
Cash Flows from Operating Activities:
Net loss.................................................. $(31,322) $(13,708)
Adjustments to reconcile net loss
to net cash flows provided by operating activities--
Depreciation and amortization............................ 28,944 32,407
Charges related to lease guarantee....................... 1,506 1,748
Accretion of discount on Bond indebtedness................ 13,795 16,489
Other adjustments to reduce the carrying value
of non current assets.................................... 2,148 2,315
Provision for doubtful accounts........................... 1,809 3,825
-------- --------
16,880 43,076
Changes in operating assets and liabilities:
Receivables, net......................................... (1,688) (4,141)
Inventory................................................ (1,883) (519)
Other current assets..................................... (673) 2,114
Other assets............................................. (654) (204)
Due to affiliates, net................................... (451) 438
Accounts payable......................................... 2,251 2,624
Accrued interest payable................................. 26,693 29,909
Other liabilities........................................ 87 13
-------- --------
Net cash flows provided by operating activities......... 40,562 73,310
-------- --------
Cash Flows from Investing Activities:
Purchase of property and equipment........................ (15,749) (19,477)
Investment in CRDA obligation............................. (4,000) (4,274)
-------- --------
Net cash flows used in investing activities............. (19,749) (23,751)
-------- --------
Cash Flows from Financing Activities:
Repayments of borrowings.................................. (645) (781)
Partnership distribution.................................. (1,710) (1,205)
-------- --------
Net cash flows used in financing activities............. (2,355) (1,986)
-------- --------
Net Increase (Decrease) in Cash and Cash Investments........ 18,458 47,573
Cash and Cash Investments Beginning of Period............... 58,044 61,196
======== ========
Cash and Cash Investments End of Period..................... $ 76,502 $108,769
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest.................... $ 42,074 $ 40,718
======== ========
Supplemental Disclosure of Non-Cash Transactions:
Issuance of PIK bonds in lieu of cash interest............ $ 12,249 $ 15,112
======== ========
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-42
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump Taj
Mahal Associates ("Taj Associates"), and its wholly owned subsidiary, Trump Taj
Mahal Funding, Inc. ("Taj Funding"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
Taj Associates was formed on June 23, 1988, as a New Jersey limited
partnership. Taj Associates was converted to a general partnership in December,
1990. The current partners and their respective ownership interests are Trump
Taj Mahal, Inc. ("TTMI"), 49.995%, The Trump Taj Mahal Corporation ("TTMC"),
.01%, and TM/GP Corporation ("TM/GP"), the managing general partner, and a
wholly owned subsidiary of Taj Mahal Holding Corp. ("Taj Holding"), 49.995%.
The accompanying financial statements have been prepared by Taj Associates
and Taj Funding without audit. In the opinion of Taj Associates and Taj
Funding, all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the financial position, results of operations and
changes in cash flows for the periods presented, have been made.
The accompanying financial statements have been prepared by Taj Associates
and Taj Funding pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, certain information and note
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in Taj Associates and Taj Funding's
December 31, 1994 Annual Report on Form 10-K.
Donald J. Trump ("Trump") beneficially owns 50% of Taj Associates and has
pledged his total ownership interest as collateral under various debt
agreements.
The casino industry in Atlantic City is seasonal in nature. Therefore,
results of operations for the three and nine months ended September 30, 1995
and 1994 are not necessarily indicative of the operating results for a full
year.
(2) BORROWINGS
Long term debt consists of bank debt and outstanding bonds. Taj Funding's
first bonds bear interest at the rate of 11.35% and are due November 15, 1999
(the "Taj Bonds"). Each $1,000 principal amount of Taj Bonds, together with one
share of Class B Common Stock of Taj Holding ("Taj Holding Class B Common
Stock"), trade together as a Unit, and may not be transferred separately.
Interest on the Taj Bonds is due semi-annually on each November 15 and May 15.
Interest on the Taj Bonds must be paid in cash on each interest payment date at
the rate of 9.375% per annum (the "Mandatory Cash Interest Amount"). In
addition to the Mandatory Cash Interest Amount, effective May 15, 1992 and
annually thereafter, an additional amount of interest (the "Additional Amount")
in cash or additional Taj Bonds or a combination thereof, is payable equal to
the difference between 11.35% of the outstanding principal amount of the Taj
Bonds and the Mandatory Cash Interest Amount previously paid. To the extent
that there is excess available cash flow ("EACF") of Taj Associates, as defined
in the Indenture governing the Taj Bonds, for the immediately preceding
calendar year, Taj Funding will pay the Additional Amount in cash up to 10.28%
and the balance thereof may be paid at the option of Taj Funding in cash or
additional Units, provided that an equivalent amount of cash is used to
purchase or redeem Units. Additional Taj Bonds issued on October 4, 1991
amounted to approximately $7,208,000. For the period from the issuance of the
Taj Bonds, October 4, 1991 through December 31, 1992, there was no EACF.
Accordingly, Taj Funding paid the Additional Amounts on May 15, 1993 and May
15, 1992 through the issuance of approximately $14,579,000 and $8,844,000,
F-43
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
respectively, in additional Taj Bonds. Of the $14,870,000 Additional Amount due
May 15, 1994, $2,621,000 was paid in cash and the $12,249,000 balance in Taj
Bonds. Of the $15,112,000 Additional Amount due May 15, 1995, Taj Funding
satisfied the entire obligation through the issuance of Taj Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Taj Bonds is completely dependent on the
operations of Taj Associates. The Taj Bonds are guaranteed as to payment of
principle and interest by Taj Associates and are collateralized by
substantially all Taj Associates' property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting By
Entities in Reorganization Under the Bankruptcy Code", the Bonds when issued
were stated at the present value of amounts to be paid, determined at current
interest rates (effective rate of approximately 18%). The effective interest
rate of the Taj Bonds was determined based on the trading price of the Taj
Bonds for a specific period. Stating the debt at its approximate present value
resulted in a reduction of approximately $204,276,000 in the carrying amount of
the Taj Bonds. This gain is being offset by increased interest costs over the
period of the Taj Bonds to accrete such Taj Bonds to their face value at
maturity. At September 30, 1995, the unaccreted balance of this discount was
approximately $137,108,000. The current interest rates of other borrowings
approximated their stated interest rates as of the effective date.
Taj Associates also has a loan agreement (the "NatWest Loan") with National
Westminster Bank, U.S.A. ("NatWest") which provided financing up to $50,000,000
for certain items of furniture, fixtures and equipment installed in the Trump
Taj Mahal Casino Resort. The NatWest Loan bears interest at 9 3/8% per annum.
Principal and interest is payable monthly in the fixed amount of $373,000 to be
applied first to accrued interest and the balance to the extent available, to
principal, through maturity, November 15, 1999. Additionally, on May 15 of each
year while principal is still outstanding, NatWest will receive 16.5% of the
EACF of the preceding calendar year in excess of the Additional Amount, to be
applied first to accrued but unpaid interest, and then to principal.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus any
after acquired furniture, fixtures and equipment that replaces such property,
or of the same type, provided however, that the NatWest Loan may be
subordinated to a lien to secure purchase money financing of such after
acquired property up to 50% of the value of such after acquired property.
In November 1991,Taj Associates obtained a working capital line of credit in
the amount of $25,000,000 with a maturity of five years. In September 1994, Taj
Associates extended the maturity to November 1999, in consideration for
modifications of the terms of the facility. Interest on advances under the line
are at prime plus 3% with a minimum of 0.666% per month. The agreement provides
for a 3/4% annual fee and a 1/2% unused line fee and contains various
covenants. During 1995 and 1994, no amounts were outstanding under the line.
(3) CASINO LICENSE RENEWAL
Taj Funding and Taj Associates are subject to regulation and licensing by the
New Jersey Casino Control Commission (the "CCC"). The Taj Associates' casino
license must be renewed periodically, is not transferable, is dependent upon
the financial stability of the Partnership and can be revoked at anytime. Upon
revocation, suspension for more than 120 days, or failure to renew the casino
license due to Taj Associates' financial condition or for any other reason, the
Casino Control Act (the "Casino Control Act") provides that the CCC may appoint
a conservator to take possession of and title to the hotel and casino's
business and property, subject to all valid liens, claims and encumbrances. On
June 22, 1995, the CCC renewed Taj Associates casino license for four years,
through March 31, 1999.
F-44
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(4) LEGAL PROCEEDINGS
Taj Associates, its Partners, certain of its employees and Taj Funding are
involved in various legal proceedings incurred in the normal course of
business. In the opinion of management of Taj Associates, the expected
disposition of these proceedings would not have a material adverse effect on
the Taj Associates' or Taj Funding's financial condition or results of
operations.
(5) PARTNERSHIP DISTRIBUTION
Taj Associates is obligated to reimburse Taj Holding for its operating
expenses which consist of directors and officers liability insurance, board of
director fees and expenses, and administrative expenses. Total expenses for the
nine months ended September 30, 1995 and 1994 approximated $1,205,000 and
$1,710,000, respectively.
(6) FINANCIAL INFORMATION TAJ FUNDING
Financial information relating to Taj Funding is as follows (in
thousands):
DECEMBER SEPTEMBER
31, 1994 30, 1995
--------- -----------
(UNAUDITED)
Total Assets (including
First Mortgage Note Receivable of $765,130 and
$780,242
in addition to related interest receivable)....... $ 783,562 $813,472
Total Liabilities and Capital (including
Taj Bonds payable of $765,130 and
$780,242 and in addition to related interest pay-
able)............................................. $ 783,562 813,472
1994 1995
Three months ending September 30: --------- -----------
Interest Income.................................... $ 21,711 $ 22,140
Interest Expense................................... $ 21,711 $ 22,140
Net Income......................................... $ -- $ --
Nine months ending September 30:
Interest Income.................................... $ 64,611 $ 65,775
Interest Expense................................... $ 64,611 $ 65,775
Net Income......................................... $ -- $ --
(7) SUBSEQUENT EVENTS
On January 8, 1996, Trump Hotels & Casino Resorts, Inc. ("THCR"), Taj Holding
and THCR Merger Corp. ("Merger Sub") entered into the Agreement and Plan of
Merger, as amended by the Amendment to Agreement and Plan of Merger dated as of
January , 1996 (the "Merger Agreement"), pursuant to which Merger Sub will
merge with and into Taj Holding (the "Merger"). The Merger Agreement provides
that each outstanding share of Taj Holding Class A Common Stock will be
converted into the right to receive, at each holder's election, either (a)
$30.00 in cash or (b) that number of shares of Common Stock of THCR par value
$.01 per share ("Common Stock"), or shall have a market value equal to $30.00.
The Merger Agreement also contemplates the following transactions occurring in
connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of
Common Stock and the consummation of the offering by THCR Atlantic City
Holdings ("AC Holdings") and its wholly owned subsidiary THCR Atlantic City
Funding, Inc. of up to $1,180,000 aggregate principal amount of mortgage
notes, the aggregate proceeds of which will be used, together with available
cash, to (i) pay
F-45
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
cash to those holders of Taj Holding Class A Common Stock electing to
receive cash in the Merger, (ii) redeem the Taj Bonds, (iii) redeem the
outstanding shares of Taj Holding Class B Common Stock as required in
connection with the redemption of the Taj Bonds, (iv) retire, by purchasing
and/or defeasing, the outstanding 10 7/8% First Mortgage Notes due 2001 of
Trump Plaza Funding, Inc., (v) satisfy the indebtedness of Taj Associates,
the owner and operator of the Taj Mahal, under Taj Associates' loan
agreement with National Westminster Bank USA, (vi) purchase certain real
property used in the operation of the Taj Mahal that is currently leased
from a corporation wholly owned by Trump, (vii) purchase certain real
property used in the operation of Trump Plaza Hotel and Casino that is
currently leased from an unaffiliated third party, (viii) make a payment to
Bankers Trust to obtain releases of the liens and guarantees that Bankers
Trust has with respect to Taj Associates, and (ix) pay related fees and
expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
F-46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To THCR Atlantic City Funding, Inc.
We have audited the accompanying balance sheet of THCR Atlantic City Funding,
Inc. (a Delaware Corporation) as of January 30, 1996. This balance sheet is the
responsibility of the management of THCR Atlantic City Funding, Inc. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of THCR Atlantic City Funding, Inc.
as of January 30, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey
January 31, 1996
F-47
THCR ATLANTIC CITY FUNDING, INC.
BALANCE SHEET
JANUARY 30, 1996
ASSETS
Cash...................................................................... $100
----
Total Assets............................................................ $100
====
LIABILITIES AND SHAREHOLDER'S EQUITY
Commitments and Contingencies
Common Stock, $.01 par value, 1,000 shares authorized, 100 shares issued
and outstanding.......................................................... $100
----
Total Shareholder's Equity.............................................. 100
----
Total Liabilities and Shareholder's Equity.............................. $100
====
The accompanying notes to balance sheet are an integral part of this balance
sheet.
F-48
THCR ATLANTIC CITY FUNDING, INC.
NOTES TO BALANCE SHEET
JANUARY 30, 1996
(1) ORGANIZATION AND OPERATIONS
THCR Atlantic City Funding, Inc. ("AC Funding"), which is wholly owned by
Trump Plaza Holding Associates ("AC Holdings"), was formed on January 30, 1996
to raise funds through the issuance and sale of debt securities for the benefit
of Trump Taj Mahal Associates ("Taj Associates") and Trump Plaza Associates
("Plaza Associates").
As AC Funding has no operations, its ability to service its debt is dependent
upon the successful operations of Taj Associates and Plaza Associates.
(2) PROPOSED ISSUANCE OF FIRST MORTGAGE NOTES
AC Holdings, AC Funding, Plaza Associates and Taj Associates have filed
registration statements for the issuance and sale of $[1,180,000] of mortgage
notes due 2006. The proceeds of the mortgage notes are to be used, among other
things, to purchase Trump Taj Mahal Funding, Inc.'s outstanding 11.35% Mortgage
Bonds, Series A due 1999 and Trump Plaza Funding, Inc.'s 10 7/8% First Mortgage
Notes due 2001.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of Trump Hotels & Casino Resorts, Inc.
("THCR") and Taj Mahal Holding Corp.; (ii) the risk in refinancing and
repayment of indebtedness and the need for additional financing; (iii) the
restrictions imposed on certain activities by certain debt instruments; (iv)
the recent results of Trump Plaza Hotel and Casino ("Trump Plaza") and the
Trump Taj Mahal Casino Resort (the "Taj Mahal"); and (v) risks associated with
the expansion of Trump Plaza ("Trump Plaza Expansion"), the expansion of the
Taj Mahal and the riverboat gaming project approximately 25 miles from downtown
Chicago (the "Indiana Riverboat"). There can be no assurance that the Trump
Plaza Expansion or the Taj Mahal Expansion will be completed or that the
Indiana Riverboat or any other gaming venture, will open or that any of THCR's
or the Taj Mahal's operations will be successful. See "Risk Factors" included
elsewhere in this Prospectus for a discussion of these and other factors.
F-49
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE ISSUERS, THE GUARANTORS, OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOT ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
PAGE
Prospectus Summary....................................................... 3
Risk Factors............................................................. 21
Use of Proceeds.......................................................... 32
Capitalization........................................................... 33
Selected Historical Combined Financial Information....................... 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 36
Unaudited Pro Forma Financial Information................................ 50
Business................................................................. 56
Regulatory Matters....................................................... 83
Management............................................................... 92
Certain Transactions..................................................... 105
Description of the First Mortgage Notes.................................. 112
Security Ownership of Certain Beneficial Owners and Management........... 113
Description of the AC Holdings Partnership Agreement..................... 114
Certain Federal Income Tax Considerations................................ 115
Underwriting............................................................. 117
Legal Matters............................................................ 118
Experts.................................................................. 118
Available Information.................................................... 118
Index to Financial Statements............................................ F-1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$1,180,000,000
(LOGO)
TRUMP PLAZA HOLDING ASSOCIATES
THCR ATLANTIC CITY FUNDING, INC.
% FIRST MORTGAGE NOTES DUE 2006
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the First Mortgage Notes being registered, all of which will be paid by
AC Holdings. All amounts are estimates except the registration fee and the
NASD filing fee.
Registration Fee..................................................... $
NASD Filing Fee......................................................
Blue Sky Fees and Expenses...........................................
Accounting Fees and Expenses.........................................
Legal Fees and Expenses..............................................
Printing and Engraving Fees and Expense..............................
Miscellaneous........................................................
------
Total.............................................................. $
======
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation may indemnify directors and officers against liabilities
and expenses they may incur in such capacities provided certain standards are
met, including good faith and the belief that the particular action is in or
not opposed to the best interests of the corporation.
AC HOLDINGS
Article IX of the Certificate of Incorporation of Plaza Holding Inc., the
managing general partner of AC Holdings, provides that Plaza Holding Inc. may
indemnify any director, officer, employee or agent of Plaza Holding Inc., or
other person, to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law.
Article IX of the By-Laws of Plaza Holding Inc. provides that Plaza Holding
Inc. shall indemnify to the fullest extent permitted under and in accordance
with the laws of the State of Delaware any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of Plaza Holding Inc.) by reason of
the fact that he is or was a director, officer, incorporator, employee or
agent of Plaza Holding Inc., or is or was serving at the request of Plaza
Holding Inc. as a director, officer, trustee, employee or agent of or in any
other similar capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of Plaza Holding Inc., and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding shall (in the case of any action, suit
or proceeding against a director of Plaza Holding Inc.) or may (in the case of
any action, suit or proceeding against an officer, trustee, employee or agent)
be paid by Plaza Holding Inc. in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors upon
receipt of an undertaking by or on behalf of the indemnified person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by Plaza Holding Inc. as authorized in Article IX of the By-Laws
of Plaza Holding Inc.
Article IX of the By-Laws of Plaza Holding Inc. further provides that no
director shall be personally liable to Plaza Holding Inc. or any stockholder
for monetary damages for breach of fiduciary duty as a director, except for
any matter in respect of which such director (A) shall be liable under Section
174 of the General Corporation
II-1
Law of the State of Delaware or any amendment thereto or successor provision
thereto, or (B) shall be liable by reason that, in addition to any and all
other requirements for liability, he:
(i) shall have breached his duty of loyalty to Plaza Holding Inc. or its
stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of Plaza
Holding Inc. shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
AC FUNDING
Article IX of the AC Funding Certificate of Incorporation provides that AC
Funding shall indemnify to the fullest extent permitted under and in
accordance with the laws of the State of Delaware any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of AC Funding) by
reason of the fact that he is or was a director, officer, incorporator,
employee or agent of AC Funding, or is or was serving at the request of AC
Funding as a director, officer, trustee, employee or agent of or in any other
similar capacity with another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of AC Funding, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in, or not opposed to, the best
interests of AC Funding, and, with respect to any criminal action or
proceeding, shall not, of itself, create a presumption that the person had
reasonable cause to believe that his conduct was unlawful. Article IX of the
AC Funding Certificate of Incorporation further provides that AC Funding shall
indemnify to the fullest extent permitted under and in accordance with the
laws of the State of Delaware any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit, by or in the right of AC Funding to procure a judgment in its favor
by reason of the fact that such person is or was a director, officer, employee
or agent of AC Funding, or is or was serving at the request of AC Funding as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of AC Funding and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to AC Funding unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. Expenses (including attorneys' fees)
incurred in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall (in the case of any action, suit or
proceeding against a director of AC Funding) or may (in the case of any
action, suit or proceeding against an officer, trustee, employee or agent) be
paid by AC Funding in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
THCR as authorized in Article IX.
II-2
No director or officer shall be personally liable to AC Funding or any
stockholder for monetary damages for breach of fiduciary duty as a director or
officer, except for any matter in respect of which such director or officer
(A) shall be liable under Section 174 of the General Corporation Law of the
State of Delaware or any amendment thereto or successor provision thereto, or
(B) shall be liable by reason that, in addition to any and all other
requirements for liability, he:
(i) shall have breached his duty of loyalty to AC Funding or its
stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of AC
Funding shall be eliminated or limited to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended.
PLAZA ASSOCIATES
Section 16.14 of Plaza Associates' Second Amended and Restated Partnership
Agreement provides that Plaza Associates shall indemnify and hold harmless
each Partner, its Affiliates and all officers, directors, employees and agents
(individually, an "Agent") of such Partner, and its affiliates (individually,
an "Indemnitee") from and against any and all losses, claims, demands, costs,
damages, liabilities, joint and several, expenses of any nature (including
reasonable attorneys' fees and disbursements), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits, or
proceedings, civil, criminal, administrative or investigative, brought or
threatened in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise, arising out of or incidental to the
business of Plaza Associates or their status as an Agent including without
limitation liabilities under the Federal and state securities laws, regardless
of whether the Indemnitee continues to be a Partner, an Affiliate of a
Partner, or an Agent of a Partner or of an Affiliate of a Partner at the time
any such liability or expense is paid or incurred, so long as such indemnified
person acted in good faith on behalf of Plaza Associates, Plaza Funding or AC
Holdings and in a manner reasonably believed by such person to be in or not
opposed to the best interests of Plaza Associates, Plaza Funding or AC
Holdings but only if such course of conduct does not constitute gross
negligence or willful misconduct; provided that such indemnification or
agreement to hold harmless shall be recoverable only out of assets of Plaza
Associates and not from the Partners and; provided, further that no
indemnification shall be made to or on behalf of an Indemnitee if a judgment
or other final adjudication adverse to the Indemnitee establishes that his or
its acts or omissions (i) in the case of an Indemnitee who is or was a
director of Plaza Funding or the AC Holdings managing general partner, were in
breach of his duty of loyalty to Plaza Funding or the AC Holdings managing
general partner, as the case may be, or were not in good faith or involved a
knowing violation of law, or resulted in receipt by the Indemnitee of an
improper personal benefit or (ii) in the case of all other Indemnitees,
constituted gross negligence or willful misconduct.
Termination of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not itself create a
presumption that such Indemnitee did not meet the applicable standard of
conduct for indemnification. Indemnity shall be paid in advance of the final
disposition of the proceeding to an Indemnitee provided that the Indemnitee
undertakes to repay Plaza Associates if it shall ultimately be determined that
he or it is not entitled to indemnification as provided by Section 16.14. The
indemnification provided by Section 16.14 shall be in addition to any other
rights to which an Indemnitee may be entitled under any agreement, as a matter
of law or equity, or otherwise, both as to action in the Indemnitee's capacity
as a Partner, an Affiliate of a Partner, or as an officer, director, employee
or agent of a Partner or Affiliate of a Partner and as to any action in
another capacity, and shall continue as to an Indemnitee who has ceased to
serve in such
II-3
capacity and shall inure to the benefit of the heirs, successors, assigns and
administrators of the Indemnitee. No Indemnitee shall be denied
indemnification in whole or in part under Section 16.14 by reason of the fact
that the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if such interest was fully disclosed and the
transaction was approved by Plaza Funding.
THCR
AC Holdings and AC Funding are currently subsidiaries of THCR. Article IX of
the THCR Certificate of Incorporation provides that THCR shall indemnify to
the fullest extent permitted under and in accordance with the laws of the
State of Delaware any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of THCR) by reason of the fact that he is or was a
director, officer, incorporator, employee or agent of THCR, or is or was
serving at the request of THCR as a director, officer, trustee, employee or
agent of or in any other similar capacity with another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of THCR, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in,
or not opposed to, the best interests of THCR, and, with respect to any
criminal action or proceeding, shall not, of itself, create a presumption that
the person had reasonable cause to believe that his conduct was unlawful.
Expenses (including attorneys' fees) incurred in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall (in
the case of any action, suit or proceeding against a director of THCR) or may
(in the case of any action, suit or proceeding against an officer, trustee,
employee or agent) be paid by THCR in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors upon
receipt of an undertaking by or on behalf of the indemnified person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by THCR as authorized in Article IX.
No director or officer shall be personally liable to THCR or any stockholder
for monetary damages for breach of fiduciary duty as a director or officer,
except for any matter in respect of which such director or officer (A) shall
be liable under Section 174 of the General Corporation Law of the State of
Delaware or any amendment thereto or successor provision thereto, or (B) shall
be liable by reason that, in addition to any and all other requirements for
liability, he:
(i) shall have breached his duty of loyalty to THCR or its stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of THCR
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
II-4
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
There have been no recent sales of unregistered securities of the registrants
other than in connection with the formation and capitalization of AC Funding,
which sale was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended. In that regard, on January 30, 1996, AC
Funding sold to AC Holdings 100 shares of its Common Stock for $100.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
1.1* Underwriting Agreement, dated , 1996 among AC Holdings, AC
Funding, the Guarantors, Donaldson, Lufkin & Jenrette Securities
Corporation and BT Securities Corporation and Salomon Brothers
Inc.
2.1(13) Agreement and Plan of Merger, dated January 8, 1996, between
Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and
THCR Merger Corp.
2.1.1(15) Amendment to Agreement and Plan of Merger, dated January 31,
1996, by and among Trump Hotels & Casino Resorts, Inc., Taj
Mahal Holding Corp. and THCR Merger Corp.
3.1 Certificate of Incorporation of THCR Atlantic City Funding, Inc.
3.2 By-Laws of THCR Atlantic City Funding, Inc.
3.3-3.6 Intentionally omitted.
3.7(6) Second Amended and Restated Partnership Agreement of Trump Plaza
Associates.
3.8(7) Partnership Agreement of Trump Plaza Holding Associates.
3.8.1(7) Amendment No. 1 to the Partnership Agreement of Trump Plaza
Holding Associates.
3.8.2(14) Amendment No. 2 to the Partnership Agreement of Trump Plaza
Holding Associates.
4.1(7) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Trump Plaza Associates, as guarantor, and First Bank
National Association, as trustee.
4.2(7) Indenture of Mortgage, between Trump Plaza Associates, as
mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
4.3(7) Assignment Agreement between Trump Plaza Funding, Inc., and
First Bank National Association, as trustee.
4.4(7) Assignment of Operating Assets from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.5(7) Assignment of Leases and Rents from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.6(7) Indenture of Mortgage between Trump Plaza Associates and First
Bank National Association, as trustee.
4.7(7) Assignment of Leases and Rents from Trump Plaza Associates to
First Bank National Association, as trustee.
4.8(7) Assignment of Operating Assets from Trump Plaza Associates to
First Bank National Association, as trustee.
4.9(7) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(7) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(7) Pledge Agreement of Trump Plaza Funding, Inc., in favor and for
the benefit of First Bank National Association, as trustee.
4.12-4.25 Intentionally omitted.
II-5
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
4.26* Form of Indenture among THCR Atlantic City Holding and THCR
Atlantic City Funding, Inc., as issuers, the guarantors named
therein and First Bank National Association as trustee.
4.27* Form of First Mortgage Note Certificate (included in exhibit
4.26).
4.28* Form of Indenture of Mortgage and Security Agreement among THCR
Atlantic City Holdings and THCR Atlantic City Funding, Inc., the
guarantors named therein and First Bank National Association, as
trustee.
4.29* Form of Assignment Agreement among THCR Atlantic City Funding,
Inc. and THCR Atlantic City Holdings, the guarantors named
therein, and First Bank National Association, as trustee.
5.1* Opinion of Willkie Farr & Gallagher.
8.1* Opinion of Willkie Farr & Gallagher with respect to certain tax
matters.
10.1-10.6 Intentionally omitted.
10.7(9) Employment Agreement between Trump Plaza Associates and Barry
Cregan.
10.8-10.9 Intentionally omitted.
10.10(3) Agreement of Lease, dated as of July 1, 1980, by and between SSG
Enterprises, as lessor and Atlantic City Seashore 2, Inc., as
lessee, as SSG Enterprises' interest has been assigned to
Seashore Four, and as Atlantic City Seashore 2, Inc.'s interest
has been, through various assignments, assigned to Trump Plaza
Associates (with schedules).
10.11(3) Agreement of Lease, dated July 11, 1980, by and between Plaza
Hotel Management Company, as lessor, and Atlantic City Seashore
3, Inc., as lessee, as Atlantic City Seashore 3, Inc.'s interest
has been, through various assignments, assigned to Trump Plaza
Associates (with schedules).
10.12(3) Agreement of Lease, dated as of July 1, 1980, by and between
Magnum Associates and Magnum Associates II, as lessor and
Atlantic City Seashore 1, Inc., as lessee, as Atlantic City
Seashore 1, Inc.'s interest has been, through various
assignments, assigned to Trump Plaza Associates (with
schedules).
10.13-10.15 Intentionally omitted.
II-6
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
10.16(1) Trump Plaza Hotel and Casino Retirement Savings Plan effective
as of November 1, 1986.
10.17-10.20 Intentionally omitted.
10.21(4) Assignment of Lease, dated as of July 28, 1988, by and between
Magnum Associates and Magnum Associates II, as assignor, Trump
Seashore Associates, as assignee, and Trump Plaza Associates, as
lessee.
10.22-10.27 Intentionally omitted.
10.28(2) Option Agreement, dated as of February 2, 1993, between Donald
J. Trump and Trump Plaza Associates.
10.29 Intentionally omitted.
10.30(5) Amended and Restated Services Agreement between Trump Plaza
Associates and Donald J. Trump.
10.31-10.32 Intentionally omitted.
10.33(6) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg
and Robert Rothenberg, dated October 3, 1983.
10.34(6) Intentionally omitted.
10.35(6) Mortgage from Trump Plaza Associates to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
10.35.1(6) Collateral Assignment of Leases from Trump Plaza Associates to
The Mutual Benefit Life Insurance Company, dated October 5,
1990.
10.36-10.37 Intentionally omitted.
10.38(8) Employment Agreement between Trump Plaza Associates and Nicholas
L. Ribis.
10.38.1(12) Employment Agreement between Trump Hotels & Casino Resorts
Holdings, L.P. and Nicholas L. Ribis (with exhibits).
10.39(8) Severance Agreement between Trump Plaza Associates and Robert M.
Pickus.
10.40 Employment Agreement, dated as of February 7, 1995, between
Trump Plaza Associates and Kevin S. Smith.
10.41(10) Employment Agreement between Trump Plaza Associates and James A.
Rigot.
10.42(10) Option and Right of First Offer Agreement between Trump Plaza
Associates and Missouri Boardwalk Inc., dated June 24, 1993.
10.43(10) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated
June 24, 1993.
10.44(10) Sublease between Donald J. Trump and Missouri Boardwalk Inc.,
dated June 24, 1993.
10.45 Intentionally omitted.
10.46(12) Executive Agreement among Donald J. Trump, Trump Hotels & Casino
Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47(12) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts, Inc.
10.48-10.49 Intentionally omitted.
10.50(11) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
II-7
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
10.51-10.55 Intentionally omitted.
10.55(12) Trademark Security Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.56(11) Agreement of Sublease between Donald J. Trump and Time Warner
Entertainment Company, L.P., as amended.
10.57-10.60 Intentionally omitted.
21* List of Subsidiaries of AC Holdings.
23.1 Consent of Arthur Andersen LLP.
23.2 Intentionally omitted.
23.3* Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
23.4* Consent of Sterns & Weinroth.
24.1(16) Power of Attorney.
25* Statement of Eligibility Under the Trust Indenture Act of 1939
of the First Mortgage Note Trustee.
27 Financial Data Schedule of THCR AC Atlantic City Funding, Inc.
- ---------------------
*To be filed by amendment.
(1) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
ended December 31, 1986.
(2) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
ended December 31, 1992.
(3) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-4604, of Trump
Plaza Funding, Inc.
(4) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the fiscal
year ended December 31, 1990.
(5) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58608, of Trump Plaza Holding Associates.
(6) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-58602, of
Trump Plaza Funding, Inc. and Trump Plaza Associates.
II-8
(7) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-58608, of
Trump Plaza Holding Associates.
(8) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
Plaza Holding Associates for the year ended December 31, 1993.
(9) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 1O-Q of Trump Plaza Funding, Inc. for the
quarter ended September 30, 1994.
(10) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
Plaza Holding Associates for the year ended December 31, 1994.
(11) Incorporated herein by reference to the identically numbered Exhibit to
the Registration Statement on Form S-1, Registration No. 33-90784, of
Trump Hotels & Casino Resorts, Inc.
(12) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. for the quarter ended June 30, 1995.
(13) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated January 10, 1996.
(14) Incorporated herein by reference to the identically numbered Exhibit to
the Quarterly Report on Form 10-Q of Trump Plaza Funding, Inc., Trump
Plaza Associates and Trump Plaza Holding Associates for the quarter ended
June 30, 1995.
(15) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated February 1, 1996.
(16) Contained on the signature page of this Registration Statement.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--Valuation and Qualifying Accounts of Trump Plaza Holding
Associates and Trump Plaza Associates for the years ended
December 31, 1992, 1993 and 1994.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York, on February 1, 1996.
THCR ATLANTIC CITY HOLDINGS
By:Trump Plaza Holding, Inc.,
its Managing General Partner
/s/ Donald J. Trump
By: _________________________________
Name:Donald J. Trump
Title:President
THCR ATLANTIC CITY FUNDING, INC.
/s/ Donald J. Trump
By: _________________________________
Name:Donald J. Trump
Title:Chairman of the Board of
Directors
TRUMP PLAZA ASSOCIATES
By:Trump Plaza Funding, Inc.,
its Managing General Partner
/s/ Donald J. Trump
By: _________________________________
Name:Donald J. Trump
Title:President and Treasurer
II-10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer and director of Trump Plaza
Holding, Inc., Managing General Partner of THCR Atlantic City Holdings, whose
signature appears below constitutes and appoints Donald J. Trump and Nicholas
L. Ribis, and each of them, his true and lawful attorneys-in-fact and agents,
with full and several power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Donald J. Trump President and February 1, 1996
- ------------------------------------ Chairman of the
DONALD J. TRUMP Board of Directors
(principal
executive officer)
/s/ Francis X. McCarthy, Jr. Chief Financial February 1, 1996
- ------------------------------------ Officer (principal
FRANCIS X. MCCARTHY, JR. financial and
accounting
officer)
/s/ Nicholas L. Ribis Vice President and February 1, 1996
- ------------------------------------ Director
NICHOLAS L. RIBIS
/s/ Wallace B. Askins Director February 1, 1996
- ------------------------------------
WALLACE B. ASKINS
/s/ Don M. Thomas Director February 1, 1996
- ------------------------------------
DON M. THOMAS
II-11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer and director of THCR
Atlantic City Funding, Inc., whose signature appears below constitutes and
appoints Donald J. Trump and Nicholas L. Ribis, and each of them, his true and
lawful attorneys-in-fact and agents, with full and several power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Donald J. Trump Chairman of the February 1, 1996
- ------------------------------------- Board of Directors
DONALD J. TRUMP
/s/ Nicholas L. Ribis President, Chief February 1, 1996
- ------------------------------------- Executive Officer,
NICHOLAS L. RIBIS Chief Financial
Officer and
Director (principal
executive and
financial officer)
/s/ Robert M. Pickus Director February 1, 1996
- -------------------------------------
ROBERT M. PICKUS
/s/ John P. Burke Corporate Treasurer February 1, 1996
- ------------------------------------- (principal
JOHN P. BURKE accounting officer)
II-12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer and director of Trump Plaza
Funding, Inc., Managing General Partner of Trump Plaza Associates, whose
signature appears below constitutes and appoints Donald J. Trump and Nicholas
L. Ribis, and each of them, his true and lawful attorneys-in-fact and agents,
with full and several power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Donald J. Trump President and February 1, 1996
- ------------------------------------- Chairman of the
DONALD J. TRUMP Board of Directors
(principal
executive officer)
/s/ Francis X. McCarthy, Jr. Chief Financial February 1, 1996
- ------------------------------------- Officer (principal
FRANCIS X. MCCARTHY, JR. financial and
accounting officer)
/s/ Nicholas L. Ribis Director February 1, 1996
- -------------------------------------
NICHOLAS L. RIBIS
/s/ Wallace B. Askins Director February 1, 1996
- -------------------------------------
WALLACE B. ASKINS
/s/ Don M. Thomas Director February 1, 1996
- -------------------------------------
DON M. THOMAS
II-13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Holding Associates and
Trump Plaza Associates:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Plaza Holding Associates and Trump Plaza
Associates (Partnerships) included in this registration statement and have
issued our report thereon dated February 18, 1995 (except with respect to the
matters discussed in Note 10, as to which the date is January 31, 1996). Our
audit was made for the purposes of forming an opinion on the basic financial
statements taken as a whole. The accompanying schedule is the responsibility
of the Partnerships' management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 18, 1995
(except with respect to
the matters discussed in
Note 10, as to which
the date is January 31, 1996)
S-1
SCHEDULE II
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992 1993 AND 1994
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND CHANGES END OF
OF PERIOD EXPENSES (DEDUCTIONS) PERIOD
----------- ---------- ------------ -----------
YEAR ENDED DECEMBER 31,
1992
Allowances for doubtful
accounts................ $20,231,000 $4,675,000 $(10,504,000)(A) $14,402,000
=========== ========== ============ ===========
Valuation allowance for
interest differential on
CRDA bonds.............. $ 1,385,000 $ 645,000 $ (96,000)(B) $ 1,934,000
=========== ========== ============ ===========
YEAR ENDED DECEMBER 31,
1993
Allowances for doubtful
accounts................ $14,402,000 $ 90,000 $ (3,876,000)(A) $10,616,000
=========== ========== ============ ===========
Valuation allowance for
interest differential on
CRDA bonds.............. $ 1,934,000 $1,047,000 -- $ 2,981,000
=========== ========== ============ ===========
YEAR ENDED DECEMBER 31,
1994
Allowances for doubtful
accounts................ $10,616,000 $ 323,000 $ (2,446,000)(A) $ 8,493,000
=========== ========== ============ ===========
Valuation allowance for
interest differential on
CRDA bonds.............. $ 2,981,000 $ 838,000 $ (1,645,000)(B) $ 2,174,000
=========== ========== ============ ===========
- ---------------------
(A) Write-off of uncollectible accounts.
(B) Write-off of allowance applicable to contribution of CRDA deposits.
S-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Taj Mahal Associates and Subsidiary:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Taj Mahal Associates (Partnership) and
Subsidiary included in this registration statement and have issued our report
thereon dated March 22, 1995 (except with respect to the matter discussed in
Note 10, as to which the date is January 31, 1996). Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The accompanying schedule is the responsibility of the Partnership's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 22, 1995
(except with respect to
the matter discussed in
Note 10, as to which the
date is January 31, 1996)
S-3
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED DEDUCTIONS BALANCE
BEGINNING COSTS AND TO OTHER FROM AT END
OF PERIOD EXPENSES ACCOUNTS RESERVES OF PERIOD
---------- ---------- -------- ---------- ---------
December 31, 1992:
Allowance for doubtful
receivables............ $ 5,664 $6,197 $-- $6,586(B) $ 5,275
Valuation allowance for
CRDA investments (A)... 1,806 2,563 -- -- 4,369
------- ------ ---- ------ -------
$ 7,470 $8,760 $-- $6,586 $ 9,644
======= ====== ==== ====== =======
December 31, 1993:
Allowance for doubtful
receivables............ $ 5,275 $3,472 $-- $4,401(B) $ 4,346
Valuation allowance for
CRDA investments (A)... 4,369 2,764 -- -- 7,133
------- ------ ---- ------ -------
$ 9,644 $6,236 $-- $4,401 $11,479
======= ====== ==== ====== =======
December 31, 1994:
Allowance for doubtful
receivables............ $ 4,346 $2,974 $-- $3,261(B) $ 4,059
Valuation allowance for
CRDA investments (A)... 7,133 2,134 -- 4,753 4,514
------- ------ ---- ------ -------
$11,479 $5,108 $-- $8,014 $ 8,573
======= ====== ==== ====== =======
- ---------------------
(A) See Note 5 to financial statements.
(B) Uncollectible accounts written off, net of recoveries.
S-4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
3.1 Certificate of Incorporation of THCR Atlantic City Funding, Inc.
3.2 By-Laws of THCR Atlantic City Funding, Inc.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule of THCR AC Atlantic City Funding, Inc.