As Filed with the Securities and Exchange Commission on August 29, 1996
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TRUMP HOTELS & CASINO RESORTS, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
TRUMP HOTELS & CASINO RESORTS, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Limited Partnership Interests Exchangeable into Common Stock
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2) Aggregate number of securities to which transaction applies:
15.33863% of Limited Partnership Interests
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$30.00 per share of Common Stock
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4) Proposed maximum aggregate value of transaction:
$176,900,000
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5) Total Fee Paid:
$35,380
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
2500 Boardwalk
Atlantic City, New Jersey 08401
August 29, 1996
Dear Stockholders:
You are cordially invited to attend a Special Meeting of stockholders (the
"Special Meeting") of Trump Hotels & Casino Resorts, Inc. ("THCR"), which will
be held on September 30, 1996 at The Plaza Hotel, 768 Fifth Avenue, New York,
New York, commencing at 2:00 p.m. , local time. At this important meeting, you
will be asked to approve the proposed acquisition (the "Acquisition") by Trump
Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"), a subsidiary of THCR,
of all of the outstanding equity interests of Trump's Castle Associates, a New
Jersey general partnership ("Castle Associates") and the owner and operator of
Trump's Castle Casino Resort in Atlantic City, New Jersey. The approval of the
Acquisition will constitute approval and adoption of the Agreement, dated as of
June 24, 1996, as amended (the "Agreement"), by and among THCR, THCR Holdings,
TC/GP, Inc., Trump's Castle Hotel & Casino, Inc. and Donald J. Trump ("Trump").
Trump is currently the beneficial owner of 100% of the outstanding equity
interests of Castle Associates.
Following the Acquisition, THCR's gaming operations will include Trump's
Castle Casino Resort, the Trump Plaza Hotel and Casino, which also includes
Trump World's Fair, the Trump Taj Mahal Casino Resort and THCR's riverboat
casino at Buffington Harbor on Lake Michigan, making THCR one of the largest
casino entertainment companies in the United States. In addition, THCR will
continue to be the exclusive vehicle through which Trump will engage in new
gaming activities in both emerging and established gaming jurisdictions.
The Acquisition will strengthen THCR's position as a leader in the casino
entertainment industry and enhance THCR's presence in the growing Atlantic City
gaming market. The Acquisition will provide THCR with a significant presence in
Atlantic City's marina district (the "Marina"), the principal focus of expansion
in the Atlantic City gaming market, and will position THCR as the only casino
operator in Atlantic City with facilities at both The Boardwalk and the Marina.
Salomon Brothers Inc ("Salomon"), the financial advisor to the Special
Committee (the "Special Committee") of the Board of Directors of THCR (the
"Board of Directors"), rendered its opinion on June 24, 1996 to the effect that,
as of such date, the consideration to be paid by THCR and THCR Holdings, taken
as a whole, in the Acquisition is fair, from a financial point of view, to THCR
and THCR Holdings. The written opinion of Salomon, dated June 24, 1996, is
included in the accompanying Proxy Statement and should be read carefully in its
entirety by the stockholders of THCR.
THE BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE HAVE CONSIDERED THE TERMS
AND CONDITIONS OF THE ACQUISITION, DETERMINED THAT THE ACQUISITION IS FAIR TO,
AND IN THE BEST INTERESTS OF, THCR AND UNANIMOUSLY APPROVED THE TERMS OF THE
ACQUISITION AND THE AGREEMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
TO APPROVE THE ACQUISITION.
In addition, at the Special Meeting, you will be asked to consider and vote
upon a proposal to amend THCR's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock, par
value $.01 per share (the "Common Stock"), from 50,000,000 to 75,000,000 (the
"Amendment"). The Board of Directors considers it advisable to have additional
shares of Common Stock available for use for future financings, acquisitions,
stock dividends or stock splits and for other general corporate purposes. The
availability of such shares for issuance in the future will give THCR greater
flexibility and permit such shares to be issued without the expense and delay of
a special meeting of stockholders of THCR.
THE BOARD OF DIRECTORS HAS CONSIDERED AND UNANIMOUSLY APPROVED THE
AMENDMENT. THE BOARD OF DIRECTORS OF THCR RECOMMENDS THAT YOU VOTE TO APPROVE
THE AMENDMENT.
The accompanying Proxy Statement explains in detail the Acquisition and the
Amendment. Please read the Proxy Statement carefully in its entirety.
It is important that your shares be represented at the Special Meeting,
regardless of the number you hold. Therefore, please fill in, sign, date and
return your proxy card as soon as possible, whether or not you plan to attend
the Special Meeting. This will not prevent you from subsequently voting your
shares in person if you choose to attend the Special Meeting. All shares will be
voted in accordance with the instructions indicated in such proxies. If no
instructions are indicated, such shares will be voted "FOR" approval of the
Acquisition and the Amendment.
Sincerely,
/s/ NICHOLAS L. RIBIS
NICHOLAS L. RIBIS
President and Chief Executive Officer
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
2500 Boardwalk
Atlantic City, New Jersey 08401
(609) 441-6060
-------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held September 30, 1996
-------------------
To the Stockholders of
Trump Hotels & Casino Resorts, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders of Trump
Hotels & Casino Resorts, Inc., a Delaware corporation ("THCR"), has been called
by the Board of Directors of THCR and will be held at The Plaza Hotel, 768 Fifth
Avenue, New York, New York, on September 30, 1996, at 2:00 p.m., local time, and
thereafter as it may from time to time be adjourned or postponed (the "Special
Meeting"), for the following purposes:
1. To approve the acquisition by Trump Hotels & Casino Resorts
Holdings, L.P., a Delaware limited partnership and a subsidiary of THCR
("THCR Holdings"), of all the outstanding equity interests of Trump's
Castle Associates, a New Jersey general partnership and the owner and
operator of Trump's Castle Casino Resort in Atlantic City, New Jersey (the
"Acquisition"), which approval will constitute approval and adoption of the
Agreement, dated as of June 24, 1996, as amended (the "Agreement"), by and
among THCR, THCR Holdings, TC/GP, Inc., Trump's Castle Hotel & Casino, Inc.
and Donald J. Trump ("Trump").
2. To approve and adopt an amendment to THCR's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
THCR's common stock, par value $.01 per share (the "Common Stock"), from
50,000,000 to 75,000,000 (the "Amendment").
3. To transact such other business as may properly come before the
Special Meeting.
Approval of the Acquisition will require the affirmative vote of a majority
of (i) the outstanding shares of Common Stock (excluding shares held by Trump
and the other officers and directors of THCR and their affiliates) and (ii) the
outstanding voting power of the Common Stock and THCR's Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"), voting as single class.
Approval of the Amendment will require the affirmative vote of a majority of the
outstanding voting power of the Common Stock and Class B Common Stock, voting as
a single class.
Only holders of record of Common Stock and Class B Common Stock as of the
close of business on August 26, 1996 are entitled to notice of, and to vote at,
the Special Meeting.
The accompanying Proxy Statement explains in detail the Acquisition and the
Amendment. A copy of the Agreement is attached to the accompanying Proxy
Statement as Annex A. The Proxy Statement and Annexes thereto form a part of
this Notice.
By order of the Board of Directors,
/s/ ROBERT M. PICKUS
ROBERT M. PICKUS
Secretary
August 29, 1996
Your vote is important. To ensure that your shares are represented, whether
or not you expect to be present at the Special Meeting, you are urged to please
fill in, sign, date and return the enclosed proxy card in the enclosed postage
paid envelope. You may revoke your proxy at any time before it is voted at the
Special Meeting. All shares will be voted in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such shares will be
voted "FOR" approval of the Acquisition and the Amendment. If you attend the
Special Meeting, you may vote your shares in person, and the proxy will not be
used.
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
2500 Boardwalk
Atlantic City, New Jersey 08401
---------------
PROXY STATEMENT
---------------
This Proxy Statement (the "Proxy Statement") is furnished to the holders of
Common Stock, par value $.01 per share ("THCR Common Stock"), of Trump Hotels &
Casino Resorts, Inc., a Delaware corporation ("THCR"), in connection with the
solicitation of proxies by the Board of Directors of THCR (the "Board of
Directors"), to be voted at the special meeting of stockholders of THCR to be
held on September 30, 1996, at 2:00 p.m., New York City time, at The Plaza
Hotel, 768 Fifth Avenue, New York, New York, and at any adjournment or
postponement thereof (the "Special Meeting"). The Board of Directors has fixed
August 26, 1996 as the record date (the "Record Date") for the Special Meeting.
This Proxy Statement relates to the proposed acquisition (the
"Acquisition") by Trump Hotels & Casino Resorts Holdings, L.P., a Delaware
limited partnership and a subsidiary of THCR ("THCR Holdings" and collectively
with THCR, the "THCR Entities"), of all of the outstanding equity interests of
Trump's Castle Associates, a New Jersey general partnership ("Castle
Associates") that owns and operates Trump's Castle Casino Resort in Atlantic
City, New Jersey, pursuant to the Agreement, dated as of June 24, 1996, as
amended (the "Agreement"), by and among THCR, THCR Holdings, TC/GP, Inc.
("TC/GP"), a Delaware corporation wholly owned by Donald J. Trump ("Trump"),
Trump's Castle Hotel & Casino, Inc. ("TCHI" and, collectively with TC/GP, the
"Castle Entities"), a New Jersey corporation wholly owned by Trump, and Trump.
Trump is currently the beneficial owner of 100% of the outstanding equity
interests of Castle Associates. As a result of the Acquisition, Castle
Associates will be beneficially owned by THCR Holdings.
Pursuant to the terms of the Agreement, the aggregate consideration payable
for all of the outstanding equity interests of Castle Associates is $176.9
million, payable in limited partnership interests in THCR Holdings (exchangeable
into shares of THCR Common Stock) and cash as set forth below (the "Castle
Equity Consideration"). The Castle Equity Consideration represents: (A) $525.0
million (the agreed-upon value for the business and operations of Castle
Associates) minus (B) $314.0 million (the sum of all the aggregate principal
amounts of (i) Castle Associates' capital lease obligations and indebtedness
under the Castle Term Loan (as defined), (ii) Increasing Rate Subordinated
Pay-in-Kind Notes due 2005 (the "Castle PIK Notes") of Trump's Castle Funding,
Inc. ("Castle Funding") not held by THCR Holdings, (iii) Castle Senior Notes (as
defined) and (iv) Castle Mortgage Notes (as defined) outstanding as of the date
of the Agreement) minus (C) $40.8 million (the aggregate principal amount of
Castle PIK Notes held by THCR Holdings estimated to be outstanding as of the
closing date of the Acquisition (the "Closing Date") less the aggregate discount
at which Trump could have repurchased the Castle PIK Notes held by THCR
Holdings) plus (D) $6.7 million (the estimated amount of excess cash over the
operating needs of Castle Associates as of the Closing Date).
Neither THCR nor THCR Holdings will be liable for the debt obligations of
Castle Associates following the Acquisition.
(continued on following page)
The date of this Proxy Statement is August 29, 1996.
<PAGE>
The Agreement contemplates that the following transactions will take place
on the Closing Date:
(i) Trump will contribute to THCR Holdings his 61.5% equity interest
in Castle Associates, in consideration of which he will receive a 9.52854%
limited partnership interest in THCR Holdings (the "Trump Consideration"),
exchangeable into 3,626,450 shares of THCR Common Stock (valuing each such
share at $30.00 (the "THCR Stock Contribution Value"));
(ii) TC/GP will contribute to THCR Holdings its 37.5% equity interest
in Castle Associates, in consideration of which it will receive a 5.81009%
limited partnership interest in THCR Holdings (the "TC/GP Consideration"),
exchangeable into 2,211,250 shares of THCR Common Stock (valuing each such
share at the THCR Stock Contribution Value); and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and a wholly
owned subsidiary of THCR Holdings ("Merger Sub"), will merge (the "TCHI
Merger") with and into TCHI (holder of a 1.0% equity interest in Castle
Associates), whereupon (x) each share of common stock of TCHI, par value
$.01 per share (the "TCHI Common Stock"), outstanding immediately prior to
the TCHI Merger will be converted into the right to receive $.8845 in cash
(the "TCHI Consideration") and each share of common stock of Merger Sub
will be converted into the right to receive one share of common stock of
the surviving corporation of the TCHI Merger and (y) each holder of the
outstanding warrants (the "Castle Warrants") issued under the Warrant
Agreement, dated as of December 30, 1993 (the "Castle Warrant Agreement"),
between TCHI and First Bank National Association, as warrant agent (the
"Castle Warrant Agent"), will be entitled to receive for each former share
of TCHI Common Stock for which each Castle Warrant was exercisable an
amount in cash equal to the TCHI Consideration (the "Castle Warrant
Consideration").
The Agreement provides that if the THCR Stock Market Value (as defined below) is
higher than $38.00, the Trump Consideration and the TC/GP Consideration (and the
number of shares of THCR Common Stock into which they are exchangeable) will be
reduced appropriately as of the Closing Date so that no value will be received
by Trump or TC/GP in respect of any appreciation of the THCR Common Stock above
$38.00 per share. The Agreement defines "THCR Stock Market Value" as the average
of the closing sale prices on the New York Stock Exchange ("NYSE") of a share of
THCR Common Stock for the twenty day trading period ending three trading days
immediately preceding the Closing Date.
In connection with the Acquisition, the Second Amended and Restated
Partnership Agreement of Castle Associates, dated as of December 30, 1993 (the
"Castle Partnership Agreement"), will be amended to convert Castle Associates
from a general partnership to a limited partnership. Upon consummation of the
Acquisition, THCR Holdings will own a 99% limited partnership interest in Castle
Associates and TCHI, the surviving corporation of the TCHI Merger, will own a 1%
general partnership interest in Castle Associates. See "The Agreement--The
Acquisition." Upon consummation of the Acquisition, THCR's and Trump's
beneficial equity interests in THCR Holdings will be approximately 63.4% and
36.6%, respectively, and Trump's beneficial equity interest in THCR Holdings
will be exchangeable, at his option, into 13,918,723 shares of THCR Common
Stock.
The Acquisition is subject to satisfaction of a number of conditions,
including the affirmative vote of a majority of the outstanding shares of THCR
Common Stock (excluding shares held by Trump and the other officers and
directors of THCR and their affiliates) and the receipt of various third party
approvals and consents. If the Acquisition is not approved by the stockholders
of THCR, Trump will be able to terminate the Agreement and pursue other
potential opportunities with respect to his ownership of Castle Associates.
This Proxy Statement also relates to the proposed amendment to THCR's
Amended and Restated Certificate of Incorporation (the "THCR Certificate of
Incorporation") to increase the number of shares of THCR Common Stock authorized
for issuance thereunder from 50,000,000 to 75,000,000 (the "Amendment"). The
Board of Directors considers it advisable to have additional shares of THCR
Common Stock available for use for future financings, acquisitions, stock
dividends or stock splits and for other general corporate purposes. The
availability of such shares for issuance in the future will give THCR greater
flexibility and permit such shares to be issued without the expense and delay of
a special meeting of stockholders of THCR.
This Proxy Statement and the accompanying proxy card are first being sent
or given to stockholders on or about August 29, 1996.
2
<PAGE>
TABLE OF CONTENTS
Page
----
PROXY STATEMENT SUMMARY ................................................. 4
The Acquisition ..................................................... 4
Parties to the Acquisition .......................................... 5
The Special Meeting ................................................. 5
Dissenting Stockholders' Rights of Appraisal ........................ 6
Recommendation of the Board of Directors ............................ 6
Opinion of Financial Advisor ........................................ 6
The Agreement ....................................................... 6
Certain Federal Income Tax Considerations ........................... 7
Accounting Treatment ................................................ 7
Regulatory Approvals ................................................ 7
Dividends ........................................................... 7
Summary Financial Information of THCR ............................... 8
Summary Financial Information of Castle Associates .................. 10
Corporate Structure and Organization ................................ 11
CURRENT OWNERSHIP STRUCTURE OF THCR ..................................... 12
OWNERSHIP STRUCTURE OF THCR AFTER THE
ACQUISITION ............................................................ 13
PROPOSALS ............................................................... 14
Proposal 1--Approval of the Acquisition ............................. 14
Proposal 2--Amendment of the THCR Certificate of
Incorporation to Increase the Number of Authorized
Shares of THCR Common Stock ........................................ 14
GENERAL INFORMATION ..................................................... 16
THE SPECIAL MEETING ..................................................... 16
Purpose ............................................................. 16
Record Date; Voting Rights; Proxies ................................. 16
Quorum; Broker Non-Votes ............................................ 16
Required Vote ....................................................... 17
Solicitation of Proxies; Independent Auditors ....................... 17
THE ACQUISITION ......................................................... 18
Background of the Acquisition ....................................... 18
Reasons for the Acquisition ......................................... 20
Opinion of Financial Advisor ........................................ 21
Interest of Certain Persons in the Acquisition ...................... 24
Regulatory Matters .................................................. 25
Certain Federal Income Tax Considerations ........................... 25
THE AGREEMENT ........................................................... 26
The Acquisition ..................................................... 26
Closing ............................................................. 27
Conditions to the Acquisition ....................................... 27
Representations and Warranties ...................................... 28
Conduct Pending the Acquisition ..................................... 28
Other Covenants ..................................................... 29
No Solicitation ..................................................... 29
Indemnification ..................................................... 30
Termination ......................................................... 30
Fees and Expenses ................................................... 31
Amendment; Waiver; Survival ......................................... 31
UNAUDITED PRO FORMA FINANCIAL INFORMATION ............................... 32
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL INFORMATION OF THCR .......................................... 37
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL INFORMATION OF CASTLE
ASSOCIATES ............................................................. 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CASTLE ASSOCIATES ........................................ 40
Results of Operations for the Six Months Ended
June 30, 1996 and 1995 ............................................. 40
Results of Operations for the Years Ended
December 31, 1995 and 1994 ......................................... 41
Results of Operations for the Years Ended
December 31, 1994 and 1993 ......................................... 42
Inflation ........................................................... 43
Liquidity and Capital Resources ..................................... 43
BUSINESS OF CASTLE ASSOCIATES ........................................... 45
The Casino-Hotel .................................................... 45
Marketing Strategy .................................................. 45
Atlantic City Market ................................................ 46
Trump's Castle Expansion ............................................ 48
Competition ......................................................... 48
Seasonality ......................................................... 50
Employees and Labor Relations ....................................... 50
Historical Background ............................................... 50
Legal Proceedings ................................................... 51
Properties .......................................................... 51
MARKET PRICE AND DIVIDEND DATA OF
CASTLE ASSOCIATES AND THE CASTLE ENTITIES .............................. 52
DESCRIPTION OF THE CASTLE PARTNERSHIP
AGREEMENT .............................................................. 53
General ............................................................. 53
Management of Castle Associates ..................................... 53
Indemnification ..................................................... 54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF THCR .......................................... 55
SUBMISSION OF STOCKHOLDER PROPOSALS
--1997 ANNUAL MEETING .................................................. 56
AVAILABLE INFORMATION ................................................... 56
INFORMATION INCORPORATED BY REFERENCE ................................... 56
INDEX TO FINANCIAL STATEMENTS ........................................... F-1
Annex A: Agreement
Annex B: Fairness Opinion of Salomon Brothers Inc
3
<PAGE>
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PROXY STATEMENT SUMMARY
The following is a summary of the information contained in this Proxy
Statement and is qualified in its entirety by the more detailed information and
financial statements included elsewhere herein and incorporated herein by
reference. Certain capitalized terms used herein are defined elsewhere in this
Proxy Statement. Unless otherwise indicated, the term "THCR" as used herein
includes THCR and its subsidiaries. Stockholders of THCR are urged to read
carefully this Proxy Statement and Annexes hereto in their entirety.
The Acquisition
The Acquisition will combine three "Four Star" Atlantic City casino hotels,
a riverboat casino and the rights to all new Trump gaming ventures. Upon
consummation of the Acquisition, THCR will own and operate the Trump Plaza Hotel
and Casino, which also includes Trump World's Fair ("Trump Plaza"), and the
Trump Taj Mahal Casino Resort (the "Taj Mahal"), each located on The Boardwalk
in Atlantic City, New Jersey, Trump's Castle Casino Resort ("Trump's Castle"),
located in the marina district of Atlantic City, New Jersey (the "Marina"), as
well as a riverboat casino located at Buffington Harbor on Lake Michigan in
Indiana (the "Indiana Riverboat"), making THCR one of the largest casino
entertainment companies in the United States. In addition, THCR will continue to
be the exclusive vehicle through which Trump will engage in new gaming
activities in both emerging and established gaming jurisdictions.
The Acquisition will strengthen THCR's position as a leader in the casino
entertainment industry and enhance THCR's presence in the growing Atlantic City
gaming market (the "Atlantic City Market"). The Acquisition will provide THCR
with a significant presence in the Marina, the principal focus of expansion in
the Atlantic City Market, and will position THCR as the only casino operator in
Atlantic City with facilities both on The Boardwalk and in the Marina. In
addition, the Acquisition will provide opportunities for operational
efficiencies and economies of scale and will eliminate the perceived conflict of
interest caused by the differing ownership of Trump's Castle and the THCR
properties in Atlantic City. Ownership of Trump's Castle will further enable
THCR to retain patrons that may be drawn from The Boardwalk to the Marina by new
casino development at the Marina.
The Acquisition will also enable THCR to benefit from (i) the excellent
condition of the current facilities at Trump's Castle, which have been designed
to accommodate additional development with minimal disruption to existing
operations, (ii) the proximity of Trump's Castle to the "H-Tract," an
approximately 150-acre parcel of land proposed to be Atlantic City's newest area
of casino hotel development (the "H-Tract"), and (iii) the proposed expansion at
Trump's Castle expected to be completed by June 1, 1998 (the "Trump's Castle
Expansion"), which would, among other things, enable THCR to capitalize on the
expected increase in gaming activity at the Marina.
The following table profiles THCR's casino and hotel capacity following
consummation of the Acquisition, giving effect to the proposed expansion at the
Taj Mahal (the "Taj Mahal Expansion") as well as the Trump's Castle Expansion:
<TABLE>
<CAPTION>
Trump's
Trump Taj Taj Mahal Trump's Castle Indiana
Plaza Mahal Expansion(a) Castle Expansion(a) Riverboat Total
----- ----- ------------ ------ ---------------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Casino square
footage .... 140,000 120,000(b) 60,000 73,000 57,000 37,000 487,000
Slot machines 4,270 3,550 2,500 2,275 1,300 1,500 15,395
Table games . 140 169 -- 90 40 73 512
Hotel rooms . 1,400 1,250 800 728 1,500 -- 5,678
</TABLE>
(a) Plans for the expansion at the Taj Mahal and Trump's Castle are subject to
modification.
(b) Excludes a 12,000 square foot poker, keno and race simulcasting room which
contains 64 poker tables.
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4
<PAGE>
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Parties to the Acquisition
Trump Hotels & Casino Resorts. THCR currently owns and operates Trump Plaza
and the Taj Mahal, each located on The Boardwalk in Atlantic City, New Jersey,
as well as the Indiana Riverboat.
Trump Plaza's casino floor space is currently the largest in Atlantic City,
with approximately 140,000 square feet of casino floor space, housing a total of
approximately 4,270 slot machines and 140 table games. In addition, Trump
Plaza's hotel capacity is approximately 1,400 guest rooms, currently among the
largest in Atlantic City. The Taj Mahal's casino floor space is currently the
second largest in Atlantic City and, from the time it commenced operations in
1990 until May 1996, it ranked first among all Atlantic City casinos in terms of
total gaming revenues, table revenues and slot revenues. THCR's strategy is to
capitalize on each of Trump Plaza's and the Taj Mahal's respective reputations
for excellence, as well as to meet both existing demand and the increase in
demand that management anticipates will result from the increased number of
available rooms and infrastructure improvements that are currently being
implemented to enhance further the vacation destination appeal of Atlantic City.
The Indiana Riverboat, which opened on June 8, 1996, features an
approximately 280-foot luxury yacht with approximately 37,000 feet of gaming
space with 1,500 slot machines, 73 table games, a capacity for approximately
2,450 passengers and 300 employees and is one of the largest riverboat casinos
in the United States. The Indiana Riverboat's principal market is the
approximately 6.8 million people residing within 50 miles of Buffington Harbor
in the greater Chicago metropolitan area.
Castle Associates. Castle Associates currently owns and operates Trump's
Castle, a luxury casino hotel in the Marina located on an approximately 14.7
acre triangular-shaped parcel of land, which is approximately two miles from The
Boardwalk. Trump's Castle is approximately one-quarter mile from the H-Tract.
The casino at Trump's Castle consists of approximately 73,000 square feet of
casino space that includes 90 table games, 2,275 slot machines, keno parlor and
simulcast racetrack wagering. The hotel at Trump's Castle consists of a 27-story
hotel with 728 guest rooms (including 185 suites), eight restaurants, a 460-seat
cabaret theater, 58,000 square feet of convention space, a swimming pool, tennis
courts and a sports and health facility. Trump's Castle also features a
nine-story garage, with approximately 3,000 parking spaces, boat facilities and
a helipad situated on the roof of the parking garage, making Trump's Castle the
only Atlantic City casino hotel with access by land, sea and air. As a result of
its high quality amenities, its exceptional customer service and its
geographical location, Trump's Castle distinguishes itself as a desirable
alternative to the Atlantic City casinos located on The Boardwalk.
The Trump's Castle Expansion is estimated to be completed by June 1, 1998.
The plans for the Trump's Castle Expansion, which are preliminary in nature and
subject to modification, are expected to include (i) the addition of a new hotel
tower consisting of 1,500 rooms and suites; (ii) a 430-foot luxury yacht to be
moored in the Marina, which will be physically connected to the casino-hotel and
accessible to the main casino and will feature 40,000 square feet of casino
space with 1,300 slot machines and 40 table games; (iii) a 7,000 square foot
expansion of the existing coffee shop; and (iv) a 17,000 square foot expansion
of the existing casino. The Trump's Castle Expansion is dependent upon a number
of factors, including the availability of financing upon acceptable terms and
the consent of Castle Associates' debtholders to the incurrence of additional
indebtedness. See "Business of Castle Associates--Trump's Castle Expansion."
Following the Acquisition, THCR may determine to pursue alternative
strategies with respect to Trump's Castle, including, but not limited to,
participation in joint ventures, refinancings or similar transactions involving
Castle Associates.
The Special Meeting
Time, Place and Date. The Special Meeting will be held at The Plaza Hotel,
768 Fifth Avenue, New York, New York on September 30, 1996, at 2:00 p.m., local
time.
Purpose. At the Special Meeting, holders of THCR Common Stock and Class B
Common Stock, par value $.01 per share, of THCR ("THCR Class B Common Stock")
will be asked to approve the Acquisition, which approval will constitute
approval and adoption of the Agreement. In addition, holders of THCR Common
Stock and THCR Class B Common Stock will be asked to approve the Amendment,
which will increase the number of shares of THCR Common Stock authorized for
issuance under the THCR Certificate of Incorporation from 50,000,000 to
75,000,000. Stockholders of THCR will also be asked to consider and vote upon
such other matters as may properly be brought before the Special Meeting.
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5
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Voting Required; Record Date. Approval of the Acquisition will require the
affirmative vote of a majority of (i) the outstanding shares of THCR Common
Stock (excluding shares held by Trump and other directors and executive officers
of THCR and their affiliates) and (ii) the outstanding voting power of the THCR
Common Stock and THCR Class B Common Stock, voting as a single class. Approval
of the Amendment will require the affirmative vote of a majority of the
outstanding voting power of the THCR Common Stock and THCR Class B Common Stock,
voting as a single class. Only holders of record of THCR Common Stock and THCR
Class B Common Stock at the Record Date are entitled to vote at the Special
Meeting.
As of the Record Date, (i) directors and executive officers of THCR and
their affiliates had the power to vote shares representing approximately 0.3% of
the outstanding shares of THCR Common Stock; and (ii) Trump had the power to
vote 100% of the outstanding shares of THCR Class B Common Stock, representing
approximately 25% of the combined voting power of the shares of THCR Common
Stock and THCR Class B Common Stock. All of such officers, directors and
affiliates have indicated that they intend to vote their shares for approval of
the Acquisition and the Amendment. In addition, Trump has agreed to vote his
shares of THCR Common Stock and THCR Class B Common Stock for approval of the
Acquisition.
Dissenting Stockholders' Rights of Appraisal
Stockholders of THCR are not entitled to appraisal rights with respect to
the Acquisition.
Recommendation of the Board of Directors
The Board of Directors and the Special Committee of the Board of Directors,
consisting of its three independent directors (the "Special Committee"), have
considered the terms and conditions of the Acquisition and certain other
information, including the opinion of the Special Committee's financial advisor,
and have determined that the proposed Acquisition is fair to, and in the best
interests of, THCR, and have unanimously approved the terms of the Acquisition
and the Agreement. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF THCR VOTE "FOR" APPROVAL OF THE ACQUISITION.
In addition, the Board of Directors has determined that it is advisable to
amend the THCR Certificate of Incorporation in order to increase the number of
shares of THCR Common Stock authorized thereunder from 50,000,000 to 75,000,000
and has voted to amend the THCR Certificate of Incorporation, subject to
stockholder approval, to reflect such increase. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THCR VOTE "FOR" APPROVAL OF THE
AMENDMENT.
Opinion of Financial Advisor
Salomon Brothers Inc ("Salomon") was retained by the Special Committee to
act as its financial advisor and was asked to render its opinion to the Special
Committee as to the fairness to THCR and THCR Holdings, from a financial point
of view, of the consideration to be paid by THCR and THCR Holdings, taken as a
whole, in the Acquisition. On June 24, 1996, Salomon delivered its written
opinion to the effect that, as of such date, the consideration (as specified in
the opinion) to be paid by THCR and THCR Holdings, taken as a whole, in the
Acquisition is fair, from a financial point of view, to THCR and THCR Holdings.
A copy of the full written opinion of Salomon, dated June 24, 1996 (the "Salomon
Fairness Opinion"), attached to this Proxy Statement as Annex B, is incorporated
herein by reference and should be read carefully in its entirety. Salomon will
receive usual and customary fees and be reimbursed for certain expenses,
including fees and expenses of counsel, in connection with rendering financial
advisory and certain other services to THCR.
The Agreement
Pursuant to the terms of the Agreement, upon consummation of the
Acquisition, THCR Holdings will beneficially own 100% of the outstanding equity
interests of Castle Associates. See "The Agreement." In addition, THCR's and
Trump's beneficial equity interests in THCR Holdings will be approximately 63.4%
and 36.6%, respectively, and Trump's beneficial equity interest will be
exchangeable, at his option, into 13,918,723 shares of THCR Common Stock
(subject to certain adjustments). A copy of the Agreement is attached to this
Proxy Statement as Annex A.
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6
<PAGE>
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The Agreement provides that the Acquisition is subject to the satisfaction
of a number of conditions, including the affirmative vote of a majority of the
outstanding shares of THCR Common Stock (excluding shares held by Trump and the
other officers and directors of THCR and their affiliates) and the receipt of
various third party approvals and consents.
The Agreement may be terminated and the Acquisition abandoned at any time
prior to the Closing Date (i) by joint written consent of Trump, the Castle
Entities and the THCR Entities; (ii) by either Trump and the Castle Entities or
by the THCR Entities if certain conditions have not been satisfied or waived;
(iii) by Trump or TCHI if acting upon certain unsolicited acquisition proposals
with respect to TCHI; and (iv) by any party to the Agreement, if the Acquisition
has not been consummated on or before December 31, 1996.
Certain Federal Income Tax Considerations
As a result of the Acquisition, THCR Holdings will acquire an adjusted tax
basis in the contributed interests in Castle Associates equal to Trump's and
TC/GP's respective adjusted tax basis in such interests immediately prior to the
Acquisition and THCR Holdings will acquire an adjusted tax basis in the assets
of Castle Associates that is equal to such adjusted tax basis. All gain in
respect of such contributed interests as of the date of the Acquisition will be
allocated to Trump and TC/GP, with tax depreciation, to the extent available and
computed using new recovery periods, first being allocated to THCR based on the
fair market value of such assets and the remainder to Trump and TC/GP. The
Acquisition is not expected to have any other material income tax consequences
to THCR or the holders of THCR Common Stock.
Accounting Treatment
The Acquisition is expected to be accounted for as a "purchase" for
accounting and reporting purposes.
Regulatory Approvals
Certain aspects of the Acquisition require notification to, and/or
approvals from, certain federal and state regulatory authorities. Consummation
of the Acquisition is conditioned upon, among other things, receipt of certain
regulatory approvals, including the expiration or termination of the waiting
period applicable to the consummation of the Acquisition under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). On August 6, 1996, early termination of the waiting period under the HSR
Act was granted with respect to the Acquisition. See "The
Acquisition--Regulatory Matters."
Dividends
THCR has never paid a dividend on the THCR Common Stock and does not
anticipate paying one in the foreseeable future.
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7
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Summary Financial Information of THCR
The following table sets forth certain historical consolidated financial
information of Trump Plaza Associates ("Plaza Associates") and Trump Atlantic
City Associates ("Trump AC") (predecessors of THCR) for each of the four years
ended December 31, 1991 through 1994 and for the period January 1, 1995 through
June 12, 1995 and certain historical consolidated financial information of THCR
for the period from inception (June 12, 1995) to December 31, 1995 (see Note 1
below). The historical financial information of Trump AC and Plaza Associates as
of and for each of the four years ended December 31, 1994 and as of June 12,
1995 and for the period January 1, 1995 through June 12, 1995 as set forth below
has been derived from the audited consolidated financial statements of Trump AC
and Plaza Associates. The historical financial information of THCR as of
December 31, 1995 and for the period from inception (June 12, 1995) through
December 31, 1995 as set forth below has been derived from the audited
consolidated financial statements of THCR. The historical financial information
of THCR as of June 30, 1996 and for the six months ended June 30, 1996 as set
forth below has been derived from the unaudited consolidated financial
statements of THCR. In the opinion of THCR, such unaudited financial statements
reflect all adjustments (consisting only of normal recurring accruals) which
THCR considers necessary for a fair presentation of the financial position and
results of operations for these periods. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results to be expected
for the entire year. All financial information should be read in conjunction
with "Unaudited Pro Forma Financial Information" contained in this Proxy
Statement and THCR's Management's Discussion and Analysis of Financial Condition
and Results of Operations and financial statements and related notes thereto
which are incorporated herein by reference.
<TABLE>
<CAPTION>
Trump AC and Plaza Associates THCR
----------------------------------- --------------------------------
From From Inception
Year Ended December 31, January 1,1995 (June 12, 1995) to Six Months
----------------------------------- through December 31, 1995 Ended
1991 1992 1993 1994 June 12, 1995 (Note 1) June 30, 1996
---- ---- ---- ---- ------------- ------------------ -------------
(dollars in thousands, except per share information) (dollars in thousands,
except per share information)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Gaming ............................ $ 233,265 $ 265,448 $ 264,081 $ 261,451 $ 122,865 $ 175,208 $ 288,361
Other ............................. 66,411 73,270 69,203 66,869 29,523 44,659 71,030
Trump World's Fair ................ 11,547 9,465 -- -- -- -- --
---------- ----------- ---------- ---------- ----------- ------------ ------------
Gross revenues ................... 311,223 348,183 333,284 328,320 152,388 219,867 359,391
Promotional allowances ............ 31,539 34,865 32,793 33,257 14,540 24,394 38,385
---------- ----------- ---------- ---------- ----------- ------------ ------------
Net revenues ..................... 279,684 313,318 300,491 295,063 137,848 195,473 321,006
---------- ----------- ---------- ---------- ----------- ------------ ------------
Costs and Expenses:
Gaming ............................ 133,547 146,328 136,895 139,540 69,467 95,533 169,611
Other ............................. 23,404 23,670 24,778 23,380 9,483 14,449 22,880
General and administrative ........ 69,631 75,459 71,624 73,075 30,081 42,826 65,652
Depreciation and amortization ..... 16,193 15,842 17,554 15,653 6,999 9,219 21,622
Restructuring charges ............. 943 5,177 -- -- -- -- --
Pre-opening expenses .............. -- -- -- -- -- -- 9,966
Trump World's Fair ................ 19,879 11,839 -- -- -- -- --
---------- ----------- ---------- ---------- ----------- ------------ ------------
Total costs and expenses ........ 263,597 278,315 250,851 251,648 116,030 162,027 289,731
---------- ----------- ---------- ---------- ----------- ------------ ------------
Income from operations ............. 16,087 35,003 49,640 43,415 21,818 33,446 31,275
Interest expense, net .............. 33,363 31,356 39,889 48,219 22,113 31,273 50,426
Other non-operating expense
(income)(a) ....................... 14,818 1,462 3,873 4,931 1,649 4,094 (9,182)
Extraordinary gain (loss) (b) ...... -- (38,205) 4,120 -- (9,250) --
(59,132)
Minority interest .................. -- -- -- -- -- -- 14,828
Provision (benefit) for
income taxes ...................... (2,864) (233) 660 (865) (161) -- --
---------- ----------- ---------- ---------- ----------- ------------ ------------
Net income (loss) .................. ($ 29,230)($ 35,787) $ 9,338 ($ 8,870) ($ 11,033) ($ 1,921) ($ 54,273)
========== =========== ========== ========== =========== ============ ============
Net (loss) per common share(c) ..... ($ 0.19) ($ 3.42)
Other Data:
EBITDA(e) .......................... $ 44,000 $ 60,399 $ 68,241 $ 60,524 $ 29,011 $ 42,942 $ 63,990
Book value per share ............... ($ 16.53)
Balance Sheet Data (at end
of period):
Cash and cash equivalents .......... $ 10,474 $ 18,802 $ 14,393 $ 11,144 $ 28,125 $ 19,208 $ 181,750
Property and equipment, net ........ 306,834 300,266 293,141 298,354 301,316 408,231 1,463,264
Total assets ....................... 378,398 370,349 374,498 375,643 394,085 584,545 1,943,961
Total long-term debt, net of current
maturities(d) ..................... 33,326 249,723 395,948 403,214 331,142 494,471 1,391,531
Total capital (deficit) ............ 54,043 11,362 (54,710) (63,580) (74,613) 50,591 399,265
</TABLE>
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<TABLE>
<CAPTION>
THCR Pro Forma
(Note 1)
------------------------------------------------
Year Ended Six Months Ended
December 31, 1995 June 30, 1996
----------------- --------------
(dollars in thousands, except per share information)
Statement of Operations Data: (unaudited)
<S> <C> <C>
Net revenues ............................................. $ 1,192,632 $ 603,714
Depreciation and amortization ............................ 84,982 48,315
Income from operations ................................... 181,951 44,751
Interest expense, net .................................... 198,245 100,795
Net loss ................................................. (12,590) (66,956)
Net loss per common share(f) ............................. ($0.52) ($2.77)
Other Data:
EBITDA (e) ............................................... 272,150 105,576
Book value per share ..................................... -- 17.22
Balance Sheet Data (at end of period):
Total assets ............................................. -- 2,440,553
Total long-term debt, net of current maturities -- 1,661,712
Total capital ............................................ -- 416,951
</TABLE>
- ----------
Note 1: THCR was incorporated on March 28, 1995 and conducted no operations
until the June 12, 1995 offering of 10,000,000 shares of THCR Common
Stock (the "June 1995 Stock Offering" and, collectively with the June
12, 1995 offering of the THCR Senior Notes (as defined), the "June
1995 Offerings"). The financial data as of December 31, 1995 and for
the period ended December 31, 1995 reflect the operations of THCR from
inception (June 12, 1995) to December 31, 1995.
(a) Other non-operating expense for the year ended December 31, 1991
includes a $10.9 million charge associated with the rejection of the
lease associated with the former Trump Regency Hotel (now known as
Trump World's Fair) and $4.0 million of costs associated with certain
litigation. Other non-operating expense for 1992 includes $1.5 million
of costs associated with certain litigation. Other non-operating
expense for the years ended December 31, 1993 and 1994, for the period
January 1, 1995 through June 12, 1995 and for the period June 12, 1995
through December 31, 1995 includes $3.9, $4.9, $1.6 and $2.1 million,
respectively, of real estate taxes and leasing costs associated with
the hotel adjacent to Trump Plaza's main tower ( "Trump Plaza East ").
Other non-operating income for the six months ended June 30, 1996
includes a $10.0 million license fee relating to the exclusive license
granted to Atlantic Jersey Thermal Systems, Inc. ( "Atlantic Thermal
").
(b) The extraordinary loss for the year ended December 31, 1992 consists
of the effect of stating the Preferred Stock of Trump Plaza Funding,
Inc. ( "Plaza Funding ") issued at fair value as compared to the
carrying value of these securities and the write off of certain
deferred financing charges and costs. The excess of the carrying value
of a note obligation over the amount of the settlement payment net of
related prepaid expenses in the amount of $4.1 million has been
reported as an extraordinary gain for the year ended December 31,
1993. The extraordinary loss of $9.3 million for the period from
January 1, 1995 through June 12, 1995 relates to the redemption of the
121? 2% Pay-in-Kind Notes due 2003 of Trump Plaza Holding Associates
(currently Trump AC) (the "Plaza PIK Notes ") and warrants thereto
(the "Plaza PIK Note Warrrants ") and the write off of related
unamortized deferred financing costs. The extraordinary loss of $59.1
million for the six months ended June 30, 1996 relates to the
redemption of the Plaza Notes (as defined) and the write-off of
related unamortized deferred financing costs.
(c) Earnings per share is based upon weighted average shares outstanding,
shares and phantom stock units awarded to the Chief Executive Officer
of THCR under THCR's 1995 Stock Incentive Plan (the "1995 Stock Plan")
and common stock equivalent. The shares of THCR Class B Common Stock
owned by Trump have no economic interest and, therefore, are not
considered.
(d) Reflects reclassification in 1991 of indebtedness relating to
outstanding mortgage bonds as a current liability due to then-existing
events of default.
(e) EBITDA represents income from operations before interest expense,
taxes, depreciation, amortization, non-cash compensation charges
associated with awards to the President of THCR under the 1995 Stock
Plan, the non-cash write-down of CRDA (as defined) investments and
pre-opening expenses. EBITDA should not be construed as an alternative
to net income or any other measure of performance, liquidity or cash
flows generated by operating, investing and financing activities.
Management has included information concerning EBITDA as it
understands that it is used by certain investors as one measure of
THCR's historical ability to service its debt.
(f) Pro forma per share is based on the shares outstanding as of June 30,
1996 and the shares awarded to the Chief Executive Officer of THCR
pursuant to the 1995 Stock Plan. The shares of THCR Class B Common
Stock beneficially owned by Trump have no economic interest and,
therefore, are not considered.
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Summary Financial Information of Castle Associates
The following table sets forth certain historical consolidated financial
information of Castle Associates for each of the five years ended December 31,
1991 through 1995 and for the periods ended June 30, 1995 and 1996. The
historical financial information of Castle Associates as of and for each of the
five years ended December 31, 1991 through 1995 as set forth below has been
derived from the audited consolidated financial statements of Castle Associates.
The historical financial information of Castle Associates as of June 30, 1995
and 1996 and for the six months ended June 30, 1995 and 1996 as set forth below
has been derived from the unaudited consolidated financial statements of Castle
Associates. In the opinion of Castle Associates, such unaudited financial
statements reflect all adjustments (consisting only of normal recurring
accruals) which Castle Associates considers necessary for a fair presentation of
the financial position and results of operations for these periods. Operating
results for the six months ended June 30, 1996 are not necessarily indicative of
the results to be expected for the entire year. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Castle Associates", "Unaudited Pro Forma Financial Information", the
consolidated financial statements of Castle Associates and related notes thereto
and the consolidated condensed financial statements of Castle Associates and
related notes thereto included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
-------------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(dollars in thousands) (dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Gaming ..................... $194,760 $242,008 $246,370 $258,455 $280,124 $124,511 $127,173
Other ...................... 53,208 57,298 58,456 56,930 59,986 26,008 28,512
Gross revenues ............. 247,968 299,306 304,826 315,385 340,110 150,519 155,685
Promotional allowances ..... 27,882 30,656 31,599 31,572 34,547 14,363 18,943
Net revenues ............... 220,086 268,650 273,227 283,813 305,563 136,156 136,742
Costs and Expenses:
Gaming ..................... 117,714 147,011 145,717 151,036 165,679 73,677 80,198
Other ...................... 29,251 31,105 28,661 27,542 29,453 7,300 6,321
General and
administrative ............ 49,568 56,722 54,558 61,974 61,431 35,536 38,140
Depreciation and
amortization .............. 21,414 19,802 16,425 14,437 14,639 7,113 7,677
Reorganization costs ....... 4,499 5,983 -- -- -- -- --
Income from operations ..... (2,360) 8,027 27,866 28,824 34,361 12,530 4,406
Interest expense, net ...... 47,839 44,861 56,251 43,537 45,513 22,365 23,338
Extraordinary gain ......... -- 128,187 -- -- -- -- --
Net income (loss) .......... ($ 50,199) $ 91,353 ($ 28,385) ($ 14,713) ($ 11,152) ($ 9,835) ($ 18,932)
Balance Sheet Data
(at end of period):
Cash and cash equivalents ... $ 14,972 $ 23,610 $ 20,439 $ 19,122 $ 21,038 $ 15,624 $ 17,767
Property and equipment--net . 351,177 340,383 334,354 328,174 322,115 326,276
319,280
Total assets ................ 391,303 379,641 375,935 368,797 370,581 365,820 359,170
Total long-term debt, net
of current maturities ...... -- 279,445 309,794 317,748 326,554 318,659 328,697
Total capital ............... (63,406) 60,799 31,678 16,965 5,813 7,130 (13,119)
</TABLE>
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10
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Corporate Structure and Organization
The general partners of Castle Associates are Trump, TC/GP, a Delaware
corporation wholly owned by Trump, and TCHI, a New Jersey corporation wholly
owned by Trump. Trump, TC/GP and TCHI currently own a 61.5%, 37.5% and 1.0%
general partnership interest, respectively, in Castle Associates. In connection
with the Acquisition, Castle Associates will be converted into a New Jersey
limited partnership. Upon consummation of the Acquisition, THCR Holdings and
TCHI (as the surviving corporation in the TCHI Merger) will own a 99% limited
partnership interest and a 1% general partnership interest, respectively, in
Castle Associates. Merger Sub was, upon formation, and Castle Associates and
TCHI (as the surviving corporation in the TCHI Merger) each will be, upon
consummation of the Acquisition, designated as an unrestricted subsidiary under
the indenture pursuant to which THCR Holdings and Trump Hotels & Casino Resorts
Funding, Inc. ("THCR Funding"), a Delaware corporation and a wholly owned
subsidiary of THCR Holdings, issued $155,000,000 aggregate principal amount of
their 15 1/2% Senior Secured Notes due 2005 (the "THCR Senior Notes"). Upon
consummation of the Acquisition, all of THCR Holdings' direct and indirect
equity interests in Castle Associates will be pledged to the trustee under the
indenture under which the THCR Senior Notes were issued (the "THCR Senior Note
Indenture"). See "The Acquisition--Background of the Acquisition." Neither THCR
nor THCR Holdings will be liable for the debt obligations of Castle Associates.
Merger Sub, a wholly owned subsidiary of THCR Holdings, was formed for the
purpose of effecting the TCHI Merger and has not conducted any business.
The business and operations of Castle Associates are currently managed by a
Board of Partner Representatives(the "Castle Board of Partner Representatives"),
including three members appointed by the holders of the Castle Mortgage Notes
(as defined) and the Castle PIK Notes (the "Noteholder Representatives"). As a
result of the Acquisition and the conversion of Castle Associates from a general
partnership to a limited partnership, Castle Associates will be managed by its
sole general partner, TCHI, pursuant to the same terms and provisions currently
set forth in the Castle Partnership Agreement. TCHI's board of directors will
include the three Noteholder Representatives. See "Description of the Castle
Associates Partnership Agreement--Management of Castle Associates."
THCR is the sole general partner of THCR Holdings, and Trump, Trump
Casinos, Inc., a New Jersey corporation wholly owned by Trump ("Trump Casinos"),
and THCR/LP Corporation, a New Jersey corporation indirectly wholly owned by
THCR, are the limited partners of THCR Holdings. Upon consummation of the
Acquisition, TC/GP will also become a limited partner of THCR Holdings.
THCR has the exclusive rights, responsibilities and discretion in the
management and control of THCR Holdings. 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. THCR Holdings' principal assets are its ownership
interests in its subsidiaries. THCR Holdings' subsidiaries include Trump
Indiana, Inc., a Delaware corporation ("Trump Indiana"), Plaza Associates, a New
Jersey partnership, and Trump Taj Mahal Associates, a New Jersey partnership
("Taj Associates"). Plaza Associates, Taj Associates and Trump Indiana own and
operate Trump Plaza, the Taj Mahal and the Indiana Riverboat, respectively. In
addition to its ownership of the Indiana Riverboat, Trump Indiana has a 50%
equity interest in Buffington Harbor Riverboats, LLC, which owns, develops and
operates all common land-based and waterside operations in support of the
Indiana Riverboat and another operator's riverboat casino at Buffington Harbor.
Upon consummation of the Acquisition, THCR, through its subsidiaries, will
manage Castle Associates and will own and operate Trump's Castle.
Trump Casino Services, L.L.C., a New Jersey limited liability company
("Trump Services"), was formed on June 27, 1996 for the purpose of realizing
cost savings and operational synergies by consolidating certain administrative
functions of, and providing certain services to, each of Plaza Associates and
Taj Associates. Trump AC and Trump Atlantic City Corporation, a wholly owned
subsidiary of Trump AC, own a 99% and 1% interest, respectively, in Trump
Services. On July 8, 1996, Trump Services, Plaza Associates and Taj Associates
entered into an agreement pursuant to which Trump Services will provide to each
of Taj Associates and Plaza Associates certain management, financial and other
functions and services necessary and incidental to the respective operations of
each of their casino hotels. Management of THCR believes that Trump Services
will also be one of the vehicles through which cost savings and operational
synergies associated with the Acquisition will be realized.
THCR, a Delaware corporation, was incorporated on March 28, 1995. The
principal executive offices of THCR are located at 2500 Boardwalk, Atlantic
City, New Jersey 08401, and its telephone number is (609) 441-6060. The
principal executive offices of Castle Associates are located at One Castle
Boulevard, Atlantic City, New Jersey 08401, and its telephone number is (609)
340-5191.
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11
<PAGE>
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CURRENT OWNERSHIP STRUCTURE OF THCR
[The printed material contains a flow chart graphic depicting the current
ownership structure of THCR.]
- --------------------------------------------------------------------------------
12
<PAGE>
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OWNERSHIP STRUCTURE OF THCR AFTER THE ACQUISITION
[The printed material contains a flow chart graphic depicting the ownership
structure of THCR after the acquisition.]
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13
<PAGE>
PROPOSALS
Proposal 1--Approval of the Acquisition
The Board of Directors and the Special Committee have determined that the
Acquisition is fair to, and in the best interest of, THCR. Upon consummation of
the Acquisition, THCR Holdings will beneficially own 100% of the equity
interests of Castle Associates, and THCR's and Trump's beneficial equity
interests in THCR Holdings will be approximately 63.4% and 36.6%, respectively,
and Trump's beneficial equity interest will be exchangeable, at his option, into
13,918,723 shares of THCR Common Stock. See "The Agreement."
The terms of the Acquisition and the Agreement were approved by the Board
of Directors and by the Special Committee on June 24, 1996. See "The
Acquisition--Background of the Acquisition." The reported high and low sale
prices of the THCR Common Stock on the NYSE on June 24, 1996, the last full day
of trading prior to the announcement of the Acquisition, were $30.00 and $28.00
per share, respectively.
Approval of the Acquisition will require the affirmative vote of a majority
of (i) the outstanding shares of THCR Common Stock (excluding shares held by
Trump and the other officers and directors of THCR and their affiliates) and
(ii) the outstanding voting power of THCR Common Stock and THCR Class B Common
Stock, voting as a single class. Approval of the Acquisition will constitute
approval and adoption of the Agreement. Broker non-votes and abstentions will
have the effect of votes against Proposal 1. See "Special Meeting--Quorum;
Broker Non Votes" and "--Required Vote."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
ACQUISITION.
Proposal 2--Amendment of the THCR Certificate of Incorporation to Increase the
Number of Authorized Shares of THCR Common Stock
The Board of Directors has determined that it is advisable to amend the
THCR Certificate of Incorporation, and has recommended that the stockholders of
THCR approve the Amendment to increase the number of shares of THCR Common Stock
authorized under the THCR Certificate of Incorporation from 50,000,000 to
75,000,000. As of the Record Date, there were 24,140,090 shares of THCR Common
Stock issued and outstanding. The remaining 25,859,910 shares of THCR Common
Stock are not reserved for future use, except for (i) 3,993,333 shares reserved
for issuance under the 1995 Stock Plan, (ii) 1,800,000 shares reserved for the
exercise of THCR Common Stock warrants held by Trump and (iii) 8,081,023 shares
reserved for the conversion of limited partnership interests in THCR Holdings
beneficially held by Trump. Upon consummation of the Acquisition, an additional
5,837,700 shares of THCR Common Stock will be reserved for the conversion of the
Trump Consideration and the TC/GP Consideration.
The Board of Directors considers it advisable to have additional shares of
THCR Common Stock available for use for future financings, acquisitions, stock
dividends or stock splits and for other general corporate purposes. The
availability of such shares for issuance in the future will give THCR greater
flexibility and permit such shares to be issued without the expense and delay of
a special meeting of stockholders of THCR.
If the Amendment is adopted, Article IV.A of the THCR Certificate of
Incorporation will be amended to read in its entirety as follows:
"A. Authorized Capitalization
The total number of shares of stock which the Corporation shall
have the authority to issue is 76,001,000 shares of all classes of
stock, consisting of 1,000,000 shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), 75,000,000 shares of Common
Stock, par value $.01 per share (the "Common Stock"), and 1,000 shares
of Class B Common Stock, par value $.01 per share (the "Class B Common
Stock")."
If the Amendment is adopted, the additional shares of THCR Common Stock may
be issued by direction of the Board of Directors at such times, in such amounts
and upon such terms as the Board of Directors may determine, without further
approval of THCR's stockholders unless, in any instance, such approval is
expressly required by regulatory agencies or otherwise. NYSE rules require
stockholder approval as a prerequisite to continued listing of the shares in
several situations, including acquisition transactions, where the issuance of
additional shares could result
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in an increase of 20% or more in the number of shares of capital stock of THCR
outstanding. Holders of THCR Common Stock have no preemptive rights to subscribe
to any additional securities that THCR may issue, nor is the THCR Common Stock
subject to calls or assessments by THCR.
The proposed increase in the authorized number of shares of THCR Common
Stock could have a number of effects on THCR's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares in the future. The increase could have an effect on the
potential realizable value of a stockholder's investment. In the absence of a
proportionate increase in THCR's earnings and book value, an increase in the
aggregate number of outstanding shares of THCR caused by the issuance of the
additional shares would dilute the earnings per share and book value per share
of all outstanding shares of THCR's stock. If such factors were reflected in the
price per share of THCR Common Stock, the potential realizable value of a
stockholder's investment could be adversely affected.
The Amendment was approved by the Board of Directors on June 24, 1996.
Approval of the Amendment will require the affirmative vote of a majority
of the outstanding voting power of THCR Common Stock and THCR Class B Common
Stock, voting as a single class. Broker non-votes and abstentions will have the
effect of votes against Proposal 2. See "The Special Meeting--Quorum; Broker
Non-Votes" and "--Required Vote."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT.
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GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of THCR in
connection with the Special Meeting. The Special Meeting will be held at 2:00
p.m. on September 30, 1996 at The Plaza Hotel, 768 Fifth Avenue, New York, New
York. This Proxy Statement and the accompanying form of proxy are first being
sent or given to stockholders on or about August 29, 1996.
THE SPECIAL MEETING
Purpose
At the Special Meeting, holders of THCR Common Stock and THCR Class B
Common Stock will be asked to approve the Acquisition, which approval will
constitute approval and adoption of the Agreement. In addition, at the Special
Meeting, holders of THCR Common Stock and THCR ClassB Common Stock will be asked
to approve the Amendment. At the Special Meeting, stockholders of THCR will also
consider and vote upon such other matters as may properly be brought before the
Special Meeting.
THE BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE HAVE UNANIMOUSLY APPROVED
THE TERMS OF THE ACQUISITION AND THE AGREEMENT; THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" APPROVAL OF THE ACQUISITION. THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE TERMS OF THE AMENDMENT AND RECOMMENDS A VOTE "FOR"
APPROVAL OF THE AMENDMENT.
Record Date; Voting Rights; Proxies
The Board of Directors has fixed the close of business on August 26, 1996
as the Record Date for determining holders entitled to notice of and to vote at
the Special Meeting.
As of the Record Date, THCR had 24,140,090 shares of THCR Common Stock and
1,000 shares of THCR Class B Common Stock outstanding and entitled to vote at
the Special Meeting. Each share of THCR Common Stock entitles the holder thereof
to one vote on each proposal to be acted upon at the Special Meeting and the
1,000 shares of THCR Class B Common Stock, all of which are beneficially owned
by Trump, are entitled to an aggregate of 8,081,023 votes on each proposal to be
acted upon at the Special Meeting. The voting power of the shares of THCR Class
B Common Stock equals the voting power of the number of shares of THCR Common
Stock issuable upon the conversion of the limited partnership interests in THCR
Holdings beneficially held by Trump. The THCR Class B Common Stock provides the
holders thereof with a voting interest in THCR which is proportionate to such
holder's equity interest in THCR Holdings' assets represented by limited
partnership interests in THCR Holdings.
All shares of THCR Common Stock and THCR Class B Common Stock represented
by properly executed proxies will, unless such proxies have previously been
revoked, be voted in accordance with the instructions indicated in such proxies.
Stockholders may vote in favor of a proposal, against a proposal or may abstain
from voting. Stockholders should specify their choices on the enclosed proxy
card. If no instructions are indicated with respect to the matters to be acted
upon, such shares will be voted "FOR" approval of the Acquisition and "FOR"
approval of the Amendment. If any other matter or matters are properly presented
for action before the Special Meeting, the shares represented by the proxy will
be voted with respect thereto by the persons named in the proxy as in their
judgment is in the best interests of THCR and its stockholders, unless such
authorization is withheld. Stockholders may vote by either completing and
returning the enclosed proxy card prior to the Special Meeting, voting in person
at the Special Meeting or submitting a signed proxy card at the Special Meeting.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice thereof to the Secretary of THCR, by signing
and returning a later dated proxy or by voting in person at the Special Meeting;
however, mere attendance at the Special Meeting will not itself have the effect
of revoking the proxy. THCR does not know of any matters other than as described
in the Notice of Special Meeting that are to come before the Special Meeting.
Quorum; Broker Non-Votes
The presence in person or by proxy of the holders of the shares
representing a majority of the outstanding voting power of the THCR Common Stock
and THCR Class B Common Stock is necessary to constitute a quorum in connection
with the transaction of business at the Special Meeting.
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Broker "non-votes" (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares as to a matter with respect to which the brokers
or nominees do not have discretionary power to vote) and shares for which duly
executed proxies have been received but with respect to which holders of shares
have abstained from voting will be treated as present for purposes of
determining the presence of a quorum at the Special Meeting. Broker "non-votes"
and abstentions will have the effect of a vote against Proposal 1 and Proposal
2.
Required Vote
While neither Delaware law, the THCR Certificate of Incorporation nor
THCR's Amended and Restated By-Laws (the "THCR By-Laws") requires the approval
of the stockholders of THCR in connection with the Acquisition, such approval is
required by the rules of the NYSE, the stock exchange on which the THCR Common
Stock is listed. Pursuant to the rules of the NYSE, an affirmative vote of a
majority of the stockholders of a company is required whenever, as in the
Acquisition, (i) the company is acquiring an entity from a director, officer or
substantial stockholder of the company and the number of shares of common stock
to be issued in the acquisition, or the number of shares of common stock into
which the securities to be issued in the acquisition are convertible, exceeds
one percent of (x) the voting power outstanding or (y) the number of shares of
common stock outstanding before the issuance; or (ii) the number of shares of
common stock to be issued in the acquisition, or the number of shares of common
stock into which the securities to be issued in the acquisition are convertible,
exceeds 20% of (x) the voting power outstanding or (y) the number of shares of
common stock outstanding before the issuance. Accordingly, in order to comply
with the rules of the NYSE, the affirmative vote of a majority of the
outstanding voting power of the THCR Common Stock and THCR Class B Common Stock,
voting as a single class, is required to approve the Acquisition. In addition to
the voting requirements of the NYSE, the Agreement requires that the Acquisition
be approved by the affirmative vote of the majority of the outstanding shares of
THCR Common Stock (excluding shares held by Trump and other directors and
executive officers of THCR and their affiliates).
The THCR Certificate of Incorporation and the applicable provisions of the
Delaware General Corporation Law (the "DGCL") require approval of the Amendment
by the stockholders of THCR. Accordingly, the affirmative vote of a majority of
the outstanding voting power of the THCR Common Stock and THCR Class B Common
Stock, voting as single class, will be required to approve the Amendment.
Only holders of record of THCR Common Stock and THCR Class B Common Stock
at the Record Date are entitled to vote at the Special Meeting.
As of the Record Date, (i) directors and executive officers of THCR and
their affiliates had the power to vote shares representing approximately 0.3% of
the outstanding shares of THCR Common Stock; and (ii) Trump had the power to
vote 100% of the outstanding shares of THCR Class B Common Stock, representing
approximately 25% of the combined voting power of the shares of THCR Common
Stock and THCR Class B Common Stock. All of such officers, directors and
affiliates have indicated that they intend to vote their shares for approval of
the Acquisition and the Amendment. In addition, Trump has agreed to vote his
shares of THCR Common Stock and THCR Class B Common Stock for approval of the
Acquisition.
Solicitation of Proxies; Independent Auditors
The entire cost of soliciting proxies from its stockholders will be borne
by THCR. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone or telegram by directors, officers or regular
employees of THCR, who will not receive additional compensation for such
solicitation but may be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith. THCR has retained MacKenzie Partners, Inc., a
proxy soliciting firm, to assist in the solicitation of proxies and will pay
such firm a fee, estimated not to exceed $15,000 plus reimbursement of
reasonable out-of-pocket expenses, which are not expected to exceed $15,000.
Arrangements may also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward proxy solicitation materials to the
beneficial owners of shares of THCR Common Stock held of record by such persons,
in which case THCR will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith.
One or more representatives of Arthur Andersen LLP, independent certified
public accountants for THCR and Castle Associates, will be present at the
Special Meeting, will have the opportunity to make a statement if so desired and
will be available to respond to appropriate questions.
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THE ACQUISITION
Background of the Acquisition
On May 21, 1996, Castle Associates assigned to THCR Holdings its rights
under the Option Agreement with Hamilton Partners, L.P. ("Hamilton"), dated as
of June 23, 1995 ("the Option Agreement"), pursuant to which Castle Associates
held an option (the "Option") to acquire certain of the Castle PIK Notes owned
by Hamilton. Immediately following the assignment of the Option, THCR Holdings
exercised the Option and acquired approximately $59.3 million of the Castle PIK
Notes (the "Acquired Castle PIK Notes") for a purchase price of approximately
$38.7 million (the "Castle PIK Note Purchase Price"). The Acquired Castle PIK
Notes represented approximately 90% of the Castle PIK Notes outstanding on such
date. In addition, THCR Holdings, Trump and Castle Associates entered into an
agreement pursuant to which the parties thereto agreed to promptly begin good
faith negotiations with respect to a transaction involving the acquisition of
100% of the equity interests of Castle Associates by THCR Holdings (or a
subsidiary of THCR Holdings) or a similar business combination. If an agreement
with respect to the acquisition by THCR Holdings of 100% of the equity interests
of Castle Associates had not been entered into by November 21, 1996, each of
Castle Associates and Trump would then have had the right to purchase the
Acquired Castle PIK Notes from THCR Holdings for successive periods of 90 days
for an amount in cash equal to the Castle PIK Note Purchase Price plus interest
at a rate of 16% per annum. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Castle Associates--Liquidity
and Capital Resources."
In connection with the acquisition of the Acquired Castle PIK Notes, THCR
Holdings and THCR Funding solicited and obtained from the holders of the THCR
Senior Notes the waiver of certain provisions of the THCR Senior Note Indenture
(the "THCR Senior Note Waiver"). As consideration for the THCR Senior Note
Waiver, THCR Holdings and THCR Funding agreed (i) to pay to those holders
executing the THCR Senior Note Waiver $1.25 per $1,000 principal amount of THCR
Senior Notes following the expiration of the solicitation and on the Closing
Date; (ii) to repurchase at least $10 million of THCR Senior Notes prior to
December 31, 1996; (iii) to pledge the Acquired Castle PIK Notes to the trustee
under the THCR Senior Note Indenture for the benefit of the holders of the THCR
Senior Notes; and (iv) to pledge on the Closing Date all of the equity interests
of Castle Associates to the trustee under the THCR Senior Note Indenture for the
benefit of the holders of the THCR Senior Notes. THCR also agreed that the
aggregate consideration to be paid for all of the equity interests of Castle
Associates will only consist of equity interests in THCR Holdings or THCR which
constitute Qualified Equity Interests (as defined in the THCR Senior Note
Indenture) and cash in an amount not to exceed $10 million.
On May 28, 1996, the Special Committee met to discuss a potential
acquisition of Castle Associates and to consider the retention of Salomon as
financial advisor to the Special Committee, among other things, to render an
opinion to the Special Committee as to the fairness of the consideration to be
paid by THCR Holdings in any proposed acquisition and to render such financial,
advisory and investment banking services requested by the Special Committee.
Following the May 28 meeting of the Special Committee, the Special Committee
retained Salomon as its financial advisor.
On June 11, 1996, Salomon presented to the Special Committee its initial
analysis with respect to the valuation of Castle Associates, which included
discussions regarding due diligence, structure of any proposed acquisition,
negotiation strategy and timing. Following the June 11 meeting of the Special
Committee, Salomon continued its analysis of the business and operations of
Trump's Castle with a view towards developing and negotiating, on behalf of the
Special Committee, a valuation for the business as a whole and for Trump's
equity interest in Castle Associates.
On June 13, 1996, counsel for Trump delivered to counsel for the Special
Committee Trump's proposal for the sale of his equity interest in Castle
Associates to THCR (the "June 13 Proposal"). The June 13 Proposal provided for
the sale of Trump's outstanding equity interest in Castle Associates for an
aggregate consideration of $600 million, including assumption of debt. The June
13 Proposal indicated Trump's willingness to accept shares of THCR Common Stock
or limited partnership interests in THCR Holdings, equal to a fixed value of
$30.00 per share of THCR Common Stock, divided into the difference between (i)
$600 million and (ii) the sum of the amounts outstanding (A) of 11 1/2% Senior
Secured Notes due 2000 of Castle Funding (the "Castle Senior Notes"), (B) of 11
3/4% Mortgage Notes due 2003 of Castle Funding (the "Castle Mortgage Notes"),
(C) of Castle PIK Notes not held by THCR Holdings and (D) under the loan (the
"Castle Term Loan") with Midlantic Bank, N.A. (clauses (A) through (D),
collectively, the "Debt Assumption"). The proposal also indicated that such
shares of THCR Common Stock or
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limited partnership interests in THCR Holdings would be accompanied by
registration, voting and exchange rights similar to Trump's then-existing
interests in THCR and THCR Holdings.
On June 18, 1996, Salomon and counsel for the Special Committee met with
Trump regarding the June 13 Proposal. At this meeting, Salomon indicated to
Trump that the price reflected in the June 13 Proposal was substantially in
excess of a price which could be recommended to the Special Committee. Salomon
also indicated to Trump that any final purchase price that might result from
negotiations should include a "collar," such that if the market price of the
THCR Common Stock exceeded a negotiated level, the number of shares issuable to
Trump would be reduced. The parties also discussed having any final transaction
be subject to approval by a separate vote of THCR's unaffiliated stockholders.
Trump indicated that he would consider reducing the purchase price to
approximately $550 million, but wished to retain the right to vote his shares of
THCR Class B Common Stock in any stockholder vote. Following the June 18
meeting, Salomon and counsel for the Special Committee considered Trump's
revised proposal. It was Salomon's conclusion that the $550 million proposal
represented a value which still was in excess of an amount which could be
recommended to the Special Committee.
Salomon and counsel for the Special Committee met again with Trump on June
20, 1996 to negotiate a price for the proposed acquisition. At this meeting,
Trump indicated that he would consider a price below $550 million. After
negotiations, Salomon indicated that it would discuss with the Special Committee
a transaction which valued Trump's Castle at $525 million and in which the Debt
Assumption would be net of the aggregate discount at which Trump may repurchase
the Castle PIK Notes held by THCR Holdings. Trump reiterated his position that
he wished to vote his shares of THCR Class B Common Stock on any final
transaction agreed to by the parties.
The Special Committee met on June 21, 1996 to discuss the proposed
transaction. At that meeting, Salomon presented its analysis of a purchase of
the equity of Castle Associates at the $525 million valuation. At this time,
Salomon discussed the substantial reduction in the purchase price negotiated
with Trump from the price represented in the June 13 Proposal and indicated to
the Special Committee that it expected that, assuming conditions remained the
same, it would be able to issue a fairness opinion on a transaction price of
$525 million. This price would result in the issuance of limited partnership
interests in THCR Holdings exchangeable into approximately 5.7 million shares of
THCR Common Stock, assuming a $30.50 per share price (i.e., the closing price
for the THCR Common Stock on June 20, 1996). Salomon and counsel for the Special
Committee also discussed other issues relating to the proposed form of agreement
to effectuate the transaction, including the inclusion of a "collar," whether
Trump would be entitled to vote his shares of THCR Class B Common Stock in the
transaction and the THCR Common Stock market price to be used in setting the
percentage of limited partnership interests in THCR Holdings issuable to Trump
in the transaction. After lengthy discussions, the Special Committee concluded
that it would consider the $525 million price, but instructed counsel to
negotiate a "collar" in which the percentage of limited partnership interests in
THCR Holdings issuable to Trump would be reduced if the THCR stock price
exceeded a fixed level above $30.50 per share (but would not increase if the
THCR stock price fell below $30.50 per share). The Special Committee also
concluded that, in order to maximize procedural fairness, the transaction would
be submitted to a separate vote of THCR's unaffiliated stockholders,
notwithstanding that such a vote was not required under the DGCL, the THCR
Certificate of Incorporation, the THCR By-Laws or the rules of the NYSE.
After the conclusion of the meeting of the Special Committee, counsel for
the Special Committee telephoned Trump and his counsel to discuss the remaining
issues other than price. At this time, counsel for the Special Committee
proposed a one-way "collar" at a price of THCR Common Stock above approximately
$36.00 per share and a requirement that the transaction be approved by a
separate vote of THCR's unaffiliated stockholders. Trump indicated that he would
agree to a "collar" at the $40.00 per share level and the voting issue as
proposed, but requested that the percentage of limited partnership interests in
THCR Holdings exchangeable into shares of THCR Common Stock be fixed at the June
21, 1996 THCR Common Stock closing price of $29.875 per share. After further
negotiations, the parties agreed to consider a "collar" at the $38.00 per share
level and fix the percentage of limited partnership interests in THCR Holdings
issuable in the transaction based on a price of $30.00 per share of THCR Common
Stock.
The Special Committee, together with its financial and legal advisors, met
by telephone on June 23, 1996. During this meeting, the Special Committee
further discussed the remaining issues in the transaction and Salomon's fairness
analysis, and Salomon indicated that, assuming conditions remained the same, it
would be prepared to render on the next day a fairness opinion based on the
consideration proposed at the conclusion of discussions with Trump on June 21,
1996. The Special Committee then authorized counsel to finalize a definitive
agreement on these terms. On June 24, 1996, Salomon delivered to the Special
Committee its fairness opinion in the form attached hereto as Annex
<PAGE>
B and the Board of Directors and the Special Committee each approved the terms
of the Agreement and the Acquisition. Counsel for the Special Committee and
counsel for Trump finalized the Agreement, which was executed on June 24, 1996.
On August 14, 1996, certain stockholders of THCR filed two derivative
actions in the Court of Chancery in Delaware (Civil Action Nos. 15148 and 15160)
against each of the members of the Board of Directors, THCR, THCR Holdings,
Castle Associates and TC/GP. The plaintiffs claim that the directors of THCR
breached their fiduciary duties in connection with the Acquisition and seek an
injunction, damages and an accounting. THCR and the other defendants believe
that these suits are without merit and intend to contest vigorously the
allegations against them.
Reasons for the Acquisition
The Board of Directors and the Special Committee considered the terms and
conditions of the Acquisition and determined that the Acquisition is fair to,
and in the best interest of, THCR. Accordingly, the Board of Directors and the
Special Committee recommend that the stockholders of THCR approve the
Acquisition. In making their respective determinations and recommendations
concerning the Acquisition, which determinations and recommendations were the
product of the business judgment of the respective members thereof, exercised in
light of their fiduciary duties to THCR and the stockholders of THCR, the Board
of Directors and the Special Committee reviewed and considered information and
documentation relating to the Acquisition and considered a number of factors,
including, but not limited to, the following:
(a) The Acquisition would be strategically favorable to THCR because
of THCR's and Castle Associates' business, operations, properties, assets,
financial condition, operating results and future prospects, the current
conditions in, and the future prospects of, the Atlantic City Market and
the competitive positions of each of Trump Plaza, the Taj Mahal and Trump's
Castle.
(b) The Acquisition would strengthen THCR's position as a leader in
the casino entertainment industry and enhance THCR's presence in the
growing Atlantic City Market, making THCR the only casino operator in
Atlantic City with facilities both on The Boardwalk and in the Marina.
(c) The Acquisition would result in synergies and cost savings
(estimated to be approximately $6 million to $10 million on an annual
basis), which would have a favorable impact on long-term value for the
stockholders of THCR.
(d) The Acquisition would eliminate the perceived conflict of interest
caused by the differing ownership of Trump's Castle and the THCR properties
in Atlantic City.
(e) The Acquisition would enhance THCR's ability to retain patrons
that may be drawn from The Boardwalk to the Marina.
(f) THCR would benefit from (i) the excellent condition of the current
facilities at Trump's Castle, which have been designed to accommodate
additional development with minimal disruption to existing operations, (ii)
the proximity of Trump's Castle to the H-Tract and (iii) the Trump's Castle
Expansion, which would, among other things, enable THCR to capitalize on
the expected increase in gaming activity at the Marina.
(g) The Agreement fixes the percentage of limited partnership
interests in THCR Holdings issuable in the Acquisition based on a price of
the THCR Common Stock of $30.00 per share; provided, however, that if the
THCR Stock Market Value is higher than $38.00, each of the Trump
Consideration and the TC/GP Consideration (and the number of shares of THCR
Common Stock into which they are exchangeable) will be reduced
appropriately as of the Closing Date so that no value will be received by
Trump or TC/GP in respect of any appreciation of the THCR Common Stock
above $38.00 per share.
(h) The Agreement requires approval of the Acquisition by a majority
of the unaffiliated stockholders of THCR through a separate class vote.
(i) The rendering of the Salomon Fairness Opinion and the oral
presentation of Salomon described below under "--Opinion of Financial
Advisor."
In view of the wide variety of factors considered, neither the Board of
Directors nor the Special Committee found it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in making their determinations.
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Opinion of Financial Advisor
Salomon has delivered its written opinion to the Special Committee that,
based upon and subject to various considerations set forth in such opinion, as
of June 24, 1996, the Consideration (as specified in the opinion) to be paid by
the THCR Entities in the Acquisition is fair, from a financial point of view, to
THCR and THCR Holdings. No limitations were imposed by the Special Committee
upon Salomon with respect to the investigations made or procedures followed by
Salomon in rendering its opinion.
The full text of the Salomon Fairness Opinion, which sets forth assumptions
made, general procedures followed, matters considered and limits on the review
undertaken by Salomon, is attached hereto as Annex B. The Salomon Fairness
Opinion is directed only to the fairness, from a financial point of view, of the
Consideration (as specified in such opinion) and does not address the underlying
business decision of either of the THCR Entities to effect the Acquisition or
constitute a recommendation to any stockholder of THCR as to how such
stockholder should vote at the Special Meeting. The summary of the opinion of
Salomon set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion attached hereto as Annex B.
STOCKHOLDERS OF THCR ARE URGED TO READ THE SALOMON FAIRNESS OPINION CAREFULLY
AND IN ITS ENTIRETY.
In connection with its written opinion, dated as of June 24, 1996, Salomon
reviewed and analyzed, among other things: (a) a draft of the Agreement and
assumed that the final form of such agreement would not vary in any regard that
is material to Salomon's analysis; (b) certain publicly available business and
financial information relating to THCR and Castle Associates; (c) certain other
information, including financial projections, provided to or reviewed for
Salomon by THCR and Castle Associates; (d) certain information concerning cost
savings and combination benefits expected to result from the Acquisition that
was provided by the management of THCR and Castle Associates; (e) certain
publicly available and other information concerning the trading of, and the
trading market for, the THCR Common Stock, the nature and terms of certain
recent transactions which Salomon believed to be reasonably comparable to the
Acquisition or otherwise relevant to its inquiry; and (f) certain publicly
available information with respect to other companies that Salomon believed to
be relevant or comparable in certain respects to Castle Associates and THCR, and
the trading markets for such other companies' securities. Salomon also met with
certain officers and employees of THCR and Castle Associates to discuss the
foregoing, including the past and current business operations and financial
condition and prospects of THCR and Castle Associates, respectively, and the
cost savings and combination benefits expected to result from the Acquisition as
well as other matters that Salomon believed relevant to its inquiry. Salomon
also considered such other information, financial studies, analyses,
investigations and financial, economic, market and trading criteria which
Salomon deemed relevant to its inquiry. The Salomon Fairness Opinion was
necessarily based upon business, market, economic and other conditions as they
existed on, and could be evaluated as of, the date thereof and the information
made available to Salomon through the date thereof.
In arriving at the Salomon Fairness Opinion, Salomon assumed and relied
upon the accuracy and completeness of all of the financial and other information
provided to it, reviewed by or for it, or discussed with it or publicly
available and Salomon has not assumed any responsibility for any independent
verification of such information or for any independent evaluation or appraisal
of the assets of THCR or Castle Associates. With respect to THCR's and Castle
Associates' financial projections and the estimates of cost savings and
combination benefits expected to result from the Acquisition, Salomon assumed
that they have been reasonably determined on bases reflecting the best currently
available estimates and judgments of THCR's or Castle Associates' management, as
the case may be, as to the future financial performance of THCR or Castle
Associates, as the case may be, and such expected cost savings and combination
benefits, and Salomon expressed no opinion with respect to such forecasts or
expected savings or benefits or the assumptions upon which they are based.
Salomon did not address the underlying business decision of either of the THCR
Entities to effect the Acquisition and is not making any recommendation to the
holders of THCR Common Stock as to how such holders should vote with respect to
the Acquisition at the Special Meeting. Salomon's opinion does not imply any
conclusion as to the likely trading range for the THCR Common Stock following
the consummation of the Acquisition, which may vary depending on, among other
factors, changes in interest rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities. Salomon relied as to all legal matters on advice of counsel to THCR.
In rendering Salomon's opinion, Salomon assumed that the representations
and warranties of each party contained in the Agreement are true and correct,
that each party will perform all of the covenants and agreements required to be
performed by it under the Agreement and that all conditions to the consummation
of the Acquisition
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will be satisfied without waiver thereof. Salomon also assumed that all material
governmental, regulatory or other consents and approvals will be obtained and
that in the course of obtaining any necessary governmental, regulatory or other
consents and approvals, as contemplated by the Agreement, no restrictions will
be imposed or waivers made that would have any material adverse effect on the
contemplated benefits to either of the THCR Entities of the Acquisition.
In connection with rendering its written opinion to the Special Committee,
Salomon performed a variety of financial analyses, the material portions of
which are summarized below. The summary set forth below does not purport to be a
complete description of the analyses performed by Salomon or its presentation to
the Special Committee. In addition, Salomon believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the processes underlying Salomon's
opinion. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not susceptible to partial analysis or summary
description. The projections provided by the management of each of THCR and
Castle Associates underlying Salomon's analyses are not necessarily indicative
of future results or values, which may be significantly more or less favorable
than such projections. Estimates of values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold. The range of valuation for any particular
analysis should not be taken to be the view of Salomon of the actual value of
Castle Associates or THCR. None of the analyses performed by Salomon was
assigned a greater significance by Salomon than any other.
The projections furnished to Salomon were provided to or reviewed for
Salomon by the management of each of THCR and Castle Associates. THCR and Castle
Associates do not publicly disclose internal management projections of the type
provided to Salomon in connection with the review of the Acquisition. Such
projections were not prepared with a view toward public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a summary of certain analyses performed by Salomon in
connection with its opinion datedJune 24, 1996:
Comparable Public Company Analysis. Salomon compared Castle Associates to
20 public gaming companies. In this regard, Salomon noted that although such
companies were the best available publicly traded companies, none of the
companies has the same management, makeup and size as Castle Associates. The
publicly traded gaming companies selected by Salomon for purposes of this
analysis were: Ameristar Casinos, Inc. ("Ameristar"); Aztar Corporation; Bally
Entertainment Corporation ("Bally Entertainment"); Bally's Grand, Inc.; Boyd
Gaming Corporation ("Boyd"); Circus Circus Enterprises, Inc. ("Circus Circus");
Griffin Gaming & Entertainment, Inc.; Harrah's Entertainment, Inc. ("Harrah's");
Harveys Casino Resorts; Hilton Hotels Corporation ("Hilton"); Hollywood Casino
Corporation; MGM Grand, Inc. ("MGM"); Mirage Resorts, Inc. ("Mirage"); Players
International, Inc.; Primadonna Resorts, Inc.; Rio Hotel & Casino, Inc.;
Showboat, Inc.; Station Casinos, Inc.; Stratosphere Corporation and THCR (the
"Comparable Companies"). Using publicly available information, Salomon
calculated multiples of closing stock prices at June 19, 1996 to latest twelve
months earnings and 1996 and 1997 estimated earnings and multiples of firm value
to latest twelve months earnings before interest, taxes, depreciation and
amortization ("EBITDA"). The median multiple of firm value to latest twelve
months EBITDA for the overall gaming sector used by Salomon in its analysis was
9.9x for the latest twelve months ended March 31, 1996 and 7.6x estimated for
1996. The median multiple of firm value to latest twelve months EBITDA for
gaming companies with substantial Atlantic City exposure used by Salomon in its
analysis was 9.4x for the latest twelve months and 7.3x estimated for 1996. The
median multiple of firm value to latest twelve months EBITDA ended March 31,
1996 for comparable single property and near single property gaming companies
used by Salomon in its analysis was 9.7x for the latest twelve months ended
March 31, 1996 and 8.7x estimated for 1996. Salomon derived median multiples
from the foregoing analysis of the Comparable Companies and applied them to
comparable financial data relating to Castle Associates. This analysis resulted
in a firm value range of $419 million to $515 million for Castle Associates.
Analysis of Selected Private Gaming Merger and Acquisition Transactions.
Salomon reviewed the firm values in ten private acquisitions or business
combination transactions in the gaming industry during the last two years. Among
other factors, Salomon indicated that the merger and acquisition transaction
environment varies over time because of macroeconomic factors such as interest
rate and equity market fluctuations and microeconomic factors such as industry
results and growth expectations. These acquisitions and business combinations
included the
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following: Hilton/Bally Entertainment (pending); Ameristar/Gem Gaming, Inc.
(Reserve Hotel & Casino) (pending); Boyd/Par-A-Dice Gaming Corporation
(pending); Hollywood Park, Inc./Boomtown, Inc. (pending); THCR/Taj Mahal Holding
Corp. ("Taj Holding") (1996); William G. Bennett/Sahara Hotel & Casino (1995);
MGM/Diamond Beach Hotel & Casino (1995); Circus Circus/The Hacienda Hotel and
Casino (1995); Circus Circus/Goldstrike Resorts (1995); and ITT
Corporation/Caesars World, Inc. (1995). Using publicly available information,
Salomon calculated the following range of multiples of the firm value to latest
twelve months EBITDA (5.2x to 12.9x). Based on this analysis and Salomon's
selection of the most comparable transactions, Salomon derived a firm value
range of $478 million to $552 million for Castle Associates.
Discounted Cash Flow Analysis. Salomon performed a discounted cash flow
analysis of Castle Associates assuming three scenarios: A (no Trump's Castle
Expansion), B (Trump's Castle Expansion as proposed) and C (Trump's Castle
Expansion delayed two years). Pursuant to such analysis, the value of Castle
Associates was estimated as the sum of (i) the estimated present value of Castle
Associates' projected free cash flow plus (ii) the estimated present value of
the product of (x) 2001 EBITDA multiplied by (y) numbers representing various
terminal or exit multiples for Castle Associates, based upon certain operating
and financial assumptions, forecasts and other information provided to Salomon
by the management of Castle Associates. Salomon estimated Castle Associates'
future free cash flow using projections provided by the management of Castle
Associates for 1996, 1997, 1998, 1999, 2000 and 2001, and certain variants
thereof. For purposes of such analysis, Salomon utilized discount rates ranging
from 11.0% to 13.0% and terminal values derived by applying terminal value
multiples ranging from 6.5x to 8.5x to Castle Associates' 2001 projected EBITDA.
Salomon noted that the selection of an appropriate discount rate is an
inherently subjective process and reflects such factors as THCR's estimated cost
of capital and cost of equity, the estimated amount of excess capital at Castle
Associates, the uncertainty associated with achieving management projections and
transaction risk generally. Based on the foregoing factors, Salomon determined
that the appropriate range of discount rates was 11% to 13%. Under Scenario A,
this analysis resulted in a range of values of $362 million to $414 million for
Castle Associates. Salomon also examined Scenario B. This analysis resulted in a
range of values of $501 million to $598 million for Castle Associates. Salomon
also examined Scenario C, under which the Trump's Castle Expansion is delayed
two years. This analysis resulted in a range of values of $462 million to $550
million for Castle Associates. Salomon noted that the discounted cash flow
analysis is a widely used valuation methodology, but that it relies on numerous
assumptions regarding the future performance of a company and the future
economic environment, including earnings growth rates, free cash flows, terminal
values and discount rates, which are inherently uncertain because they are
predicated upon future events and circumstances.
Valuation of Synergies. Salomon analyzed the expected cost savings from the
combination of THCR and Castle Associates based on management's projections.
These combination benefits include: purchase discounts, healthcare costs,
mailing costs, legal costs, administrative costs (such as risk management,
accounts payable and internal audit) and executive compensation. This analysis
indicated a firm value range of $33 million to $43 million in combination
benefits.
THCR Valuation Analysis. Salomon examined the history of trading prices for
THCR Common Stock from June 1995 until June 1996. Salomon observed that the
price of THCR Common Stock had increased nearly 130% since its initial public
offering in June 1995. Salomon compared the current trading multiples of THCR to
the Comparable Companies and noted that THCR traded at a multiple of firm value
to latest twelve months EBITDA of 9.7x and estimated 1996 EBITDA of 6.9x.
Salomon compared these multiples to the corresponding median multiples for the
Comparable Companies of 9.9x and 7.6x, respectively. Salomon also performed a
discounted cash flow analysis of THCR. Pursuant to such analysis, the value of
THCR was estimated as the sum of (i) the estimated present value of THCR's
projected free cash flow plus (ii) the estimated present value of the product of
(x) 2001 EBITDA multiplied by (y) numbers representing various terminal or exit
multiples for THCR, based upon certain operating and financial assumptions,
forecasts and other information provided to Salomon by the management of THCR.
Salomon estimated THCR's future free cash flow using projections provided by the
management of THCR for 1996, 1997, 1998, 1999, 2000 and 2001. For purposes of
such analysis, Salomon utilized discount rates ranging from 11.0% to 13.0% and
terminal values derived by applying terminal value multiples ranging from 6.5x
to 8.5x to THCR's 2001 projected EBITDA. This analysis resulted in a range of
values of $2.0 billion to $2.3 billion for THCR which equates to an equity value
per share of THCR Common Stock of $28 to $37.
Pro Forma Combination Analysis. Salomon reviewed certain pro forma
financial effects resulting from the Acquisition for the projected twelve-month
periods for 1997, 1998, 1999, 2000 and 2001. This analysis was based upon
certain assumptions, including that the projections provided to Salomon by
THCR's and Castle Associates'
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management were accurate. Salomon estimated that, on a pro forma basis, the
Acquisition would be dilutive to the earnings per share of THCR in 1997 and
1998, respectively. Salomon also estimated that, on a pro forma basis, the
Acquisition would be accretive to the funds from operations per share of THCR in
1997 and 1998, respectively.
Salomon is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive bidding,
secondary distributions of listed and unlisted securities and valuations for
corporate, estate and other purposes. THCR selected Salomon as its financial
advisor because of its reputation and because of its substantial experience in
transactions such as the Acquisition.
In addition to the financial advisory services referred to above, Salomon
has from time to time provided investment banking and related services to THCR
for which Salomon has received customary fees. Salomon continues to maintain a
relationship with THCR, Trump and other companies affiliated with Trump, and may
in the future provide investment banking and other related services to THCR,
Trump or other companies affiliated with Trump, for which Salomon expects to
receive customary fees or compensation. In the ordinary course of its business,
Salomon actively trades the debt and equity securities of THCR and the debt
securities of Castle Associates for its own account and for the accounts of its
customers and, accordingly, at any time may hold a long or short position in
such securities. It is expected that Salomon will become a secured creditor of
Trump in connection with a loan proposed to be made to Trump by Salomon, for
which Salomon will receive a customary fee and reimbursement of expenses.
THCR and Salomon have entered into a letter agreement dated May 28, 1996
(the "Salomon Engagement Letter") relating to the services to be provided by
Salomon in connection with the Acquisition. Pursuant to the Salomon Engagement
Letter, THCR has agreed to pay Salomon the following fees: (a) $400,000, payable
following THCR's execution of the Salomon Engagement Letter (which fee has been
paid); (b) an additional fee of $1,800,000, payable when Salomon is prepared to
render the Salomon Fairness Opinion (which fee has been paid); and (c) an
additional fee of $400,000, payable on the earlier of (i) consummation of the
Acquisition or (ii) December 1, 1996. The Special Committee was aware of this
fee structure, which is standard and customary in the industry for transactions
similar to the Acquisition, and took it into account in considering Salomon's
opinion and in approving the Agreement and the transactions contemplated
thereby. In the Salomon Engagement Letter, THCR also has agreed to reimburse
Salomon for the reasonable fees and disbursements of Salomon's counsel and
Salomon's reasonable travel and other out-of-pocket expenses. Pursuant to an
additional letter agreement dated May 28, 1996, THCR also has agreed to
indemnify Salomon against certain liabilities, including liabilities under the
federal securities laws.
Interest of Certain Persons in the Acquisition
In considering the recommendation of the Board of Directors with respect to
the Acquisition, certain members thereof may be deemed to have certain interests
in the Acquisition in addition to those of stockholders generally. Of the seven
members of the Castle Board of Partner Representatives, two (Trump and Nicholas
L. Ribis) are also members of the Board of Directors and two (Nicholas L. Ribis
and Robert M. Pickus) are also executive officers of THCR and, therefore, may be
deemed to have a conflict with respect to the Acquisition, given that THCR is a
party to the Agreement and THCR Holdings will acquire 100% of the equity of
Castle Associates if the Acquisition is consummated. John P. Burke, the
Treasurer of Castle Associates, is also Senior Vice President and Corporate
Treasurer of THCR.
In addition to Trump's positions as Chairman of the Board of Directors and
Chairman of the Castle Board of Partner Representatives, Trump currently
beneficially owns 100% of the equity of Castle Associates and approximately 25%
of the equity of THCR Holdings. As a result of the Acquisition, Trump will
receive limited partnership interests in THCR Holdings that will increase his
beneficial equity interest therein to approximately 36.6%, together with
approximately $884,500 in cash. See "The Agreement--The Acquisition."
In December 1993, Castle Associates entered into a Services Agreement with
TC/GP (the "Castle Services Agreement"). In general, the Castle Services
Agreement obligates TC/GP to provide to Castle Associates, from time to time
when reasonably requested, consulting services on a non-exclusive basis,
relating to marketing, advertising, promotional and other related services with
respect to the business and operations of Castle Associates, in exchange for
certain fees to be paid only in those years in which EBITDA (EBITDA, as used in
the Castle Services Agreement, represents income from operations before
depreciation, amortization, restructuring costs and the non-cash write-down of
CRDA investments) exceeds prescribed amounts. During the year ended 1995 and the
first quarter of 1996, Castle Associates recorded fees of $2,087,000 and
$375,000, respectively, under the Castle Services Agreement. The Castle Services
Agreement expires on December 31, 2005.
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Castle Associates has an employment agreement with Nicholas L. Ribis
pursuant to which Mr. Ribis acts as Chief Executive Officer of Castle
Associates. Mr. Ribis receives $499,125 per year from Castle Associates with
respect to his services to Trump's Castle and devotes approximately one-quarter
of his professional time to the affairs of Castle Associates.
Regulatory Matters
Antitrust Regulations. The Acquisition is subject to the expiration or
termination of the applicable waiting period under the HSR Act. Under the HSR
Act and the rules promulgated thereunder by the Federal Trade Commission (the
"FTC"), the Acquisition may not be consummated until notifications have been
given and certain information has been furnished to the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the applicable waiting
period has expired or been terminated. On July 23, 1996, THCR and Trump filed
Notification and Report forms under the HSR Act with the FTC and the Antitrust
Division. On August 6, 1996, the FTC and the Antitrust Division granted early
termination of the waiting period under the HSR Act with respect to the
Acquisition.
Based on information available to them, THCR and Trump believe that the
Acquisition can be effected in compliance with the federal antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Acquisition on antitrust grounds will not be made or that, if such a challenge
were made, THCR and Trump would prevail or would not be required to accept
certain adverse conditions in order to consummate the Acquisition.
Gaming Regulations. The Acquisition and the transactions contemplated
thereby are subject to review and approval by the New Jersey Casino Control
Commission (the "CCC"). Management believes that THCR and its respective
affiliates are, and will be upon consummation of the Acquisition, in material
compliance with all applicable gaming laws, rules and regulations.
Certain Federal Income Tax Considerations
As a result of the Acquisition, THCR Holdings will acquire an adjusted tax
basis in the contributed interests in Castle Associates equal to Trump's and
TC/GP's respective adjusted tax basis in such interests immediately prior to the
Acquisition and THCR Holdings will acquire an adjusted tax basis in the assets
of Castle Associates that is equal to such adjusted tax basis. All gain in
respect of such contributed interests and assets as of the date of the
Acquisition will be allocated to Trump and TC/GP, with tax depreciation, to the
extent available and computed using new recovery periods, first being allocated
to THCR based on the fair market value of such assets and the remainder to Trump
and TC/GP. The Acquisition is not expected to have any other material income tax
consequences to THCR or the holders of THCR Common Stock.
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THE AGREEMENT
The following description of certain terms of the Agreement is only a
summary and does not purport to be complete. This discussion is qualified in its
entirety by reference to the complete text of the Agreement, a copy of which is
attached hereto as Annex A and incorporated herein by reference. Stockholders of
THCR are urged to read carefully the Agreement in its entirety.
The Acquisition
The Agreement provides that the Castle Equity Consideration is $176.9
million, payable in limited partnership interests in THCR Holdings (exchangeable
into shares of THCR Common Stock) and cash as set forth below. The Castle Equity
Consideration represents: (A) $525.0 million (a value for the business and
operations of Castle Associates agreed to by the parties as of the date of the
Agreement for purposes of the specific transactions contemplated by the
Agreement) minus (B) $314.0 million (the sum of all the aggregate principal
amounts of (i) Castle Associates' capital lease obligations and indebtedness
outstanding under the Castle Term Loan, (ii) Castle PIK Notes not held by THCR
Holdings, (iii) Castle Senior Notes and (iv) Castle Mortgage Notes outstanding
as of the date of the Agreement) minus (C) $40.8 million (the aggregate
principal amount of all Castle PIK Notes held by THCR Holdings estimated to be
outstanding as of the Closing Date less the aggregate discount at which Trump
may repurchase the Castle PIK Notes held by THCR Holdings pursuant to agreements
entered into prior to the date of the Agreement) plus (D) $6.7 million (the
estimated amount of excess cash over the operating needs of Castle Associates as
of the Closing Date). On the terms and subject to the conditions set forth in
the Agreement, and in reliance upon the arties' representations set forth
therein, the Acquisition will take place, and the Castle Equity Consideration
will be payable, on the Closing Date as follows:
(i) Trump will, on the Closing Date, contribute to THCR Holdings and
THCR Holdings will accept as a contribution from Trump, the 61.5% interest
in Castle Associates owned beneficially and of record by Trump, in
consideration of which Trump will receive at the Closing the Trump
Consideration, exchangeable into 3,626,450 shares of THCR Common Stock
(valuing each such share at the THCR Stock Contribution Value);
(ii) TC/GP will, on the Closing Date, contribute to THCR Holdings, and
THCR Holdings will accept as a contribution from TC/GP, the 37.5% interest
in Castle Associates owned beneficially and of record by TC/GP, in
consideration of which TC/GP will receive at the Closing the TC/GP
Consideration, exchangeable into 2,211,250 shares of THCR Common Stock
(valuing each such share at the THCR Stock Contribution Value); and
(iii) the THCR Entities, Trump and TCHI will, on the Closing Date,
cause Merger Sub to be merged with and into TCHI in accordance with the New
Jersey Business Corporation Act and the DGCL whereupon (x) the separate
existence of Merger Sub will cease and TCHI will be the surviving
corporation, (y) at the effective time of the TCHI Merger (A) each share of
TCHI Common Stock outstanding immediately prior to the TCHI Merger will be
converted into the right to receive the TCHI Consideration and (B) each
share of common stock of Merger Sub will be converted into the right to
receive one share of common stock of the surviving corporation of the TCHI
Merger and (z) a provision will be made for the holders of the Castle
Warrants to receive, in accordance with the terms of the Castle Warrant
Agreement, for each former share of TCHI Common Stock for which each Castle
Warrant was exercisable immediately prior to the effective time of the TCHI
Merger, the Castle Warrant Consideration to be delivered to the Castle
Warrant Agent on behalf of the holders of the Castle Warrants representing
the consideration that such holders are entitled to receive as a result of
the TCHI Merger.
The Agreement provides that if the THCR Stock Market Value is higher than
$38.00, each of the Trump Consideration and TC/GP Consideration (and the number
of shares of THCR Common Stock into which they are exchangeable) will be reduced
appropriately as of the Closing Date so that no value will be received by Trump
or TC/GP in respect of any appreciation of the THCR Common Stock above $38.00
per share. The Agreement defines "THCR Stock Market Value" as the average of the
closing sale prices on the NYSE of a share of THCR Common Stock for the twenty
day trading period ending three trading days immediately preceding the Closing
Date.
In connection with the Acquisition, the Castle Partnership Agreement will
be amended to convert Castle Associates from a general partnership to a limited
partnership. Upon consummation of the Acquisition, THCR Holdings will own a 99%
limited partnership interest in Castle Associates and TCHI (as the surviving
corporation of the TCHI Merger) will own a 1% general partnership interest in
Castle Associates.
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Closing
Unless the Agreement is terminated and the transactions contemplated
thereby are abandoned, the closing of the Acquisition (the "Closing") will take
place as promptly as practicable (and in any event within two business days)
after satisfaction or waiver of the conditions set forth in the Agreement.
Conditions to the Acquisition
The respective obligations of the THCR Entities, Trump and the Castle
Entities to consummate the transactions contemplated by the Agreement are
subject to the fulfillment, at or prior to the Closing, of certain conditions,
any or all of which may be waived in whole or in part, to the extent permitted
by applicable law, including that (i) the Acquisition will have been duly
approved and adopted by the affirmative vote of a majority of the outstanding
shares of (x) THCR Common Stock and THCR Class B Common Stock, voting as a
single class, in accordance with the DGCL and the ertificate of ncorporation and
(y) THCR Common Stock (excluding shares held by officers and directors of THCR
and their affiliates); (ii) the consent of certain of Trump's personal creditors
necessary to consummate the Acquisition and the transactions contemplated
thereby will have been obtained, and all liens in favor of any such creditors on
the equity of Castle Associates will have been released; (iii) all filings
required to be made prior to the Closing with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Closing from any
governmental and regulatory authorities (including, without limitation, Gaming
Authorities (as defined in the Agreement)) in connection with the execution and
delivery of the Agreement and the consummation of the transactions contemplated
thereby will have been made or obtained (as the case may be) without
restrictions, except where the failure to obtain such consents, approvals,
permits and authorizations could not reasonably be expected to have a material
adverse effect; (iv) no court or governmental or regulatory authority of
competent jurisdiction (including, without limitation, Gaming Authorities) will
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) or taken any action that prohibits the consummation of
the transactions contemplated by the Agreement; provided, however, that the
parties invoking this condition will use their best efforts to have any such
judgment, decree, injunction or order vacated; and (v) the waiting period
applicable to the consummation of the Acquisition under the HSR Act will have
expired or been terminated.
The obligations of Trump and the Castle Entities to consummate the
transactions contemplated by the Agreement are subject to the fulfillment, at or
prior to the Closing, of certain conditions, any or all of which may be waived
in whole or in part by Trump and the Castle Entities to the extent permitted by
applicable law, including that (i) each of the THCR Entities will have performed
in all material respects all of its respective obligations under the Agreement
required to be performed by it at or prior to the Closing; (ii) each of the
representations and warranties of the THCR Entities contained in the Agreement
and in any certificate or other writing delivered by the THCR Entities pursuant
thereto will be true in all material respects at and as of the Closing Date as
if made at and as of such time (except to the extent it relates to a particular
date); and (iii) Trump will have received a certificate from THCR, in its own
capacity and as the sole general partner of THCR Holdings, signed by an
executive officer of THCR, to the effect set forth in clauses (i) and (ii) of
this paragraph.
The obligation of the THCR Entities to consummate the transactions
contemplated by the Agreement is subject to the fulfillment, at or prior to the
Closing, of certain conditions, any or all of which may be waived in whole or in
part by the THCR Entities to the extent permitted by applicable law, including
that (i) Castle Associates will have been converted into a limited partnership
and the Castle Partnership Agreement will have been amended in form and
substance satisfactory to the THCR Entities; (ii) TCHI will have complied with
Section 7.2 of the Castle Warrant Agreement and all other relevant provisions
thereof and the Castle Warrants will have been canceled or appropriate provision
will have been made therefor; (iii) the consent of certain creditors of Castle
Associates and Castle Funding to modify certain terms of the agreements to which
such creditors are parties (in form and substance satisfactory to the THCR
Entities) will have been obtained; (iv) Trump and the Castle Entities will have
performed, and will have caused Castle Associates and Castle Funding to perform,
in all material respects all of their obligations under the Agreement required
to be performed by them at or prior to the Closing; (v) each of the
representations and warranties of Trump and the Castle Entities contained in the
Agreement and in any certificate or other writing delivered by Trump and the
Castle Entities pursuant thereto will be true in all material respects at and as
of the Closing Date as if made at and as of such time (except to the extent it
relates to a particular date); and (vi) the THCR Entities will have received a
certificate signed by Trump and the Castle Entities to the effect set forth in
clauses (iv) and (v) of this paragraph.
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The THCR Entities anticipate that Castle Associates and Castle Funding will
not solicit the consent of their creditors in connection with the Acquisition
and that the TCHR Entities will waive this condition on or prior to the Closing
Date.
Representations and Warranties
The Agreement contains various representations and warranties of each of
Trump and the Castle Entities and of the THCR Entities relating to, among other
things, the following matters (which representations and warranties are subject,
in certain cases, to specified exceptions): (i) due organization, corporate
power, partnership power, standing and similar corporate and partnership
matters; (ii) capitalization; (iii) subsidiaries; (iv) reports and other
documents filed with the Securities and Exchange Commission (the "SEC") and the
accuracy of the information contained therein, including financial statements;
(v) the absence of certain changes or events having a material adverse effect on
the financial condition, business or results of operations of each party; (vi)
authorization, execution, delivery, performance and enforceability of the
Agreement and the transactions contemplated thereby; (vii) the absence of any
conflict with their respective certificates of incorporation and by-laws or
partnership agreements and compliance with applicable laws; (viii) the absence
of any consent, waiver or authorization that would have a material adverse
effect on the financial condition, business or results of operations of each
party; (ix) the absence of any litigation having a material adverse effect on
the financial condition, business or results of operations of each party; (x)
payment of taxes and filing of tax returns; (xi) material contracts and leases;
(xii) compliance with all material laws and regulations and possession of all
material licenses and permits; (xiii) the absence of undisclosed liabilities;
(xiv) the absence of any material untrue statements or omissions in this Proxy
Statement; (xv) the inapplicability of Section 203 of the DGCL; (xvi) the
absence of brokerage or finder's fees, except those payable by THCR to Salomon;
and (xvii) the receipt of the Salomon Fairness Opinion.
Conduct Pending the Acquisition
Pursuant to the terms of the Agreement, from and after the date thereof and
until the Closing, Trump and the Castle Entities will, and will cause Castle
Associates and Castle Funding to, conduct their business solely in the ordinary
course consistent with past practice and Trump and the Castle Entities will, and
will cause Castle Associates and Castle Funding not to, except with the prior
written consent of the THCR Entities or as required or permitted pursuant to the
terms thereof or as contemplated in their previous filings with the SEC or by
the terms of the Agreement (i) make any material change in the conduct of their
businesses and operations or enter into any transaction, other than in the
ordinary course of business consistent with past practice; (ii) make any change
in their certificates of incorporation or by-laws or partnership agreement, as
the case may be, issue any additional shares of capital stock or equity
securities, grant any option, warrant or right to acquire any capital stock or
equity securities, issue any security convertible into or exchangeable for their
capital stock, alter in any material respect the terms of any of their
outstanding securities, or make any change in their outstanding shares of
capital stock or in their capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise; (iii) incur, assume or
guarantee any indebtedness for borrowed money, issue any notes, bonds,
debentures or other corporate securities or grant any option, warrant or right
to purchase any thereof, other than in the ordinary course of business
consistent with past practice; (iv) make any sale, assignment, transfer,
abandonment or other conveyance of any of their assets or any part thereof,
except in the ordinary course of business consistent with past practice; (v)
subject any of their assets, or any part thereof, to any lien or suffer such to
be imposed other than such liens as may arise in the ordinary course of business
consistent with past practice or by operation of law; (vi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any shares of their
capital stock or declare, set aside or pay any dividends or make any other
distribution in respect of such shares or make any other distributions in
respect of equity interests; (vii) increase the compensation payable or to
become payable to their executive officers or employees, except for increases in
the ordinary course of business in accordance with past practice, or grant any
severance or termination pay to, or enter into any employment or severance
agreement (other than in the ordinary course of business) with, any director or
executive officer, or establish, adopt, enter into or amend in any material
respect or take action to accelerate any rights or benefits under any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust fund, policy or
arrangement for the benefit of any director, executive officer or employee;
(viii) take any other action that would cause any of the representations and
warranties made in the Agreement not to remain true and correct; or (ix) commit
themselves to do any of the foregoing.
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In addition, from and after the date of the Agreement and until the
Closing, the THCR Entities will, and will cause each of their subsidiaries to,
conduct their business solely in the ordinary course consistent with past
practice and, without the prior written consent of Trump and the Castle
Entities, the THCR Entities will not, and will cause each of their subsidiaries
not, except as required or permitted pursuant to the terms thereof or as
contemplated in their previous filings with the SEC or by the terms of the
Acquisition to: (i) make any material change in the conduct of their businesses
and operations or enter into any transaction other than in the ordinary course
of business consistent with past practice; (ii) make any change in their
certificates of incorporation or by-laws or partnership agreements, as the case
may be, or make any material change in their outstanding shares of capital stock
or in their capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise; (iii) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of their capital stock or declare,
set aside or pay any dividends or make any other distribution in respect of such
shares or make any other distributions in respect of equity interests; (iv) take
any other action that would cause any of the representations and warranties made
in the Agreement not to remain true and correct; or (v) commit themselves to do
any of the foregoing.
Other Covenants
Pursuant to the terms of the Agreement, THCR agreed (i) to prepare and file
with the SEC this Proxy Statement, (ii) to take all necessary actions to convene
the Special Meeting and (iii) to deliver to its stockholders this Proxy
Statement. Trump agreed (i) to use reasonable best efforts to cause to be
delivered to the THCR Entities "comfort letters" of Castle Associates'
independent accountants, dated and delivered the date on which this Proxy
Statement is mailed and on the Closing Date and (ii) to vote or cause to be
voted at the Special Meeting all the THCR Class B Common Stock and any shares of
THCR Common Stock that he beneficially owns for approval of the Acquisition.
THCR and Trump also agreed (i) to amend the Amended and Restated Exchange and
Registration Rights Agreement, dated as of April 17, 1996, by and among THCR,
Trump and Trump Casinos (the "Exchange Rights Agreement"), to afford Trump the
registration rights and exchange privileges contained in the Exchange Rights
Agreement with respect to the limited partnership interest in THCR Holdings that
Trump and TC/GP will receive pursuant to the Agreement and (ii) to amend the
Second Amended and Restated Agreement of Limited Partnership of THCR Holdings or
to waive any provisions thereof as will be necessary to effect the transactions
contemplated by the Agreement.
Each of the parties to the Agreement agreed (i) to give the other access to
information and personnel and to keep, subject to certain exceptions, such
information confidential; (ii) to notify the other upon the occurrence of
certain specified events; (iii) to use their best efforts to file or cause to be
filed as soon as practicable notifications under the HSR Act in connection with
the Acquisition, and to respond as promptly as practicable to any inquiries
received from the FTC and the Antitrust Division for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other governmental
authority in connection with antitrust matters; and (iv) to enter into a plan of
merger in order to effect the TCHI Merger on the terms set forth in the
Agreement.
Subject to the terms and conditions of the Agreement, each of the parties
thereto further agreed to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Acquisition, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings (including, but not limited to,
filings with all applicable governmental agencies) and to lift any injunction or
other legal bar to the transactions contemplated by the Agreement (and, in such
case, to proceed with the transactions contemplated by the Agreement as
expeditiously as possible).
No Solicitation
The Agreement provides that neither Trump nor the Castle Entities will,
directly or indirectly, take (nor will any of them authorize or permit Castle
Associates or Castle Funding, or their officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to take) any action (i) to knowingly encourage, solicit or initiate
the submission of any Acquisition Proposal (as defined in the Agreement), (ii)
to enter into any agreement with respect to any Acquisition Proposal or (iii) to
participate in any way in discussions or negotiations with, or furnish any
information to, any person in connection with, or take any other action to
facilitate
29
<PAGE>
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal.
Notwithstanding the foregoing, the parties to the Agreement agreed that in
the event Trump or TCHI receives an unsolicited Acquisition Proposal by any
other person relating to a transaction involving the sale of TCHI Common Stock
or any merger, consolidation or other business combination or acquisition of all
or substantially all of the assets or securities of TCHI, Trump or TCHI, as the
case may be, may review and act upon such unsolicited Acquisition Proposal
solely as it relates to such transaction only in the event that Trump and/or
TCHI, as the case may be, determines in good faith, after consultation with and
based upon the advice of his and/or its financial and legal advisors, that
failing to review and act upon such proposal would constitute a breach of
fiduciary duty. Trump must promptly communicate to the THCR Entities any
solicitation by or of TC/GP, TCHI, Castle Associates or Castle Funding and the
terms of any proposal or inquiry, including the identity of the person and its
affiliates making the same, that it may receive in respect of any such
transaction, or of any such information requested from it or of any such
negotiations or discussions being sought to be initiated with it.
Indemnification
Trump and the Castle Entities agreed, and agreed to cause Castle Associates
and Castle Funding to indemnify the THCR Entities and each of their officers,
directors, partners, controlling persons, affiliates, agents and employees
(other than Trump), and their respective heirs, successors and assigns (each a
"THCR Indemnified Party"), against any losses, claims, damages, expenses
(including the reasonable fees and expenses of their respective attorneys),
liabilities, actions, proceedings, investigations (formal or informal),
inquiries or threats thereof (collectively, the "Liabilities") to which a THCR
Indemnified Party may become subject and arising in any matter out of or in
connection with (i) any breach of any representation or warranty made by Trump
or the Castle Entities in the Agreement and (ii) any breach of any covenant or
agreement of Trump or the Castle Entities in the Agreement.
The THCR Entities agreed to indemnify Trump and his heirs, successors and
assigns (each a "Trump Indemnified Party" and, collectively with a THCR
Indemnified Party, an "Indemnified Party") against any Liabilities to which a
Trump Indemnified Party may become subject and arising in any matter out of or
in connection with (i) any breach of any representation or warranty made by the
THCR Entities in the Agreement and (ii) any breach of any covenant or agreement
of the THCR Entities in the Agreement.
The Agreement provides that each Indemnified Party will give notice to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and will permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided that
counsel for the Indemnifying Party, who will conduct the defense of such claim
or any litigation resulting therefrom, will be approved by the Indemnified Party
(whose approval will not unreasonably be withheld) and the Indemnified Party may
participate in such defense at such party's expense (unless the Indemnified
Party will have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in such action, in
which case the fees and expenses of counsel will be at the expense of the
Indemnifying Party); and provided further that the failure of any Indemnified
Party to give notice as provided therein will not relieve the Indemnifying Party
of its indemnification obligations, unless the Indemnifying Party is materially
prejudiced thereby. No Indemnifying Party, in the defense of any such claim or
litigation will, except with the consent of each Indemnified Party (which
consent will not unreasonably be withheld), consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
full and unconditional release from all liability in respect to such claim or
litigation. Each Indemnified Party will furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as will be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
Termination
The Agreement may be terminated and the Acquisition may be abandoned at any
time prior to the Closing (whether before or after approval of the Agreement by
the stockholders of THCR): (i) by joint written consent of Trump, the Castle
Entities and the THCR Entities; (ii) by Trump and the Castle Entities if the
conditions of the obligation of Trump and the Castle Entities to consummate the
Acquisition have not been satisfied or waived by Trump or the Castle Entities at
such time as such condition is no longer capable of satisfaction; (iii) by Trump
or
30
<PAGE>
TCHI, as the case may be, to act upon an unsolicited Acquisition Proposal with
respect to TCHI that Trump and/or TCHI, as the case may be, determines in good
faith, after consultation with and based upon the advice of his and/or its
financial and legal advisors, that failing to review and act upon such proposal
would constitute a breach of fiduciary duty; (iv) by the THCR Entities if the
conditions of the obligation of the THCR Entities to consummate the Acquisition
have not been satisfied or waived by the THCR Entities at such time as such
condition is no longer capable of satisfaction; or (v) by any party if the
Acquisition has not been consummated on or before December 31, 1996; provided,
however, that a party may not terminate the Agreement pursuant to clause (v) if
the failure of such party to fulfill any of its obligations under the Agreement
will have been the reason that the Acquisition will not have been consummated on
or before said date.
In the event of termination of the Agreement pursuant to the above
paragraph, the Agreement will terminate forthwith and (except for the willful
breach of the Agreement) there will be no liability on the part of any party;
provided, however, that certain representations and warranties, covenants and
other provisions will survive the termination of the Agreement.
Fees and Expenses
The Agreement provides that, whether or not the Acquisition is consummated,
(i) any costs and expenses incurred by a party thereto in connection with the
Acquisition and the transactions contemplated thereby will be borne in full by
such party and (ii) Trump and the Castle Entities will cause each of Castle
Associates and Castle Funding to pay for their own costs and expenses incurred
in connection with the Acquisition and the transactions contemplated thereby.
Amendment; Waiver; Survival
The Agreement provides that it may be amended by the parties thereto at any
time prior to the Closing, provided that any such amendment made after the
approval of the Acquisition by the stockholders of THCR will not, without
further approval of such stockholders, (i) alter or change the amount, kind or
manner of payment of the consideration to be received or (ii) change any other
terms or conditions of the Agreement, if any of such changes, alone or in the
aggregate, would materially and adversely affect the stockholders of THCR. Any
amendment to the Agreement must be in writing and signed by all the parties
thereto.
The Agreement also provides that, at any time prior to the Closing, the
parties thereto may, unless otherwise set forth in the Agreement, (i) extend the
time for the performance of any agreement of the other party or parties thereto,
(ii) waive any inaccuracy in the representations and warranties contained
therein or in any document delivered pursuant thereto or (iii) waive compliance
with any agreement or condition of the other party or parties thereto contained
therein. Any agreement on the part of any party to any such extension or waiver
will be effective only if set forth in a writing signed on behalf of such party
and delivered to the other party or parties. No failure or delay by any party in
exercising any right, power or privilege thereunder will operate as a waiver
thereof nor will any single or partial exercise thereof preclude any other
right, power or privilege.
All the representations, warranties, agreements or covenants contained in
the Agreement will survive the Closing Date for a period of two years.
31
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet as of , 1996 and the
Unaudited Pro Forma Consolidated Statements of Operations of THCR for the year
ended December 31, 1995 and for the months ended , 1996 (the "Unaudited Pro
Forma Financial Statements") are set forth below.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared
assuming the Acquisition had occurred on , 1996. The Unaudited Pro Forma
Consolidated Statements of Operations have been prepared assuming that the Taj
Merger Transaction and the Acquisition had occurred on January 1, 1995.
The Unaudited Pro Forma Financial Statements are presented for
informational purposes only and do not purport to present what the Balance Sheet
would have been had the Acquisition, in fact, occurred on , 1996 or what the
results of operations for the year ended December 31, 1995 or for the months
ended , 1996 would have been had the Taj Merger Transaction and the Acquisition,
in fact, occurred on January 1, 1995 or to project the results of operations for
any future period.
The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the
Acquisition and the Unaudited Pro Forma Statements of Operations give effect to
the Taj Merger Transaction and the Acquisition as follows:
I. The Taj Merger Transaction, which was completed on April 17, 1996,
include , (a) the consolidation of Taj Associates, which is an
indirect subsidiary of THCR after the Taj Merger Transaction, (b) the
redemption of the 11.35% Mortgage Bonds, Series A due 1999 of Trump
Taj Mahal Funding, Inc. and the Class B Common Stock, par value $.01
per share, of Taj Holding and the retirement of the 107 @ 8% Mortgage
Notes due 2001 of Plaza Funding (the "Plaza Notes "), (c) the offering
of $1.2 billion aggregate principal amount of 111 @ 4% irst ortgage
otes due 2006 of Trump AC and Trump Atlantic City Funding, Inc., a
wholly owned subsidiary of Trump AC, (d) the offering of 13,250,000
shares of THCR Common Stock, (e) purchase accounting adjustments
required by the merger of a wholly owned subsidiary of THCR Holdings
with and into Taj Holding, (f) the termination of the services
agreement between Taj Associates and Trump, dated as of April 1, 1991
(the "Taj Services Agreement "), (g) the cancellation of payments to
Trump Taj Mahal Realty Corp. and First Union National Bank in
connection with the acquisition of certain real property used in the
operation of (the "Specified Parcels ") and (h) the payment to Bankers
Trust Company ( "Bankers Trust ") to obtain releases of liens that
Bankers Trust ha with respect to certain equity interests in Taj
Associates and related guarantees (collectively, the "Taj Merger
Transaction "). In addition, the Unaudited Pro Forma Consolidated
Statements of Operations give effect also to the June 1995 Offerings
for the full period presented.
II. The Acquisition, which includes (a) the consolidation of Castle
Associates, an indirect subsidiary of THCR after the Acquisition, (b)
the contribution by Trump of his 61.5% equity interest in Castle
Associates in consideration for the Trump Consideration, (c) the
contribution by TC/GP of its 37.5% equity interest in Castle
Associates in consideration for the TC/GP Consideration, (d) the TCHI
Merger in which each share of TCHI Common Stock outstanding
immediately prior to the TCHI Merger will be converted into the right
to receive the TCHI Consideration and (e) payment of the Castle
Warrant Consideration to the holders of the Castle Warrants.
The Acquisition will be accounted for as a "purchase" for accounting and
reporting purposes.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the Selected Historical Consolidated Financial Information of THCR and of
Castle Associates and related notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Castle Associates",
the financial statements of Castle Associates and related notes thereto included
elsewhere in this Proxy Statement and THCR's Management's Discussion and
Analysis of Financial Condition and Results of Operations and the financial
statements and related notes thereto which are incorporated herein by reference.
32
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Trump Hotels & Casino Resorts, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Trump's for THCR
Current Assets: THCR Castle Acquisition Pro Forma
---- ------ ----------- ---------
(Historical) (Historical)
<S> <C> <C> <C> <C>
Cash and cash equivalents ....................................... $181,750 $17,767 $(1,769)(a) $197,748
Restricted cash ................................................. 25,000 25,000
Accounts receivable, net ........................................ 55,091 8,535 63,626
Inventories ..................................................... 10,341 1,459 11,799
Prepaid expenses and other current assets ....................... 18,688 2,424 (1,900)(b) 19,212
Due from affiliates, net ........................................ 616 197 813
---------- -------- ----------
Total current assets .......................................... 291,456 30,381 318,198
Property and equipment, net ..................................... 1,463,264 319,280 183,014 (a) 1,965,558
Investment in Castle PIK Notes .................................. 41,943 (41,943)(b) 0
Investment in Buffington Harbor ................................. 40,771 40,771
Land rights ..................................................... 29,135 29,135
Deferred loan costs ............................................. 52,319 52,319
Other assets .................................................... 25,043 9,509 34,552
---------- -------- ----------
Total Assets .................................................. 1,943,961 359,170 2,440,533
========== ======== ==========
Current Liabilities:
Current maturities of long-term debt ............................ 9,914 3,271 13,185
Accounts payable and accrued expenses ........................... 89,021 32,180 121,201
Accrued interest payable ........................................ 28,751 4,413 33,164
---------- -------- ----------
Total current liabilities ...................................... 127,686 39,864 167,550
Other long-term liabilities ..................................... 5,640 3,728 (3,013)(b) 6,355
Long-term debt, net of discount and current maturities .......... 1,391,531 328,697 (58,516)(b) 1,661,712
Deferred state income taxes ..................................... 4,167 4,167
---------- -------- ----------
Total Liabilities .............................................. 1,529,024 372,289 1,839,784
---------- -------- ----------
Minority interest ............................................... 15,672 168,126 (a) 183,798
---------- -------- ----------
Capital:
Common stock ................................................... 241 241
Additional paid in capital ..................................... 455,218 73,395 (73,395)(c) 472,904
17,686 (b)
Accumulated (deficit) .......................................... (56,194) (86,514) 13,119 (a) (56,194)
---------- -------- ----------
73,395 (c)
Total capital ................................................... 399,265 (13,119) 416,951
---------- -------- ----------
Total Liabilities and Capital .................................. $1,943,961 $359,170 $2,440,533
========== ======== ==========
</TABLE>
33
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Trump Hotels & Casino Resorts, Inc.
For The Year Ended December 31, 1995
(dollars in thousands, except per share information)
<TABLE>
<CAPTION>
Trump AC
and Plaza
THCR Associates
------------ -----------
Pro Forma Pro Forma
June 12, January 1, Adjustments Adjustments
1995- 1995- for the THCR For Taj
December 31, June 12, June 1995 Pro Forma Taj Merger
1995 1995 Offerings Combined Associates Transaction
------------ ----------- ----------- --------- ---------- -----------
(Historical) (Historical)
Revenues:
<S> <C> <C> <C> <C> <C> <C>
Gaming ............... $175,208 $122,865 $298,073 $501,378
Rooms ................ 12,310 7,676 19,986 43,309
Food and Beverage .... 26,065 18,537 44,602 57,195
Other ................ 6,284 3,310 9,594 15,864
-------- -------- -------- --------
Gross Revenues ...... 219,867 152,388 372,255 617,746
Less--Promotional
allowances .......... 24,394 14,540 38,934 63,998
-------- -------- -------- --------
Net Revenues ......... 195,473 137,848 333,321 553,748
-------- -------- -------- --------
Cost and Expenses:
Gaming ............... 95,533 69,467 165,000 283,786
Rooms ................ 1,305 958 2,263 15,230
Food and Beverage .... 11,178 7,128 18,306 24,612
General and
administrative ...... 42,826 30,081 72,907 96,843 (2,725)(g)
2,738 (h)
(1,743)(i)
(7,944)(j)
Depreciation and
amortization ........ 9,219 6,999 16,218 43,387 420 (g)
5,414 (k)
Other ................ 1,966 1,397 3,363
-------- -------- -------- --------
162,027 116,030 278,057 463,858
-------- -------- -------- --------
Income from
operations .......... 33,446 21,818 55,264 89,890
Interest income ...... 3,741 403 134 (d) 4,278 3,922
Interest expense ..... (35,014) (22,516) (11,239)(e) (63,711) (120,435) (709)(l)
5,058 (f) 16,706 (m)
Other non-operating .. (4,094) (1,649) (5,743) 3,120 (n)
-------- -------- ------- --------
Loss before
income taxes
and minority
interest ............. (1,921) (1,944) (9,912) (26,623)
Benefit for state
income taxes ......... (161) (161) 161 (o)
Loss before minority
interest, ............ (921) (1,783) (9,751) (26,623)
Minority interest ..... -- -- -- --
-------- -------- ------- --------
Net loss .............. ($1,921) ($1,783) ($9,751) ($26,623)
======== ======== ======= ========
Net loss per share ....
Weighted Average
Shares
Outstanding (r) ......
<CAPTION>
Pro Forma
Taj Merger Adjustments
Transaction Trump's for THCR
Pro Forma Castle Acquisition Pro Forma
----------- ------- ----------- ---------
(Historical)
Revenues:
<S> <C> <C> <C> <C>
Gaming ............... $799,451 $280,124 $1,079,575
Rooms ................ 63,295 20,052 83,347
Food and Beverage .... 101,797 30,804 132,601
Other ................ 25,458 9,130 34,588
-------- -------- --------
Gross Revenues ...... 990,001 340,110 1,330,111
Less--Promotional
allowances .......... 102,932 34,547 137,479
-------- -------- --------
Net Revenues ......... 887,069 305,563 1,192,632
-------- -------- --------
Cost and Expenses:
Gaming ............... 448,786 165,679 614,465
Rooms ................ 17,493 2,534 20,027
Food and Beverage .... 42,918 13,516 56,434
General and
administrative ...... 160,076 61,431 (3,500)(j) 218,007
Depreciation and
amortization ........ 65,439 14,639 4,904 (p) 84,982
Other ................ 3,363 13,403 16,766
-------- -------- --------
738,075 271,202 1,010,681
-------- -------- --------
Income from
operations .......... 148,994 34,361 181,951
Interest income ...... 8,200 504 8,704
Interest expense ..... (168,149) (46,017) 7,217 (l) (206,949)
Other non-operating .. (2,623) (2,623)
-------- -------- --------
Loss before
income taxes
and minority
interest ............. (13,578) (11,152) (18,917)
Benefit for state
income taxes ......... -- -- --
Loss before minority
interest, ............ (13,578) (11,152) (18,917)
Minority interest ..... -- -- 6,327 (q) 6,327
-------- -------- --------
Net loss .............. ($13,578) ($11,152) ($12,590)
======== ======== ==========
Net loss per share .... ($0.52)
==========
Weighted Average
Shares
Outstanding (r) ...... 24,206,756
==========
</TABLE>
34
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Trump Hotels & Casino Resorts, Inc.
For The Six Months Ended June 30, 1996
(dollars in thousands, except per share information)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Taj Merger Pro Forma THCR
Taj for Taj Merger Transaction Trump's Adjustments Pro
THCR Associates Transaction Pro Forma Castle for Acquisition Forma
-------- -------- -------- -------- -------- --------- --------
(Historical) (Historical) (Historical)
<S> <C> <C> <C> <C> <C>
Revenues:
Gaming ........................ $288,361 $132,870 $421,231 $127,173 $548,404
Rooms ......................... 24,154 11,301 35,455 9,005 44,460
Food and Beverage ............. 38,523 15,359 53,882 15,590 69,472
Other ......................... 8,353 4,206 12,559 3,917 16,476
-------- -------- -------- -------- ----------
Gross Revenues ............... 359,391 163,736 523,127 155,685 678,812
Less--Promotional allowances 38,385 17,770 56,155 18,943 75,098
-------- -------- -------- -------- ----------
Net Revenues .................. 321,006 145,966 466,972 136,742 603,714
-------- -------- -------- -------- ----------
Cost and Expenses:
Gaming ........................ 169,611 86,331 255,942 80,198 336,140
Rooms ......................... 4,895 4,388 9,283 755 10,038
Food and beverage ............. 16,124 6,537 22,661 5,566 28,227
General and administrative .... 65,652 27,761 (908)(g) 88,026 38,140 (1,750)(j) 124,416
(507)(i)
(3,972)(j)
Depreciation and amortization 21,622 13,647 210 (g) 38,186 7,677 2,452 (k) 48,315
2,707 (h)
Pre-opening expenses .......... 9,966 9,966 -- 9,966
Other ......................... 1,861 1,861 0 1,861
-------- -------- -------- -------- ----------
289,731 138,664 425,925 132,336 558,963
-------- -------- -------- -------- ----------
Income from operations ........ 31,275 7,302 41,047 4,406 44,751
Interest income ............... 3,721 1,092 4,813 258 (891)(k) 4,180
Interest expense .............. (54,147) (36,591) 5,497 (m) (85,241) (23,596) 3,862 (k) (104,975)
Other non-operating ........... 9,182 520 (n) 9,702 -- 9,702
-------- -------- -------- -------- ----------
Loss before extraordinary loss
and minority interest ......... (9,969) (28,197) (29,679) (18,932) (46,342)
Extraordinary loss ............. (59,132) (59,132) (59,132)
Minority interest .............. 14,828 0 14,828 0 23,690 (q) 38,518
-------- -------- -------- -------- ----------
Net loss ....................... ($ 54,273) ($ 28,197) ($ 73,983) ($ 18,932) ($ 66,956)
======== ======== ======== ======== ==========
Net loss per share ............. ($2.77)
==========
Weighted Average Shares
Outstanding (r) ............... 24,206,756
==========
</TABLE>
35
<PAGE>
Notes to Unaudited Pro Forma Financial Information
(dollars in thousands, except per share information)
(a) To record the contribution by Trump of his equity interests in Castle
Associates for $168,126, which represents the issuance of a 15.33863%
limited partnership interest in THCR Holdings to Trump (directly and
indirectly), exchangeable into 5,837,700 shares of THCR Common Stock
(valuing each share at $28.80 based on the price of the THCR Common Stock
several days before and after the date of the Agreement), the payment of
$1,769 ($.8845 for each share of TCHI Common Stock and for each outstanding
Castle Warrant) and the historical negative book value of Castle Associates
of $13,119. The total purchase price has been allocated to property and
equipment.
(b) To eliminate $59,300 ($58,516 net of discount) of the Castle PIK Notes
purchased by THCR for $38,660 which represents approximately 89.6% of the
outstanding Castle PIK Notes, plus accrued interest resulting in an
extraordinary gain of $17,686 and elimination of related interest expense
and interest income.
(c) To reclassify the remaining accumulated deficit of Castle Associates to
contributed capital as the carryforward accumulated deficit should be that
of THCR in accordance with purchase accounting.
(d) To record interest income on a $3,000 note receivable from Trump at prime
plus 1%. On March 27, 1996, this note was cancelled in accordance with its
terms based on a prior THCR Common Stock trading range.
(e) To record interest expense (including amortization of deferred financing
costs) relating to the THCR Senior Notes issued in June 1995.
(f) To eliminate interest expense (including amortization of deferred financing
costs) on the Plaza PIK Notes which were redeemed with the proceeds from
the June 1995 Offerings.
(g) To eliminate the lease payments on the Specified Parcels which were
acquired in the Taj Merger Transaction and to record the additional
depreciation associated with the purchase.
(h) To record $2,083 of additional general and administrative expenses relating
to corporate overhead of THCR Holdings and THCR prior to formation, and
$655 of operating expenses incurred at Trump Indiana prior to opening.
(i) To record the elimination of the fee resulting from the termination of the
Taj Services Agreement.
(j) To reflect the estimated reduction of identifiable costs resulting from the
consolidation of departments and the reduction of personnel. Management
believes that within two years annual cost savings from the Taj Merger
Transaction and the Acquisition would total $18,000 to $20,000 and $6,000
to $10,000, respectively.
(k) To record the additional depreciation expense resulting from the allocation
of the purchase price of the Taj Merger Transaction ($189,114) to property
and equipment. Amounts allocated to land ($9,456) and building ($179,658)
on a pro rata basis and are being depreciated over the remaining life of
the building (35 years).
(l) To record interest expense on amounts obtained under the equipment and
vessel financing line. To date, THCR has obtained a commitment for $17,000,
has signed a letter of intent for an equipment lease for $14,200 and has
obtained advances of $9,750 at a rate of 10.5%. Although THCR expects to
borrow an additional $15,000, no assurances can be given that such
financing will be available.
(m) To record adjustments to historical interest expense to give effect to the
Taj Merger Transaction.
(n) To give effect to the termination of Trump Plaza East's lease and the
$3,120 of associated annual expense.
(o) To eliminate income tax benefits.
(p) To record the additional depreciation expense resulting from the allocation
of the purchase price of the Acquisition ($183,014) to property and
equipment (see (a) above). Amounts are being allocated to land ($35,871)
and building ($147,143) on a pro rata basis and are being depreciated over
the remaining life of the building (30 years).
(q) To reflect minority interest as pro forma adjustments result in a loss at
THCR Holdings and there is a minority interest basis on THCR's pro forma
balance sheet.
(r) Weighted Average Shares Outstanding includes the number of shares
outstanding on June 30, 1996 and shares awarded to the Chief Executive
Officer of THCR pursuant to the 1995 Stock Plan. The shares of THCR Class B
Common Stock beneficially owned by Trump have no economic interest and,
therefore, are not considered.
36
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF THCR
The following table sets forth certain historical consolidated financial
information of Plaza Associates and Trump AC (predecessors of THCR) for each of
the four years ended December 31, 1991 through 1994 and for the period January
1, 1995 through June 12, 1995 and certain historical consolidated financial
information of THCR for the period from inception (June 12, 1995) to December
31, 1995 (see Note 1 below). The historical financial information of Trump AC
and Plaza Associates as of and for each of the four years ended December 31,
1994 and as of June 12, 1995 and for the period January 1, 1995 through June 12,
1995 as set forth below has been derived from the audited consolidated financial
statements of Trump AC and Plaza Associates. The historical financial
information of THCR as of December 31, 1995 and for the period from inception
(June 12, 1995) through December 31, 1995 as set forth below has been derived
from the audited consolidated financial statements of THCR. The historical
financial information of THCR as of June 30, 1996 and for the six months ended
June 30, 1996 as set forth below has been derived from the unaudited
consolidated financial statements of THCR. In the opinion of THCR, such
unaudited financial statements reflect all adjustments (consisting only of
normal recurring accruals) which THCR considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the entire year. All
financial information should be read in conjunction with "Unaudited Pro Forma
Financial Information" contained in this Proxy Statement and THCR's Management's
Discussion and Analysis of Financial Condition and Results of Operations and
financial statements and related notes thereto which are incorporated herein by
reference.
<TABLE>
<CAPTION>
Trump AC and Plaza Associates THCR
------------------------------------------------------- -----------------------------------
From From Inception
Year Ended December 31, January 1,1995 (June 12, 1995) to Six Months
----------------------------------------- through December 31, 1995 Ended
1991 1992 1993 1994 June 12, 1995 (Note 1) June 30, 1996
--------- --------- --------- --------- --------- --------- -----------
(dollars in thousands, except per share information) (dollars in thousands,
except per
share information)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Gaming ......................... $ 233,265 $ 265,448 $ 264,081 $ 261,451 $ 122,865 $ 175,208 $ 288,361
Other .......................... 66,411 73,270 69,203 66,869 29,523 44,659 71,030
Trump World's Fair ............. 11,547 9,465 -- -- -- -- --
--------- --------- --------- --------- --------- --------- -----------
Gross revenues ................ 311,223 348,183 333,284 328,320 152,388 219,867 359,391
Promotional allowances ......... 31,539 34,865 32,793 33,257 14,540 24,394 38,385
--------- --------- --------- --------- --------- --------- -----------
Net revenues .................. 279,684 313,318 300,491 295,063 137,848 195,473 321,006
--------- --------- --------- --------- --------- --------- -----------
Costs and Expenses:
Gaming ......................... 133,547 146,328 136,895 139,540 69,467 95,533 169,611
Other .......................... 23,404 23,670 24,778 23,380 9,483 14,449 22,880
General and administrative ..... 69,631 75,459 71,624 73,075 30,081 42,826 65,652
Depreciation and amortization .. 16,193 15,842 17,554 15,653 6,999 9,219 21,622
Restructuring charges .......... 943 5,177 -- -- -- -- --
Pre-opening expenses ........... -- -- -- -- -- -- 9,966
Trump World's Fair ............. 19,879 11,839 -- -- -- -- --
--------- --------- --------- --------- --------- --------- -----------
Total costs and expenses ..... 263,597 278,315 250,851 251,648 116,030 162,027 289,731
--------- --------- --------- --------- --------- --------- -----------
Income from operations .......... 16,087 35,003 49,640 43,415 21,818 33,446 31,275
Interest expense, net ........... 33,363 31,356 39,889 48,219 22,113 31,273 50,426
Other non-operating expense
(income)(a) .................... 14,818 1,462 3,873 4,931 1,649 4,094 (9,182)
Extraordinary gain (loss) (b) ... -- (38,205) 4,120 -- (9,250) -- (59,132)
Minority interest ............... -- -- -- -- -- -- 14,828
Provision (benefit) for
income taxes ................... (2,864) (233) 660 (865) (161) -- --
--------- --------- --------- --------- --------- --------- -----------
Net income (loss) ............... ($ 29,230) ($ 35,787) $ 9,338 ($ 8,870) ($ 11,033) ($ 1,921) ($ 54,273)
========= ========= ========= ========= ========= ========= ===========
Net (loss) per common share(c) .. ($ 0.19) ($ 3.42)
========= ===========
Balance Sheet Data (at end
of period):
Cash and cash equivalents ....... $ 10,474 $ 18,802 $ 14,393 $ 11,144 $ 28,125 $ 19,208 $ 181,750
Property and equipment-net ...... 306,834 300,266 293,141 298,354 301,316 408,231 1,463,264
Total assets .................... 378,398 370,349 374,498 375,643 394,085 584,545 1,943,961
Total long-term debt, net of
current maturities(d) ......... 33,326 249,723 395,948 403,214 331,142 494,471 1,391,531
Total capital (deficit) ......... 54,043 11,362 (54,710) (63,580) (74,613) 50,591 399,265
</TABLE>
37
<PAGE>
- ----------
Note 1: THCR was incorporated on March 28, 1995 and conducted no operations
until the June 1995 Stock Offering. The financial data as of December
31, 1995 and for the period ended December 31, 1995 reflect the
operations of THCR from inception (June 12, 1995) to December 31,
1995.
(a) Other non-operating expense for the year ended December 31, 1991
includes a $10.9 million charge associated with the rejection of the
lease associated with the former Trump Regency Hotel and $4.0 million
of costs associated with certain litigation. Other non-operating
expense for 1992 includes $1.5 million of costs associated with
certain litigation. Other non-operating expense for the years ended
December 31, 1993 and 1994, for the period January 1, 1995 through
June 12, 1995 and for the period June 12, 1995 through December 31,
1995 includes $3.9, $4.9, $1.6 and $2.1 million, respectively, of real
estate taxes and leasing costs associated with Trump Plaza East. Other
non-operating income for the six months ended June 30, 1996 includes a
$10.0 million license fee relating to the exclusive license granted to
Atlantic Thermal.
(b) The extraordinary loss for the year ended December 31, 1992 consists
of the effect of stating Plaza Funding's Preferred Stock issued at
fair value as compared to the carrying value of these securities and
the write off of certain deferred financing charges and costs. The
excess of the carrying value of a note obligation over the amount of
the settlement payment net of related prepaid expenses in the amount
of $4.1 million has been reported as an extraordinary gain for the
year ended December 31, 1993. The extraordinary loss of $9.3 million
for the period from January 1, 1995 through June 12, 1995 relates to
the redemption of the Plaza PIK Notes and the Plaza PIK Note Warrrants
and the write off of related unamortized deferred financing costs. The
extraordinary loss of $59.1 million for the six months ended June 30,
1996 relates to the redemption of the Plaza Notes and the write-off of
related unamortized deferred financing costs.
(c) Earnings per share is based upon weighted average shares outstanding,
shares and phantom stock units awarded to the Chief Executive Officer
of THCR under the 1995 Stock Plan and common stock equivalent. The
shares of THCR Class B Common Stock owned by Trump have no economic
interest and, therefore, are not considered.
(d) Reflects reclassification in 1991 of indebtedness relating to
outstanding mortgage bonds as a current liability due to then-existing
events of default.
38
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF CASTLE ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Castle Associates for each of the five years ended December 31,
1991 through 1995 and for the periods ended June 30, 1995 and 1996. The
historical financial information of Castle Associates as of and for each of the
five years ended December 31, 1991 through 1995 as set forth below has been
derived from the audited consolidated financial statements of Castle Associates.
The historical financial information of Castle Associates as of June 30, 1995
and 1996, and for the six months ended June 30, 1995 and 1996 as set forth below
has been derived from the unaudited consolidated financial statements of Castle
Associates. In the opinion of Castle Associates, such unaudited financial
statements reflect all adjustments (consisting only of normal recurring
accruals) which Castle Associates considers necessary for a fair presentation of
the financial position and results of operations for these periods. Operating
results for the six months ended June 30, 1996 are not necessarily indicative of
the results to be expected for the entire year. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Castle Associates", "Unaudited Pro Forma Financial Information", the
consolidated financial statements of Castle Associates and related notes thereto
and the consolidated condensed financial statements of Castle Associates and
related notes thereto included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- -------- --------- --------- --------- --------- ---------
(in thousands) (in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Gaming ................................... $ 194,760 $242,008 $ 246,370 $ 258,455 $ 280,124 $ 124,511 $ 127,173
Other .................................... 53,208 57,298 58,456 56,930 59,986 26,008 28,512
--------- -------- --------- --------- --------- --------- ---------
Gross revenues ........................... 247,968 299,306 304,826 315,385 340,110 150,519 155,685
Promotional allowances ................... 27,882 30,656 31,599 31,572 34,547 14,363 18,943
--------- -------- --------- --------- --------- --------- ---------
Net revenues ............................. 220,086 268,650 273,227 283,813 305,563 136,156 136,742
Costs and Expenses:
Gaming ................................... 117,714 147,011 145,717 151,036 165,679 73,677 80,198
Other .................................... 29,251 31,105 28,661 27,542 29,453 7,300 6,321
General and
administrative .......................... 49,568 56,722 54,558 61,974 61,431 35,536 38,140
Depreciation and
amortization ............................ 21,414 19,802 16,425 14,437 14,639 7,113 7,677
Reorganization costs ..................... 4,499 5,983 -- -- -- -- --
--------- -------- --------- --------- --------- --------- ---------
Income from operations ................... (2,360) 8,027 27,866 28,824 34,361 12,530 4,406
Interest expense, net .................... 47,839 44,861 56,251 43,537 45,513 22,365 23,338
Extraordinary gain ....................... -- 128,187 -- -- -- -- --
Net income (loss) ........................ ($ 50,199) $ 91,353 ($ 28,385) ($ 14,713) ($ 11,152) ($ 9,835) ($ 18,932)
========= ======== ========= ========= ========= ========= =========
Balance Sheet Data
(at end of period):
Cash and cash equivalents ................. $ 14,972 $ 23,610 $ 20,439 $ 19,122 $ 21,038 $ 15,624 $ 17,767
Property and equipment -- net ............. 351,177 340,383 334,354 328,174 322,115 326,276 319,280
Total assets .............................. 391,303 379,641 375,935 368,797 370,581 365,820 359,170
Total long-term debt, net
of current maturities .................... -- 279,445 309,794 317,748 326,554 318,659 328,697
Total capital (deficit) ................... (63,406) 60,799 31,678 16,965 5,813 7,130 (13,119)
</TABLE>
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CASTLE ASSOCIATES
The financial information presented below reflects the financial condition
and results of operations of Castle Associates. Castle Funding is a wholly-owned
subsidiary of Castle Associates and conducts no business other than collecting
amounts due under certain intercompany notes from Castle Associates for the
purpose of paying the principal of, premium, if any, and interest on its
indebtedness, which Castle Funding issued as a nominee for Castle Associates.
Results of Operations for the Six Months Ended June 30, 1996 and 1995
Castle Associates' net revenues (gross revenues less promotional
allowances) for the six months ended June 30, 1996 and 1995, were approximately
$136.7 million and $136.2 million, respectively, an increase of $0.5 million or
1.0%.
Gaming revenues provide the majority of Castle Associates' revenues and
primarily consist of revenue from slot machines and table games.
Slot machine win was approximately $94.9 million and $90.4 million for the
six months ended June 30, 1996 and 1995, respectively, an increase of
approximately $4.5 million or 5.0%. The total dollar amount wagered by customers
on slot machines increased by approximately $113.7 million or 11.1% to $1,136.0
million for the six months ended June 30, 1996 from approximately $1,022.3
million for the six months ended June 30, 1995. This increase in slot volume was
the result of marketing programs and special events implemented by management to
stimulate slot play, but was partially offset by a decrease in the slot win
percentage (slot win as a percentage of dollars wagered on slot machines) to
approximately 8.4% for the six months ended June 30, 1996 from approximately
8.8% for the six months ended June 30, 1995. The decrease in slot win percentage
was primarily due to an increased volume of customer play on higher denomination
slot machines which traditionally have a lower slot win percentage.
Table game win was approximately $32.3 million and $34.1 million for the
six months ended June 30, 1996 and 1995, respectively, a decrease of $1.8
million or 5.3%. The total dollar amount wagered by customers on table games
increased by approximately $32.1 million or 15.2% to approximately $243.6
million for the six months ended June 30, 1996 from approximately $211.5 for the
six months ended June 30, 1995. These increases were the result of marketing
events and special events implemented by management, as well as an increased
emphasis on providing superior customer service, but were partially offset by a
decrease in the table game win percentage (table game win as a percentage of
dollars wagered on table games) to approximately 12.8% for the six months ended
June 30, 1996 from approximately 15.5% for the six months ended June 30, 1995.
Table game win percentage is outside the control of Castle Associates, and
although it is fairly constant over the long-term, it can vary significantly
from period to period, due in part to the play of certain premium patrons who
tend to wager substantial dollar amounts on table games.
For the six months ended June 30, 1996 and 1995, credit extended to the
table games customers was approximately 31.1% and 27.3% of overall table play,
respectively. This relatively high level of credit play continues a trend which
started in 1993 and is the result of an increased level of play by individuals
who wager relatively large sums. These premium patrons tend to use a higher
percentage of credit when they wager.
Non-gaming revenues, in the aggregate, increased by approximately $2.5
million or 9.6% to approximately $28.5 million for the six months ended June 30,
1996 from approximately $26.0 million for the six months ended June 30, 1995,
primarily as a result of an approximately $2.6 million increase in food and
beverage revenue. During 1996, marketing programs that were introduced in the
latter part of 1995 designed to increase gaming revenues caused an approximately
$4.7 million increase in complimentary rooms and food and beverage revenues as
compared to the prior year.
Promotional allowances increased by approximately $4.5 million or 31.3% to
approximately $18.9 million for the six months ended June 30, 1996, from
approximately $14.4 million for the six months ended June 30, 1995. As discussed
above, marketing programs which were introduced during the latter part of 1995
that were designed to increase gaming revenues caused an increase in
complimentary rooms and food and beverage activity as compared to the prior
year.
Gaming costs and expenses increased by approximately $6.5 million or 8.8%
to approximately $80.2 million for the six months ended June 30, 1996 from
approximately $73.7 million for the six months ended June 30, 1995. This
increase is primarily the result of an increase in promotional coupon costs as
well as increased direct marketing and advertising costs associated with the new
marketing programs and special events introduced to stimulate gaming revenues.
40
<PAGE>
Room and food and beverage costs and expenses decreased approximately $1.0
million or 13.7% to approximately $6.3 million for the six months ended June 30,
1996, from approximately $7.3 million for the six months ended June 30, 1995.
This decrease is primarily due to the increased level of complimentary food,
beverage and hotel services provided to patrons. The costs of such
complimentaries have been included in gaming costs and expenses.
General and administrative costs increased approximately $2.5 million or
7.0% to approximately $38.1 million for the six months ended June 30, 1996, from
approximately $35.5 for the six months ended June 30, 1995. This increase was
primarily due to higher facilities costs, advertising costs and other
administrative costs.
Interest expense increased approximately $1.0 million or 4.4% to
approximately $23.6 million for the six months ended June 30, 1996, from
approximately $22.6 million for the six months ended June 30, 1995. This
increase is the result of an increase in the outstanding aggregate principal
amount of the Castle PIK Notes.
Results of Operations for the Years Ended December 31, 1995 and 1994
Castle Associates' net revenues (gross revenues less promotional
allowances) for the years ended December 31, 1995 and 1994 were approximately
$305.5 million and $283.8 million, respectively. Castle Associates believes that
the approximately $21.7 million or 7.6% increase is the result of aggressive
marketing programs and special events introduced by management during 1995 as
well as a continuing emphasis on providing superior customer service.
Slot machine win increased by approximately $20.0 million or 11.3% to
approximately $197.4 million for the year ended December 31, 1995, from
approximately $177.4 million for the year ended December 31, 1994. The total
dollar amount wagered by customers on slot machines increased by approximately
$322.9 million or 16.4% to approximately $2.3 billion for the year ended
December 31, 1995 from approximately $2.0 billion for the year ended December
31, 1994. This increase in slot volume was partially offset by a decrease in the
slot win percentage (slot win as a percentage of dollars wagered on slot
machines) to approximately 8.6% for the year ended December 31, 1995 from
approximately 9.0% for the year ended December 31, 1994. This win percentage
decrease was primarily due to an increased volume of customer play on higher
denomination slot machines which, traditionally, pay out at a lower win
percentage.
Table game win increased by approximately $1.7 million or 2.1% to
approximately $82.7 million for the year ended December 31, 1995, from
approximately $81.0 million for the year ended December 31, 1994. The total
dollar amount wagered by customers on table games increased by approximately
$10.2 million or 2.1% to approximately $487.7 million for the year ended
December 31, 1995 from approximately $477.5 million for the year ended December
31, 1994. Table game win percentage (table game win as a percentage of dollars
wagered on table games) remained at approximately 17.0% for the year ended
December 31, 1995 compared to the year ended December 31, 1994. Table game win
percentage is outside the control of Castle Associates, and although it is
fairly constant over the long-term, it can vary significantly from period to
period, due in part to the play of certain premium patrons who tend to wager
substantial dollar amounts on table games.
For the years ended December 31, 1995 and 1994, credit extended to the
table games customers was approximately 30.0% and 31.4% of overall table play,
respectively. This relatively high level of credit play continues a trend which
started in 1993 and is the result of an increased level of play by individuals
who wager relatively large sums. These premium patrons tend to use a higher
percentage of credit when they wager.
Non-gaming revenues, in the aggregate, increased by approximately $3.1
million or 5.2% to approximately $60.0 million for the year ended December 31,
1995 from approximately $56.9 million for the year ended December 31, 1994,
primarily as the result of an approximately $538,000 increase in rooms revenue
and an approximately $2.4 million increase in food and beverage revenue. During
1995, marketing programs designed to increase gaming revenues caused an increase
in complimentary rooms and food and beverage revenues (an approximately $2.7
million increase) as compared to 1994.
Promotional allowances increased by approximately $2.9 million or 9.2% to
approximately $34.5 million for the year ended December 31, 1995 from
approximately $31.6 million for the year ended December 31, 1994. As discussed
above, marketing programs instituted during 1995 designed to increase gaming
revenues caused an increase in complimentary rooms and food and beverage
activity as compared to the prior year.
Gaming costs and expenses increased by approximately $14.7 million or 9.7%
to approximately $165.7 million for the year ended December 31, 1995, from
approximately $151.0 million for the year ended December 31, 1994. This increase
is primarily the result of an increase in promotional cash back coupon costs
associated with the marketing programs and special events introduced during 1995
to stimulate gaming revenues.
41
<PAGE>
Rooms and food and beverage costs and expenses for the years ended December
31, 1995 and 1994 increased approximately $1.1 million or 9.0%. This increase
corresponds to the increased food and beverage and gaming revenue activity for
the year.
Other costs and expenses increased approximately $790,000 or 6.3% to
approximately $13.4 million for the year ended December 31, 1995, from
approximately $12.6 million for the year ended December 31, 1994. This increase
is primarily the result of increased real estate taxes on the casino property.
Interest expense increased approximately $1.8 million or 4.1% to
approximately $46.0 million for the year ended December 31, 1995, from
approximately $44.2 million for the year ended December 31, 1994. This increase
is the result of an increase in both the aggregate principal amount outstanding
and interest related to the Castle PIK Notes as well as an increase in the
interest rate related to the Castle Term Loan.
Results of Operations for the Years Ended December 31, 1994 and 1993
Castle Associates' net revenue (gross revenues less promotional allowances)
for the years ended December 31, 1994 and 1993 totaled approximately $283.8
million and $273.2 million, respectively, representing an increase of
approximately $10.6 million or 3.9%. Gaming revenues were approximately $258.5
million for the year ended December 31, 1994, an increase of approximately $12.1
million from gaming revenues of approximately $246.4 million for the year ended
December 31, 1993. Management believes the increase in gaming revenues was
attributable primarily to a continuing emphasis on customer service and a
repositioning by Trump's Castle to expand profitable market segments.
Slot machine win increased by approximately $4.5 million or 2.6% to
approximately $177.4 million for the year ended December 31, 1994, from
approximately $173.0 million for the year ended December 31, 1993. The total
dollar amount wagered by customers on slot machines increased by approximately
$113.9 million or 6.2% to approximately $2.0 billion for the year ended December
31, 1994 from approximately $1.8 billion for the year ended December 31, 1993.
This increase in slot volume was partially offset by a decrease in the slot win
percentage (slot win as a percentage of dollars wagered on slot machines) to
approximately 9.0% for the year ended December 31, 1994 from approximately 9.3%
for the year ended December 31, 1993. The lower slot win percentage was largely
intentional and designed by Trump's Castle in order to remain competitive and
stimulate patron play.
Table game win increased by approximately $7.6 million or 10.4% to
approximately $81.0 million for the year ended December 31, 1994, from
approximately $73.4 million for the year ended December 31, 1993. The total
dollar amount wagered by customers on table games decreased by approximately
$14.6 million or 3.0% to $477.5 million for the year ended December 31, 1994
from approximately $492.1 million for the year ended December 31, 1993. This
decrease in gaming volume was offset by an increase in the table game win
percentage (table game win as a percentage of dollars wagered on table games) to
approximately 17.0% for the year ended December 31, 1994 from approximately
14.9% for the year ended December 31, 1993. The table game win percentage is
outside the control of Castle Associates, and although it is fairly constant
over the long-term, it can vary significantly from period to period, due in part
to the play of certain premium patrons who tend to wager substantial dollar
amounts on table games.
For the years ended December 31, 1994 and 1993, gaming credit extended to
customers was approximately 31.4% and 28.9% of overall table play, respectively.
This increase in credit play reflected, in part, a shift in the gaming patron
mix as a result of increased play by individuals who wager relatively large
sums. These patrons tend to use a higher percentage of credit when they wager.
Non-gaming revenues, in the aggregate, decreased approximately $1.6 million
or 2.6% to approximately $56.9 million for the year ended December 31, 1994,
from approximately $58.5 million for the year ended December 31, 1993. This
decline was primarily attributable to a decrease in food and beverage revenues
of approximately $2.2 million or 7.1% to approximately $28.4 million for the
year ended December 31, 1994, of which approximately $15.9 million consisted of
complimentary food and beverage. This decline was due to the discontinuance of
certain unprofitable marketing programs which resulted in fewer customers
served. Such measures were implemented to improve overall operating
efficiencies. Offsetting the decrease in non-gaming revenues was an increase in
entertainment revenue of $100,000 or 1.4% and an increase in other income of
$600,000 or 8.0%.
Gaming costs and expenses increased by approximately $5.3 million or 3.7%
to approximately $151.0 million for the year ended December 31, 1994 from
approximately $145.7 for the year ended December 31, 1993. This increase
corresponds to the increase in gaming revenues on a year-to-year basis.
42
<PAGE>
The approximately $2.6 million or 15.1% decrease in room and food and
beverage operating expenses is primarily attributable to a variety of cost
reduction measures and improvements in operational efficiency during 1994
compared to 1993.
General and administrative expenses increased approximately $7.4 million or
13.6% for the year ended December 31, 1994 as compared to the prior year. This
increase was primarily attributable to:
(1) The contribution of $2.5 million to a joint project with Harrah's
Marina Casino Hotel for the beautification of the Marina in which both
casinos operate.
(2) The contributions of approximately $3.3 million in New Jersey
Casino Reinvestment Development Authority ("CRDA") deposits to certain
public improvement projects.
(3) Increased spending in connection with new business development and
facilities maintenance.
For the year ended December 31, 1994, depreciation and amortization
decreased approximately $2.0 million or 12.1% over the comparable period in
1993, primarily as a result of the impact of fully depreciated assets.
Other costs and expenses increased by approximately $1.5 million or 13.8%
due to significantly lower real estate tax expense incurred in the first quarter
of 1993 as a result of an approximately $1.8 million real estate tax credit.
Interest expense decreased for the year ended December 31, 1994 over the
comparable period in 1993 by approximately $12.8 million as a result of the
Castle Recapitalization (as defined).
Inflation
There was no significant impact on Castle Associates' operations as a
result of inflation during the six months ended June 30, 1996 or during the
years 1995, 1994 or 1993.
Liquidity and Capital Resources
Cash flow from operating activities is Castle Associates' principal source
of liquidity. For the year ended December 31, 1995 and the six months ended June
30, 1996, Castle Associates' net cash flow provided by operating activities
before cash debt service obligations was $49.8 million and $21.0 million,
respectively, and cash debt service was $36.7 million and $18.9 million,
respectively, resulting in net cash provided by operating activities of $13.1
million and $2.1 million, respectively.
In addition to cash needed to fund the day-to-day operations of Trump's
Castle, Castle Associates' principal uses of cash are capital expenditures and
debt service.
Total capital expenditures for 1996 are anticipated to be $9.0 million and
principally consist of (i) the purchase of slot machines, (ii) renovations to
guest rooms and the hotel tower and (iii) the construction of two new player
clubs. Management believes that these levels of capital expenditures are
sufficient to maintain the attractiveness of Trump's Castle and the aesthetics
of its hotel rooms and other public areas. Capital expenditures of $4.3 million
were incurred during the six months ended June 30, 1996 primarily for the
previously mentioned projects. Capital expenditures for the year ended December
31, 1995 were $8.6 million and consisted of casino floor improvements,
renovation of hotel rooms and the purchase of slot machines.
Castle Associates' debt consists primarily of (i) the Castle Term Loan,
(ii) the Castle Senior Notes, (iii) the Castle Mortgage Notes and (iv) the
Castle PIK Notes. Each of the Castle Senior Notes, Castle Mortgage Notes and
Castle PIK Notes are guaranteed by Castle Associates, and the Castle Term Loan
is guaranteed by Castle Funding.
On May 28, 1995, Castle Associates exercised its option to extend the
Castle Term Loan for an additional five year term. The Castle Term Loan bears
interest at the prime rate plus 3%, currently 11 1/4%, and requires amortized
monthly principal payments of approximately $158,000, which commenced May 31,
1995. The Castle Term Loan matures on May 28, 2000.
The Castle Senior Notes have an outstanding principal amount of $27
million, and bear interest at the rate of 11 1/2% per annum (which may be
reduced to 11 1/4% upon the occurrence of certain events). The Castle Senior
Notes mature on November 15, 2000 and are subject to a sinking fund which
requires the retirement of 15% of the Castle Senior Notes on each of November
15, 1998 and 1999.
The Castle Mortgage Notes have an outstanding principal amount of
approximately $242 million, bear interest at the rate of 11 3/4% per annum
(which may be reduced to 11 1/2% upon the occurrence of certain events) and
mature on November 15, 2003.
The Castle PIK Notes have an outstanding principal amount of approximately
$66.2 million and mature on November 15, 2005. Interest is currently payable
semi-annually at the rate of 13 7/8%. On or prior to November 15,
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2003, interest on the Castle PIK Notes may be paid in cash or through the
issuance of additional Castle PIK Notes. During the first six months of 1996,
Castle Associates and Castle Funding issued an additional $4.3 million aggregate
principal amount of Castle PIK Notes in payment of interest on the Castle PIK
Notes and anticipate additional interest due in 1996 of approximately $4.6
million will be paid through the issuance of additional Castle PIK Notes.
On June 23, 1995, Castle Associates entered into the Option Agreement with
Hamilton. The Option was granted to Castle Associates in consideration of $1.9
million of aggregate payments to Hamilton. The Option was exercisable at a price
equal to 60% of the aggregate principal amount of the Castle PIK Notes delivered
by Hamilton, with accrued but unpaid interest, plus 100% of the Castle PIK Notes
issued to Hamilton as interest subsequent to June 23, 1995. Pursuant to the
terms of the Option Agreement, upon the occurrence of certain events within 18
months of the time the Option is exercised, Castle Associates is required to
make an additional payment to Hamilton of up to 40% of the principal amount of
the Castle PIK Notes. On May 21, 1996, Castle Associates assigned the Option to
THCR Holdings, which, on that same date, exercised the Option and acquired the
Acquired Castle PIK Notes for the Castle PIK Note Purchase Price. If an
agreement with respect to the Acquisition, or a similar transaction involving
THCR Holdings' acquisition of 100% of the equity interests of Castle Associates
had not been entered into by November 21, 1996, Castle Associates would have had
the right to purchase from THCR Holdings, for a period of 90 days, the Castle
PIK Notes for an amount in cash equal to the Castle PIK Note Purchase Price plus
16% interest thereon to, but not including, the date of such purchase (the
"Castle PIK Note Repurchase Price"). In the event that Castle Associates did not
purchase the Castle PIK Notes, then Trump would have had the right to purchase
from THCR Holdings, for a subsequent period of 90 days, the Castle PIK Notes for
an amount in cash equal to the Castle PIK Note Repurchase Price calculated to,
but not including, the date of such purchase.
Castle Associates' cash debt service requirement was approximately $18.9
million during the six months ended June 30, 1996 and approximately $36.7
million in 1995. Castle Associates anticipates that approximately $20.1 million
in cash will be required during the remainder of 1996 to meet its debt service
obligations.
For the years ended December 31, 1995 and 1994, Castle Associates had a
working capital surplus of $600,000 and a working capital deficit of $1.0
million, respectively. Castle Associates believes that this level of working
capital is adequate to sustain existing operations in the foreseeable future.
Management believes, based upon its current level of operations, that,
although Castle Associates is highly leveraged, it will continue to have the
ability to pay interest on its indebtedness and to pay other liabilities with
funds from operations for the foreseeable future. However, there can be no
assurances to that effect, as Castle Associates' operating results are subject
to numerous factors outside its control, including, without limitation,
competition from within the Atlantic City Market and from other gaming
jurisdictions, general economic conditions, weather and its effect on the
ability of patrons to travel to Atlantic City and the slot machine and table
game win percentages, which can vary significantly over a short-term period. In
the event these or other circumstances change, Castle Associates may seek to
obtain a working capital facility of up to $10 million, although there can be no
assurance that such financing will be available on terms acceptable to Castle
Associates.
The ability of Castle Funding and Castle Associates to pay their
indebtedness when due will depend on their ability to either generate cash from
operations sufficient for such purposes or to refinance such indebtedness on or
before the date on which it becomes due. Castle Associates does not currently
anticipate being able to generate sufficient cash flow from operations to repay
a substantial portion of the principal amounts of the Castle Mortgage Notes and
the Castle PIK Notes. Thus, the repayment of the principal amount of this
indebtedness will likely depend primarily upon the ability of Castle Funding and
Castle Associates to refinance this debt when due. The future operating
performance of Castle Associates and the ability to refinance this debt will be
subject to the then prevailing economic conditions, industry conditions and
numerous financial, business and other factors, many of which are beyond the
control of Castle Associates. There can be no assurance that the future
operating performance of Castle Associates will be sufficient to meet these
repayment obligations or that the general state of the economy, the status of
the capital markets generally, or the receptiveness of the capital markets to
the gaming industry will be conducive to refinancing this debt or other attempts
to raise capital.
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BUSINESS OF CASTLE ASSOCIATES
The Casino-Hotel
Castle Associates owns and operates Trump's Castle, located on 14.7 acres
in the Marina, which is approximately two miles from The Boardwalk. Trump's
Castle is approximately one-quarter mile from the H-Tract. Trump's Castle
consists of a 27-story hotel tower with 728 rooms, including 185 suites, 99 of
which are oversized luxury suites, and an approximately 73,000 square foot
casino. Trump's Castle offers 2,275 slot machines, 90 table games (including 6
poker tables), 8 restaurants, approximately 58,000 square feet of convention,
ballroom and meeting space, a 9-story parking garage, which can accommodate
approximately 3,000 cars, a 460-seat cabaret theater, two cocktail lounges, a
swimming pool, tennis courts, a health club and a roof-top helipad. In addition,
Trump's Castle operates a 645-slip marina which is immediately adjacent to the
casino hotel. An elevated enclosed walkway connects Trump's Castle to a
two-story marina building which contains offices, a nautically themed retail
store, a cocktail lounge and a 240-seat gourmet restaurant that overlooks the
marina and the Atlantic City skyline. As a result of its high quality amenities,
its exceptional customer service and its geographical location, Trump's Castle
distinguishes itself as a desirable alternative to the Atlantic City casinos
located on The Boardwalk.
Casino gaming in Atlantic City is strictly regulated under the New Jersey
Casino Control Act (the "Casino Control Act") and other applicable laws, which
affect virtually all aspects of Castle Associates' operations. See "The
Acquisition--Regulatory Matters."
Marketing Strategy
Service. By providing and maintaining a first-class facility and
exceptional service, Trump's Castle has earned the AAA "Four Diamond" rating to
complement its previously existing "Four Star" Mobil Travel Guide rating.
Trump's Castle provides a broadly diversified gaming and entertainment
experience consistent with the "Trump" name and reputation for quality amenities
and first-class service.
Gaming Environment. In 1994, Castle Associates completed a 3,000 square
foot expansion of its main casino floor space, bringing the total casino floor
space to approximately 73,000 square feet. This expansion enabled Castle
Associates to introduce simulcast racetrack wagering and, at the same time,
increase the number of slot machines. These changes are designed to provide the
gaming patron with a more comfortable gaming experience. In addition, Trump's
Castle has also introduced a separate nonsmoking area on its casino floor. See
"--Properties."
Castle Associates continuously monitors the configuration of the casino
floor and the games it offers to patrons with a view towards making changes and
improvements. Trump's Castle's casino floor was the first in Atlantic City to
feature live poker.
In recent years, there has been an industry trend in the Atlantic City
Market towards fewer table games and more slot machines. For the Atlantic City
Market, revenue from slot machines increased from 54.6% of the industry gaming
revenue in 1988 to 68.8% of the industry gaming revenue in 1995. Trump's Castle
experienced a similar increase, with slot revenue increasing from 52.5% of
gaming revenue in 1988 to 74.4% of gaming revenue in 1995. In response to this
trend, Trump's Castle has devoted more of its casino floor space to slot
machines and between 1994 and 1996 has replaced 1,048 of its slot machines with
newer machines. Under the present plans of the management of Trump's Castle, the
computerized slot tracking and marketing system will continue to be upgraded and
a variety of improvements will be made to the casino floor to enhance customer
service.
"Comping" Strategy. In order to compete effectively with other Atlantic
City casino hotels, Trump's Castle offers complimentary drinks, meals, room
accommodations and/or travel arrangements ("complimentaries" or "comps")
primarily to patrons with a demonstrated propensity for gaming at Trump's
Castle. The policy at Trump's Castle is to focus promotional activities,
including complimentaries, on middle and upper middle market "drive-in" patrons
who visit Atlantic City frequently and have proven to be the most profitable
market segment.
Entertainment and Special Events. Castle Associates pursues a coordinated
program of headline entertainment and special events. Trump's Castle offers
headline entertainment approximately ten times a year, which, in 1995, included
performances by Tom Jones, Dana Carvey, Steve Lawrence and Eydie Gorme, the
Pointer
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Sisters, Nancy Sinatra, Connie Francis, Pat Cooper, Sal Richards, the Neville
Brothers and the Four Tops. Headliners who are scheduled to appear at Trump's
Castle in 1996 include George Carlin, Steve Lawrence and Eydie Gorme, Jackie
Mason, Kool and The Gang, Pattie Page and Frankie Valli. During 1996, Trump's
Castle plans to produce a series of revue-style shows which will run for periods
of six to eight weeks at various dates throughout the year.
As a part of its marketing plan, Trump's Castle offers special events aimed
at its core, middle and upper-middle market segments. In addition, Trump's
Castle hosts special events on an invitation-only basis in an effort to attract
existing targeted gaming patrons and build loyalty among existing targeted
patrons. These special events include golf tournaments, theme parties and gaming
tournaments. Headline entertainment is scheduled so as not to overlap with any
of these special events.
Player Development and Casino Hosts. Castle Associates has contracts with
sales representatives in New Jersey, New York and other states to promote
Trump's Castle. Trump's Castle has sought to attract more middle market slot
patrons, as well as premium players, through its "junket" marketing operations,
which involve attracting groups of patrons by providing airfare, gifts and room
accommodations. Player development personnel host special events, offer
incentives and contact patrons directly in an effort to attract high-limit table
game patrons.
The casino hosts at Trump's Castle assist table game patrons, and the slot
sales representatives at Trump's Castle assist slot patrons on the casino floor,
make room and dinner reservations and provide general assistance. Slot sales
representatives also solicit Castle Card (the frequent player identification
slot card) sign-ups in order to increase Castle Associates' marketing base.
Promotional Activities. The Castle Card constitutes a key element in the
direct marketing program of Trump's Castle. Slot machine players are encouraged
to register for and utilize their personalized Castle Card to earn various
complimentaries based upon their level of play. The Castle Card is inserted
during play into a card reader attached to the slot machine for use in
computerized rating systems. These computer systems record data about the
cardholder, including playing preferences, frequency and denomination of play
and the amount of gaming revenues produced. Slot sales and management personnel
are able to monitor the identity and location of the cardholder and the
frequency and denomination of the cardholder's slot play. They also use this
information to provide attentive service to the cardholder on the casino floor.
Trump's Castle designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Castle Card and on table wagering by the casino games supervisor. Trump's Castle
conducts slot machine and table game tournaments in which cash prizes are
offered to a select group of players invited to participate in the tournament
based upon their tendency to play. Such players tend to play at their own
expense during "off-hours" of the tournament. At times, tournament players are
also offered special dining and entertainment privileges that encourage them to
remain at Trump's Castle.
Credit Policy. Historically, Trump's Castle has extended credit on a
discretionary basis to certain qualified patrons. Credit play, as a percentage
of total dollars wagered, was approximately 29.3% for the three month period
ending March 31, 1996.
Atlantic City Market
The Atlantic City Market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.75 billion in gaming revenues
in 1995, an approximately 9.5% increase over 1994 gaming revenues of
approximately $3.42 billion. From 1990 to 1995, total gaming revenues in
Atlantic City have increased approximately 27%, while hotel rooms increased
approximately 10% during that period. Although total visitor volume to Atlantic
City remained relatively constant in 1995, the volume of bus customers dropped
to 9.6 million in 1995, continuing a decline from 11.7 million in 1990. The
volume of customers traveling by other means to Atlantic City has grown from
20.1 million in 1990 to 23.7 million in 1995.
Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
Castle Associates believes that this relatively slower growth is primarily
attributable
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to two key factors. First, there have been no significant additions to hotel
capacity in Atlantic City since 1990. Las Vegas visitor volumes have increased,
in part, due to the continued addition of new hotel capacity. Both markets have
exhibited a strong correlation between hotel room inventory and total casino
revenues. Secondly, the regulatory environment and infrastructure problems in
Atlantic City have made it more difficult and costly to operate. Total
regulatory costs and tax levies in New Jersey have exceeded those in Nevada
since inception, and there is generally a higher level of regulatory oversight
in New Jersey than in Nevada. The infrastructure problems, manifested by
impaired accessibility of the casinos, downtown Atlantic City congestion and the
condition of the areas surrounding the casinos, have made Atlantic City less
attractive to the gaming customer.
Total Atlantic City slot revenues increased 12.2% in 1995, continuing a
solid trend of increases over the past five years. From 1990 through 1995, slot
revenue growth in Atlantic City has averaged 8.3% per year. Total table revenue
increased 4.4% in 1995, while table game revenue from 1990 to 1995 has decreased
on average 0.7% per year. Castle Associates 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 by 37.2%,
while the number of table games has decreased by 4.0%. Slot revenues increased
from 58% of total casino revenues in 1990 to 69% in 1995. The second reason for
historic slow growth in table revenue is that table game players are typically
higher end players and are more likely to be interested in overnight stays and
other amenities. During peak season and weekends, room availability in Atlantic
City is currently inadequate to meet demand, making it difficult for casino
operators to aggressively promote table play.
Despite generally lower overall growth rates than the Las Vegas market,
Castle Associates believes that Atlantic City possesses similar revenue and cash
flow generation capabilities. The approximately $3.75 billion of gaming revenue
produced by the 12 casino hotels in Atlantic City in 1995 exceeded the
approximately $3.12 billion of gaming revenues produced by the 18 largest (based
on net revenues) casino hotels on the Las Vegas Strip, even though the 12
Atlantic City casino hotels have less than one-quarter the number of hotel rooms
of such 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, comprehensive
amendments to New Jersey gaming laws were made in January 1995, which has
eliminated duplicative regulatory oversight and channeled operator's funds from
regulatory support into CRDA uses. Administrative costs of regulation will be
reduced while increasing funds available for new development. In addition, on
July 25, 1996, legislation was enacted which eliminated the requirement that a
casino consist of a "single room" in a casino hotel. A casino may now consist of
"one or more locations or rooms" approved by the CCC for casino gaming.
Trump's Castle is approximately two miles from Atlantic City's 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. When completed, the new
convention center, which is estimated to cost approximately $250 million, 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 1997. The State of New Jersey is also implementing an
approximately $125 million capital plan to upgrade and expand the Atlantic City
International Airport.
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.
Castle Associates 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
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economic conditions from 1993 to 1995 and high occupancy rates, significant
investment in the Atlantic City Market has been initiated and/or announced.
Castle Associates 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."
Trump's Castle Expansion
The Trump's Castle Expansion is estimated to be completed by June 1, 1998.
The plans for the Trump's Castle Expansion, which are preliminary in nature and
subject to modification, are expected to include (i) the addition of a new hotel
tower consisting of 1,500 rooms and suites; (ii) a 430-foot luxury yacht to be
moored in the Marina, which will be physically connected to the casino-hotel and
accessible to the main casino and will feature 40,000 square feet of casino
space with 1,300 slot machines and 40 table games; (iii) a 7,000 square foot
expansion of the existing coffee shop; and (iv) a 17,000 square foot expansion
of the existing casino.
The Trump's Castle Expansion is dependent upon a number of factors,
including the availability and terms of financing and the consent of Castle
Associates' debtholders to the incurrence of additional indebtedness. The
Trump's Castle Expansion will also require various licenses and regulatory
approvals, including the approval of the CCC. Furthermore, the Casino Control
Act requires that additional guest rooms be put into service within a specified
time period after any such casino expansion. If Castle Associates completed any
casino expansion and subsequently did not complete the requisite number of
additional guest rooms within the specified time period, Castle Associates 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 THCR. In
addition, in order to operate the additional casino space contemplated by the
Trump's Castle Expansion, Castle Associates must obtain, among other regulatory
approvals, the determination of the CCC that the operation of this additional
casino space by Castle Associates will not constitute undue economic
concentration of Atlantic City casino operations. There can be no assurance that
Castle Associates will be able to obtain all the necessary financing, consents,
licenses and regulatory approvals to complete the Trump's Castle Expansion.
Competition
Competition in the Atlantic City Market is intense. Trump's Castle competes
with the other casino hotels located in Atlantic City, including Trump Plaza and
the Taj Mahal, the other casino hotels owned by THCR. At present, there are 12
casino hotels located in Atlantic City, including Trump's Castle, all of which
compete for patrons. Trump's Castle competes primarily with other Atlantic City
casinos by, among other things, providing superior products and facilities, a
premier location, name recognition and targeted marketing strategies. In
addition, there are several sites on The Boardwalk and in the Marina 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. Substantial new expansion and development activity has recently been
completed or has been announced in Atlantic City, which may intensify
competitive pressures in the Atlantic City Market. Recently, three
casino-entertainment projects in the Marina have been announced which include:
one casino/hotel facility wholly-owned by Mirage; one casino/hotel facility
wholly-owned by Circus Circus and a joint venture development project between
Mirage and Boyd. While Castle Associates 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
Trump's Castle. There also can be no assurance that the Atlantic City
development projects which are planned or underway will be completed.
Trump's Castle also competes, 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's Castle faces 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
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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's Castle competes directly with Trump Plaza and the Taj Mahal for
gaming patrons. Although neither THCR nor Castle Associates intends to operate
Trump's Castle, Trump Plaza and the Taj Mahal to the competitive detriment of
the other, the effect may be that Trump's Castle, Trump Plaza or the Taj Mahal
will operate to the competitive detriment of the other.
In addition, Trump's Castle faces competition in a number of states from
casino facilities operated by federally recognized Native American tribes.
Pursuant to the Indian Gaming Regulatory Act ("IGRA"), any state which permits
casino-style gaming (even if only for limited charity purposes) is required to
negotiate gaming contracts with federally recognized Native American tribes
wishing to commence gaming operations. 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's
Castle. In March 1996, the United States Supreme Court struck down a provision
of IGRA which allowed Native American tribes to sue states in federal court for
failing to negotiate gaming compacts in good faith. Castle Associates cannot
predict the impact of this decision on the ability of Native American tribes to
negotiate compacts with the states.
In 1991, the Mashantucket Pequot Nation opened Foxwoods Casino Resort
("Foxwoods"), a casino facility in Ledyard, Connecticut, located in the far
eastern portion of such state, an approximately three-hour drive from New York
City and an approximately two and one-half hour drive from Boston, which
currently offers 24-hour gaming and contains over 4,000 slot machines. The
Mashantucket Pequot Nation has announced various expansion plans, including its
intention to build another casino in Ledyard together with hotels, restaurants
and a theme park. In addition, the Mohegan Nation has commenced construction of
a casino resort to be located ten miles from Foxwoods. The Mohegan Nation
resort, which will be built and managed by a joint venture managed by Sun
International Hotels Ltd., is scheduled to have approximately 75% of the gaming
capacity of Foxwoods and is scheduled to open in October 1996. In addition, the
Eastern Pequots are seeking formal recognition as a Native American tribe for
the purpose of opening a casino. 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 or the Eastern Pequots
would not have a materially adverse impact on the operations of Trump's Castle.
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 Native American gaming
operation in the Catskills is subject to the approval of the Governor of New
York. The Narragansett Nation of Rhode Island, which has federal recognition, is
seeking to open a casino in Rhode Island. The Gay Head Wampanoag Tribe is
seeking to open a casino in New Bedford, Massachusetts. Other Native American
nations are seeking federal recognition, land and negotiation of gaming compacts
in New York, Pennsylvania, Connecticut and other states near Atlantic City.
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans to
begin operating slot machines at race tracks in the state of Delaware are
underway, including the slot machines currently operating at the Dover Downs and
Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved larger scale
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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's Castle could be adversely affected by
such competition, particularly if casino gaming were permitted in jurisdictions
near or elsewhere in New Jersey or in other states in the Northeast. In December
1993, the Rhode Island Lottery Commission approved the addition of slot machine
games on video terminals at Lincoln Greyhound Park and Newport Jai Alai, where
poker and blackjack have been offered for over two years. Currently, casino
gaming, other than Native American gaming, is not allowed in other areas of New
Jersey or in Connecticut, New York or Pennsylvania. On November 17, 1995, a
proposal to allow casino gaming in Bridgeport, Connecticut was voted down by
that state's Senate. A New York State Assembly plan has the potential of
legalizing non-Native American gaming in portions of upstate New York. Essential
to this plan is a proposed New York State constitutional amendment that would
legalize gambling. To amend the New York Constitution, the next elected New York
State Legislature must repass a proposal legalizing gaming and a statewide
referendum, held no sooner than November 1997, must approve the constitutional
amendment. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, a proposal has been introduced to legalize gaming in other
locations, including Philadelphia, Pennsylvania. In addition, legislation has
from time to time been introduced in the New Jersey State Legislature relating
to types of statewide legalized gaming, such as video games with small wagers.
To date, no such legislation, which may require a state constitutional
amendment, has been enacted. Castle Associates is unable to predict whether any
such legislation, in New Jersey, New York, Pennsylvania or elsewhere, will be
enacted or whether, if passed, it would have a material adverse impact on Castle
Associates.
Seasonality
The gaming industry in Atlantic City traditionally has been seasonal, with
its strongest performance occurring from May through September, with December
and January showing substantial decreases in activity. Revenues have been
significantly higher on Fridays, Saturdays, Sundays and holidays than on other
days. In addition, in the summer months, Trump's Castle may be adversely
affected by the desire of certain patrons to wager at a location which is
readily accessible to The Boardwalk.
Employees and Labor Relations
As of March 31, 1996, Castle Associates employed approximately 3,412 full-
and part-time employees, of whom approximately 1,147 were subject to collective
bargaining agreements. Castle Associates' collective bargaining agreement with
Local No. 54 (affiliated with the Hotel Employees and Restaurant Employees
International Union of the AFL-CIO) expires on September 15, 1999. Such
agreement extends to approximately 983 employees. In addition, four other
collective bargaining agreements which expire in 1996 cover approximately 176
maintenance employees. Castle Associates believes that its relationships with
its employees are satisfactory. Castle Funding has no employees.
Certain employees of Castle Associates must be licensed by or registered
with the CCC, depending on the nature of the position held. Casino employees are
subject to more stringent licensing requirements than non-casino employees, and
must meet applicable standards pertaining to such matters as financial
responsibility, good character, ability, casino training, experience and New
Jersey residency. Such regulations have resulted in significant competition for
employees who meet these requirements.
Historical Background
Castle Funding was incorporated under the laws of the State of New Jersey
in May 1985 and is wholly owned by Castle Associates. Castle Funding was formed
to serve as a financing corporation to raise funds as an agent of Castle
Associates. Since Castle Funding has no business operations, its ability to
service its indebtedness is completely dependent upon funds it receives from
Castle Associates. Accordingly, the following discussion is related primarily to
Castle Associates and its operations.
On May 29, 1992, TCHI, Castle Funding and Castle Associates restructured
their indebtedness through a prepackaged plan of reorganization to alleviate
certain liquidity problems (attributable, in part, to the overall
50
<PAGE>
deterioration in the Atlantic City Market experienced prior to such time,
aggravated by an economic recession in the Northeast and the Persian Gulf War),
to improve the amortization schedule and to extend the maturity of Castle
Associates' indebtedness. In December 1993, Castle Associates, Castle Funding
and certain affiliated entities completed a recapitalization of their debt and
equity capitalization (the "Castle Recapitalization"). The purpose of the Castle
Recapitalization was (i) to improve the debt capitalization of Castle Associates
and, initially, to decrease its cash charges, (ii) to provide the holders of the
Units (comprised of $1,000 principal amount of Castle Funding's 9 1/2% Mortgage
Bonds due 1998 and one share of TC/GP's common stock (the "Units")), who
participated in the exchange offer in connection with the Castle
Recapitalization with a cash payment of $6.19 and securities having a combined
principal amount of $905 for each Unit and (iii) to provide Trump with
beneficial ownership of 100% of the common equity interests in Castle Associates
(subject to the rights of holders of the Castle Warrants).
As a result of the Castle Recapitalization, TC/GP has a 37.5% interest in
Castle Associates, Trump has a 61.5% interest in Castle Associates and TCHI has
a 1% interest in Castle Associates; accordingly, through his ownership of 100%
of TC/GP and TCHI, Trump is the beneficial owner of 100% of the equity interests
in Castle Associates (subject to the rights of the holders of the Castle
Warrants). Also as a consequence of the Castle Recapitalization, the principal
amount of Castle Associates' debt was reduced, and, initially, Castle
Associates' cash charges were reduced. Upon consummation of the Castle
Recapitalization, Castle Associates' outstanding debt, on a consolidated basis,
consisted of the $38 million outstanding on the Castle Term Loan, $27 million
principal amount outstanding of its Castle Senior Notes, the approximately $242
million principal amount outstanding of the Castle Mortgage Notes (which are
subordinated to the Castle Senior Notes) and the approximately $50 million
principal amount outstanding of its Castle PIK Notes (which are subordinated to
both the Castle Senior Notes and the Castle Mortgage Notes).
Legal Proceedings
Castle Funding, Castle Associates, its partners, certain members of its
former executive committee and certain of its employees are involved in various
legal proceedings. Castle Associates and Castle Funding have agreed to indemnify
such persons and entities against any and all losses, claims, damages, expenses
(including reasonable costs, disbursements and counsel fees) and liabilities
including amounts paid or incurred in satisfaction of settlements, judgments,
fines and penalties) incurred by them in said legal proceedings. Such persons
and entities are vigorously defending the allegations against them and intend to
vigorously contest any future proceedings.
Various legal proceedings are now pending against Castle Associates. Castle
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 Castle 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 Castle Associates.
Properties
The Casino Parcel. Trump's Castle is located in the Marina on an
approximately 14.7 acre triangular-shaped parcel of land, which is owned by
Castle Associates in fee, located at the intersection of Huron Avenue and
Brigantine Boulevard directly across from the Marina, approximately two miles
from The Boardwalk.
Trump's Castle has approximately 73,000 square feet of casino space which
accommodates 90 table games (including 6 poker tables), 2,275 slot machines and
race simulcasting facilities. In addition to the casino, Trump's Castle consists
of a 27-story hotel with 728 guest rooms, including 185 suites, of which 99 are
"Crystal Tower" luxury suites. Renovation of 300 of the guest rooms was
completed in 1995 and 210 additional guest rooms were renovated in 1996. The
facility also offers eight restaurants, a 460-seat cabaret theater, two cocktail
lounges, 58,000 square feet of convention, ballroom and meeting space, a
swimming pool, tennis courts and a sports and health club facility. Trump's
Castle has been designed so that it can be enlarged in phases into a facility
containing 2,000 rooms and a 1,600-seat cabaret theater. Trump's Castle also has
a nine-story garage providing on-site parking for approximately 3,000 vehicles
and a helipad which is located atop the parking garage, making Trump's Castle
the only Atlantic City casino with access by land, sea and air.
During 1995 and 1996, Trump's Castle replaced over 46% of the slot machines
on its casino floor with new, more popular models and upgraded its computerized
slot tracking and slot marketing system. In 1994, Trump's Castle
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<PAGE>
added 153 slot machines, completed a 3,000 square foot expansion to its casino
which enabled Trump's Castle to accommodate the addition of simulcast race track
wagering and expended in excess of $2 million on renovations to its hotel
facility. The casino expansion also increased casino access and casino
visibility for hotel patrons. In 1993, Trump's Castle completed the construction
of a Las Vegas-style marquee and reader board, the largest of its kind on the
East Coast.
The Marina. Pursuant to an agreement (the "Marina Agreement") with the New
Jersey Division of Parks and Forestry, Castle Associates in 1987 began operating
and renovating the marina at the Marina, including docks containing
approximately 645 slips. An elevated pedestrian walkway connecting Trump's
Castle to a two-story building at the marina was completed in 1989. Castle
Associates constructed the two-story building, which contains a 240-seat
restaurant and offices as well as a snack bar and a large nautical theme retail
store. Pursuant to the Marina Agreement and a certain lease between the State of
New Jersey, as landlord, and Castle Associates, as tenant, dated as of September
1, 1990 (the "Marina Lease"), Castle Associates commenced leasing the marina and
the improvements thereon for an initial term of twenty-five years. The lease is
a net lease pursuant to which Castle Associates, in addition to the payment of
annual rent equal to the greater of (i) a certain percentage of gross revenues
of Castle Associates from operation of the marina during the lease year and (ii)
minimum base rent of $300,000 annually (increasing every five years to $500,000
in 2011), is responsible for all costs and expenses related to the premises,
including but not limited to, all maintenance and repair costs, insurance
premiums, real estate taxes, assessments and utility charges. Any improvements
made to the marina (which is owned by the State of New Jersey), excluding the
elevated pedestrian walkway, automatically become the property of the State of
New Jersey upon their completion. It is anticipated that the Marina Lease will
be renegotiated in connection with the Trump's Castle Expansion.
The Parking Parcel. Castle Associates also owns an employee parking lot
located on Route 30, approximately two miles from Trump's Castle, which can
accommodate approximately 1,000 cars.
MARKET PRICE AND DIVIDEND DATA OF CASTLE ASSOCIATES AND THE CASTLE ENTITIES
Trump, TC/GP and TCHI currently own a 61.5%, 37.5% and 1% general
partnership interest, respectively, in Castle Associates. The outstanding common
stock of TC/GP and TCHI is owned by Trump. THCR is not aware of any established
public trading market for the Castle Associates partnership interests, or the
common stock of TC/GP or TCHI.
TC/GP and TCHI have never paid a dividend with respect to their respective
common stock. The ability of either TC/GP or TCHI to pay dividends is restricted
by the indentures under which the Castle Senior Notes, Castle Mortgage Notes and
Castle PIK Notes were issued.
52
<PAGE>
DESCRIPTION OF THE CASTLE PARTNERSHIP AGREEMENT
The following is a summary of certain of the material terms of the Castle
Partnership Agreement. This summary is qualified in its entirety by reference to
the full text of the Castle Partnership Agreement, a copy of which may be
obtained without charge upon written request to Robert M. Pickus, Executive Vice
President and Secretary of THCR, 2500 Boardwalk, Atlantic City, New Jersey
08401.
General
The business of Castle Associates is to conduct casino gaming and to own
and operate Trump's Castle. Currently, Castle Associates is a general
partnership, and Trump, TC/GP and TCHI have a 61.5%, 37.5% and 1% general
partnership interest in Castle Associates, respectively. In connection with the
Acquisition, the Castle Partnership Agreement will be amended to convert Castle
Associates from a general partnership into a limited partnership. Upon
consummation of the Acquisition, THCR Holdings will own a 99% limited
partnership in Castle Associates and TCHI (as the surviving corporation of the
TCHI Merger) will own a 1% general partnership interest in Castle Associates.
The Castle Partnership Agreement terminates on December 31, 2041, unless sooner
terminated in accordance with its terms.
Management of Castle Associates
Castle Board of Partner Representatives. Management over the affairs of
Castle Associates is currently vested in TC/GP, Trump and TCHI (collectively,
the "Partners"). Until the earlier of (i) such time as all amounts under the
Castle Mortgage Notes and the Castle PIK Notes are paid in full or (ii) such
time as (A) the amount obtained by multiplying Castle Associates' EBITDA for the
immediately preceding twelve full calendar months by 5 exceeds (B) the aggregate
consolidated principal amount of Castle Associates' indebtedness for borrowed
money on a consolidated basis, outstanding as of such time, the Partners
exercise their overall control over the business, operations and activities of
Castle Associates through the Castle Board of Partner Representatives. Unless
otherwise provided in the Castle Partnership Agreement, all matters of policy
pertaining to the business of Trump's Castle must be approved by the Castle
Board of Partner Representatives.
The Castle Board of Partner Representatives consists of seven members. The
three Noteholder Representatives are appointed by the holders of the Castle
Mortgage Notes and the Castle PIK Notes. The other four members are appointed by
Trump (the "Trump Representatives"). Currently the Noteholder Representatives
are Asher O. Pacholder, Thomas F. Leahy and Arthur S. Bahr, and the Trump
Representatives are Trump, Nicholas L. Ribis, Robert M. Pickus and Roger P.
Wagner. The holders of the Castle Mortgage Notes and the Castle PIK Notes,
voting as a single class, have the right to remove the Noteholder
Representatives. In the event that the Castle Mortgage Notes and the Castle PIK
Notes are redeemed in their entirety or repurchased and retired in their
entirety, then each of the Noteholder Representatives will be deemed to have
resigned, and Trump will have the right to appoint all seven Partner
Representatives.
As a result of the Acquisition and the conversion of Castle Associates from
a general partnership to a limited partnership, Castle Associates will be
managed by its sole general partner, TCHI, pursuant to the same terms and
provisions currently set forth in the Castle Partnership Agreement. TCHI's board
of directors will include the three Noteholder Representatives.
Special Noteholder Representative Voting Requirements. The approval of the
following actions requires, in addition to the vote of a majority of the Partner
Representatives, the affirmative vote of at least two of the Noteholder
Representatives (or one of the Noteholder Representatives in the case of the
actions referred to in clause (vi) below): (i) certain sales or dispositions of
Castle Associates' assets, or the merger, combination, consolidation, or
termination or liquidation of Castle Associates with or into any other entity or
the merger, combination or consolidation of any other entity with or into Castle
Associates; (ii) any amendment or waiver of or supplement to or any change in
the indentures under which the Castle Mortgage Notes or the Castle PIK Notes
were issued that is accomplished without the consent of the holders of the
Castle Mortgage Notes or the Castle PIK Notes, as the case may be; (iii) certain
transactions or series of transactions to which Trump or any affiliate of Trump
is a party, participant or beneficiary; (iv) certain changes in the senior
management of Castle Associates; (v) the incurrence of debt, operating leases
and capital expenditures in excess of certain threshold amounts; (vi) the
commencement of, or involvement in, bankruptcy pro-
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<PAGE>
ceedings, the seeking of relief as a debtor, the modification or alteration of
the rights of creditors or the assignment for the benefit of creditors; (vii)
any amendment or supplement to, or modification of, or waiver under, or any
other change in, the Castle Term Loan; (viii) the payment of compensation to
Trump in excess of amounts payable under the Castle Services Agreement; (ix) the
amendment or any supplement to the Castle Services Agreement; (x) a change in
the nature of business conducted; and (xi) any determination to effect the
restoration, repair, replacement or rebuilding of damage, loss or destruction to
any buildings, improvements or certain personal property at Trump's Castle or
the acquisition by eminent domain of any part of Trump's Castle.
Officers of Castle Associates. Castle Associates has a Chief Executive
Officer, a Chief Operating Officer, a Chief Financial Officer, a Secretary and
such other officers, if any, as the Partners from time to time may in their
discretion elect or appoint. Any officer may be but none need be a Partner
Representative. Currently, the following persons are executive officers of
Castle Associates: Nicholas L. Ribis, Chief Executive Officer; Roger P. Wagner,
President and Chief Operating Officer; Robert E. Schaffhauser, Executive Vice
President of Finance and Chief Financial Officer; Mark A. Brown, Executive Vice
President of Operations; Robert M. Pickus, Executive Vice President of Corporate
and Legal Affairs and Secretary; John P. Burke, Treasurer; and Patricia M. Wild,
Senior Vice President, Assistant Secretary and General Counsel. It is
contemplated that these executive officers will remain as executive officers of
Castle Associates upon consummation of the Acquisition.
Compensation and Reimbursement. No Partner or Partner Representative is
entitled to separate compensation for services as Partner or Partner
Representative, except that Partner Representatives (other than Trump or any of
his affiliates) are entitled to receive an annual fee not in excess of $50,000
plus an additional fee of $2,500 for each meeting attended (in person or by
conference telephone call) (provided, that the aggregate amount of said
additional fees may not exceed $25,000 in any fiscal year), and to reimbursement
of reasonable out-of-pocket expenses incurred in connection with attendance at
meetings. Notwithstanding the foregoing, payments may be made in accordance with
the Castle Services Agreement. The Partners and the Partner Representatives are
reimbursed by Castle Associates for all expenses, disbursements and advances
incurred or made in good faith to third parties for or on behalf of Castle
Associates.
Indemnification
Castle Associates indemnifies and holds harmless each Partner, its
affiliates, each Partner Representative and his affiliates, and all officers,
directors, employees and agents of such Partner or Partner Representative, and
his affiliates (individually, an "Indemnitee") from and against any and all
losses arising from any and all claims in which the Indemnitee may be involved,
or threatened to be involved, arising out of or incidental to the business of
Castle Associates (including, without limitation, liabilities under federal and
state securities laws), but only if such course of conduct does not constitute
gross negligence or willful misconduct.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THCR
The following table sets forth, as of August 16, 1996, certain information
regarding the beneficial ownership of THCR Common Stock by (i) each of THCR's
executive officers, (ii) each director of THCR, (iii) each person who is known
to THCR to own beneficially more than 5% of the THCR Common Stock and (iv) all
officers and directors of THCR as a group. Such information is based, in part,
upon information provided by certain stockholders of THCR. In the case of
persons other than the officers and directors of THCR, such information is based
solely on a review of Schedules 13D and 13G filed with the SEC.
Beneficial Ownership
--------------------
Name Number Percent
- ---- ------ -------
Donald J. Trump ..................................... 9,881,548(1) 29.0%
Nicholas L. Ribis ................................... 82,487(2) *
John P. Burke ....................................... 400(3) *
Robert M. Pickus .................................... 200 *
Wallace B. Askins ................................... 3,000 *
Don M. Thomas ....................................... 400 *
Peter M. Ryan ....................................... 2,000 *
State Street Research & Management Company .......... 1,270,300(4) 5.3%
Oppenheimer Group, Inc. ............................. 1,490,075(5) 6.2%
All officers and directors of THCR (7 persons) ...... 9,970,035 29.3%
The above persons have sole voting and investment power, unless otherwise
indicated below.
- -----------
* Less than 1%.
(1) 725 Fifth Avenue, New York, New York 10022. These shares include 6,674,006
and 1,407,017 shares of THCR Common Stock into which Trump's and Trump
Casinos' limited partnership interests in THCR Holdings are convertible,
subject to certain adjustments. Trump Casinos is a corporation wholly owned
by Trump. These shares also include (a) 275 shares of THCR Common Stock
held by Trump's wife, Ms. Marla M. Trump, of which shares Trump disclaims
beneficial ownership, (b) 250 shares of THCR Common Stock, 100 of which are
held for Trump's account and 150 of which are held as custodian for his
children, and (c) 1,800,000 shares of THCR Common Stock underlying
currently exercisable warrants to purchase THCR Common Stock held by Trump
of which (i) 600,000 shares may be purchased on or before April 17, 1999 at
$30.00 per share, (ii) 600,000 shares may be purchased on or before April
17, 2000 at $35.00 per share and (iii) 600,000 shares may be purchased on
or before April 17, 2001 at $40.00 per share. Trump beneficially owns an
approximately 25% limited partnership interest in THCR Holdings, of which
approximately 4% is held directly by Trump Casinos. Trump is also the
beneficial owner of all of the outstanding shares of THCR Class B Common
Stock (1,000 shares) of which he holds 800 shares directly and holds 200
shares through Trump Casinos.
(2) Includes a fully vested stock bonus award of 66,667 shares of THCR Common
Stock. These shares also include 3,081 shares and 2,739 shares held by Mr.
Ribis as custodian for his son, Nicholas L. Ribis Jr., and his daughter,
Alexandria Ribis, respectively, of which shares Mr. Ribis disclaims
beneficial ownership.
(3) Mr. Burke shares voting and dispositive power of 100 of these shares with
his wife. These shares also include 100 shares beneficially owned solely by
his wife, of which shares Mr. Burke disclaims beneficial ownership.
(4) One Financial Center, 30th Floor, Boston, Massachusetts 02111. State Street
Research & Management Company ("State Street") is an investment adviser and
disclaims beneficial ownership of these shares. Metropolitan Life Insurance
Company, One Madison Avenue, New York, New York 10010, is the parent
holding company of State Street.
(5) Oppenheimer Tower, World Financial Center, New York, New York 10281.
Oppenheimer Group, Inc. ("Oppenheimer") has shared voting and dispositive
power over these shares. These shares include 886,400 shares beneficially
owned by Oppenheimer Capital, an investment adviser, of which Oppenheimer
is the parent holding company.
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<PAGE>
As security for certain indebtedness of Trump and his affiliates (other
than THCR and its subsidiaries) owed to certain lenders, Trump pledged (and
caused Trump Casinos to pledge) all of the shares of THCR Class B Common Stock
and the limited partnership interests in THCR Holdings held by Trump (and Trump
Casinos). A foreclosure on all of such collateral could result in a change of
control of THCR.
SUBMISSION OF STOCKHOLDER PROPOSALS--1997 ANNUAL MEETING
Any proposals of stockholders of THCR intended to be included in THCR's
proxy statement and form of proxy relating to THCR's next annual meeting of
stockholders must be in writing and received by the Secretary of THCR at THCR's
office at 2500 Boardwalk, Atlantic City, New Jersey 08401 no later than January
10, 1997. In the event that the next annual meeting of stockholders is called
for a date that is not within 30 days before or after June 12, 1997, in order to
be timely, notice by the stockholder must be received not later than the close
of business on the tenth day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs.
Any stockholder interested in making a proposal is referred to Article II,
Section 11 of the THCR By-Laws. Such proposals must also meet the other
requirements of the rules of the SEC relating to stockholders' proposals and the
other requirements set forth in the THCR Certificate of Incorporation and the
THCR By-Laws.
AVAILABLE INFORMATION
THCR is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, has filed reports and other information with the SEC. Reports,
proxy statements and other information of THCR are available for inspection and
copying at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain regional offices
of the SEC located at Citicorp 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, D.C. 20549 at prescribed rates. In
addition, the SEC maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants (such as
THCR) that file electronically with the SEC. The address of the SEC's Web site
is http://www.sec.gov. The THCR Common Stock is listed on the NYSE, and reports
and other information concerning THCR can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
This Proxy Statement contains forward-looking information that involves
risks and uncertainties inherent in the gaming industry and other risks and
uncertainties described in THCR's public filings; such information is subject to
the assumptions set forth in connection therewith and the information contained
herein and therein.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST FROM THE CORPORATE SECRETARY'S OFFICE, TRUMP HOTELS & CASINO
RESORTS, INC., 2500 BOARDWALK, ATLANTIC CITY, NEW JERSEY 08401; TELEPHONE NUMBER
(609) 441-6060. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE NO LATER THAN SEPTEMBER 20, 1996.
INFORMATION INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
1. Annual Report of Trump Hotels & Casino Resorts, Inc. on Form 10-K
for the year endedDecember 31, 1995.
2. Quarterly Reports of Trump Hotels & Casino Resorts, Inc. on Form
10-Q for the quarters endedMarch 31, 1996 and June 30, 1996.
3. Current Reports of Trump Hotels & Casino Resorts, Inc. on Form 8-K,
filed with the SEC onJanuary 10, 1996, February 1, 1996, May 2, 1996, May
22, 1996 and June 25, 1996.
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<PAGE>
4. Joint Proxy Statement-Prospectus of Trump Hotels & Casino Resorts,
Inc. and Taj Mahal Holding Corp., dated March 8, 1996, included in the
Registration Statement on Form S-4 of Trump Hotels & Casino Resorts, Inc.,
Registration No. 333-153.
5. Prospectus of Trump Hotels & Casino Resorts, Inc., dated April 11,
1996, included in the Registration Statement on Form S-1 of Trump Hotels &
Casino Resorts, Inc., Registration No. 333-639.
6. Proxy Statement of Trump Hotels & Casino Resorts, Inc., filed with
the SEC on May 10, 1996.
All other documents filed by THCR pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement, and prior to
the date of the Special Meeting, shall be deemed to be incorporated by reference
herein.
Any statement contained in a document filed with the SEC prior to the date
hereof and incorporated by reference herein shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. The modifying or
superseding statement may, but need not, state that it has modified or
superseded a prior statement or include any other information set forth in the
document that is not so modified or superseded. The making of a modifying or
superseding statement shall not be deemed an admission that the modified or
superseded statement, when made, constituted an untrue statement of a material
fact, an omission to state a material fact necessary to make a statement not
misleading, or the employment of a manipulative, deceptive or fraudulent device,
contrivance, scheme, transaction, act, practice, course of business or artifice
to defraud, as those terms are used in the Securities Act of 1933, as amended,
the Exchange Act or the rules and regulations thereunder. Any statement so
modified shall not be deemed in its unmodified form to constitute a part hereof
for purposes of the Exchange Act. Any statement so superseded shall not be
deemed to constitute a part hereof for purposes of the Exchange Act.
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Trump's Castle Associates and Subsidiary
Condensed and Consolidated Balance Sheets of Trump's Castle
Associates and Subsidiary at June 30, 1996 (unaudited) and
December 31, 1995 ................................................... F-2
Condensed and Consolidated Statements of Operations of
Trump's Castle Associates and Subsidiary for the six month
period ended June 30, 1996 and 1995 (unaudited) ..................... F-3
Condensed and Consolidated Statement of Partners' Capital
(Deficit) of Trump's Castle Associates and Subsidiary for
the six months ended June 30, 1996 (unaudited) ...................... F-4
Condensed and Consolidated Statements of Cash Flows for
Trump's Castle Associates and Subsidiary for the six months
ended June 30, 1996 and 1995 (unaudited) ............................ F-5
Notes to Condensed and Consolidated Financial Statements
(unaudited) ......................................................... F-6
Trump's Castle Associates and Subsidiary
Report of Independent Public Accountants ............................. F-8
Consolidated Balance Sheets of Trump's Castle Associates and
Subsidiary at December 31, 1995 and 1994 ............................ F-9
Consolidated Statements of Operations of Trump's Castle
Associates and Subsidiary for the years ended December 31,
1995, 1994, and 1993 ............................................... F-10
Consolidated Statement of Partners' Capital of Trump's Castle
Associates and Subsidiary for the years ended December 31,
1995, 1994, and 1993 ............................................... F-11
Consolidated Statements of Cash Flows of Trump's Castle
Associates and Subsidiary for the years ended December 31,
1995, 1994 and 1993 ................................................ F-12
Notes to Consolidated Financial Statements .......................... F-13
F-1
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
June 30, December 31,
1996 1995
--------- --------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................... $ 17,767 $ 21,038
Receivables, net ................................ 8,535 10,259
Due from affiliates, net ........................ 197 1,146
Inventories ..................................... 1,458 1,567
Other current assets ............................ 2,424 4,961
--------- --------
Total current assets ......................... 30,381 38,971
--------- --------
PROPERTY AND EQUIPMENT ............................ 319,280 322,115
--------- --------
OTHER ASSETS ...................................... 9,509 9,495
--------- --------
Total assets ................................. $ 359,170 $370,581
========= ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Current maturities--other borrowings ............ $ 3,271 $ 2,903
Accounts payable and accrued expenses ........... 32,180 31,108
Accrued interest payable ........................ 4,413 4,391
--------- --------
Total current liabilities .................... 39,864 38,402
MORTGAGE NOTES, due 2003 .......................... 207,773 206,569
(Net of unamortized discount of
$34,368 and $35,572, respectively)
PIK NOTES, due 2005 ............................... 58,514 54,110
(Net of unamortized discount of
$7,637 and $7,750, respectively)
OTHER BORROWINGS .................................. 62,410 62,336
OTHER LONG TERM LIABILITIES ....................... 3,728 3,351
--------- --------
Total liabilities ............................ 372,289 364,768
--------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT) ....................... (13,119) 5,813
--------- --------
Total liabilities and capital ................ $ 359,170 $370,581
========= ========
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-2
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Dollars In Thousands)
For the Six Months
Ended June 30,
---------------------------
1996 1995
--------- ---------
REVENUES:
Gaming .................................... $ 127,173 $ 124,511
Rooms ..................................... 9,005 9,194
Food and beverage ......................... 15,590 12,980
Other ..................................... 3,917 3,834
--------- ---------
Gross Revenues ......................... 155,685 150,519
Less--Promotional allowances ............... 18,943 14,363
--------- ---------
Net Revenues ........................... 136,742 136,156
COSTS AND EXPENSES:
Gaming .................................... 80,198 73,677
Rooms ..................................... 755 1,327
Food and beverage ......................... 5,566 5,973
General and administrative ................ 38,140 35,536
Depreciation and amortization ............. 7,677 7,113
--------- ---------
Total costs and expenses ............... 132,336 123,626
--------- ---------
Income From Operations ................. 4,406 12,530
INTEREST INCOME ............................ 258 224
INTEREST EXPENSE ........................... (23,596) (22,589)
--------- ---------
Net Loss ............................... ($ 18,932) ($ 9,835)
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-3
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the Six Months Ended June 30, 1996
(unaudited)
(Dollars In Thousands)
Partners'
Partners' Accumulated
Capital Deficit Total
------- -------- --------
Balance at December 31, 1995 ........ $73,395 ($67,582) $ 5,813
Net Loss ............................ -- (18,932) (18,932)
------- -------- --------
Balance at June 30, 1996 ............ $73,395 ($86,514) ($13,119)
======= ======== ========
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-4
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars In Thousands)
For the Six Months
Ended June 30,
---------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. ($18,932) ($ 9,835)
Adjustments to reconcile net loss to net cash
flows provided by operating activities
Noncash charges--
Depreciation and amortization ....................... 7,677 7,113
Accretion of bond discount .......................... 1,318 1,151
Provision for losses on receivables ................. 640 516
Valuation allowance--CRDA investments ............... 650 714
-------- --------
(8,647) (341)
Decrease in receivables ............................. 2,033 1,168
Decrease in inventories ............................. 109 211
Decrease (increase) in other current assets ......... 2,427 (3,632)
Decrease (increase) in other assets ................. 934 (155)
Increase in current liabilities ..................... 924 1,442
Increase in other liabilities ....................... 4,300 3,739
-------- --------
Net cash flows provided by operating activities .... 2,080 2,432
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment, net .............. (4,305) (5,215)
Purchase of CRDA investments .......................... (1,365) (1,241)
-------- --------
Net cash flows used in investing activities .......... (5,670) (6,456)
-------- --------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from issuance of debt ........................ 1,738 875
Repayment of other borrowings ......................... (1,419) (349)
-------- --------
Net cash flows provided by investing activities ...... 319 526
-------- --------
Net decrease in cash and cash equivalents ............ (3,271) (3,498)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 21,038 19,122
-------- --------
CASH AND CASH EQUIVALENTS AT JUNE 30 ................... $ 17,767 $ 15,624
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ................................ $ 17,974 $ 17,676
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-5
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Operations
The accompanying consolidated financial statements include those of Trump's
Castle Associates, a New Jersey general partnership (the "Partnership") and its
wholly owned subsidiary, Trump's Castle Funding, Inc., a New Jersey corporation
("Funding").
The Partnership owns and operates Trump's Castle Casino Resort, a luxury
casino hotel located in the Marina District of Atlantic City, New Jersey.
The accompanying consolidated financial statements have been prepared by
the Partnership without audit. In the opinion of the Partnership, all
adjustments, consisting of only normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash flows for
the periods presented have been made. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
The accompanying consolidated financial statements have been prepared by
the Partnership pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and note disclosures
normally included in the financial statements prepared in conformity with
generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the annual
report on Form 10-K for the year ended December 31, 1995 filed with the
Securities and Exchange Commission by the Partnership and Funding. Certain
reclassifications have been made to conform prior year financial information
with the current year presentation.
The results of operations for the six month period ending June 30, 1996 are
not necessarily indicative of the operating results to be attained for any other
period.
(2) PIK Notes
On June 23, 1995, the Partnership entered into an Option Agreement with
Hamilton Partners, L.P. ("Hamilton") which grants the Partnership an option (the
"Option") to acquire the Increasing Rate Subordinated Pay-in-Kind Notes due 2005
(the "PIK Notes") owned by Hamilton. Hamilton has represented to the Partnership
that it is the owner of at least 92% of the outstanding principal amount of the
PIK Notes. The Option was granted to the Partnership in consideration of $1.9
million of aggregate payments to Hamilton. The Option is exercisable at a price
equal to 60% of the aggregate principal amount and accrued interest of the PIK
Notes delivered by Hamilton, with accrued but unpaid interest, plus 100% of the
PIK Notes issued to Hamilton as interest subsequent to June 23, 1995. Pursuant
to the terms of the Option Agreement, upon the occurrence of certain events
within 18 months of the time the Option is exercised, the Partnership is
required to make an additional payment to Hamilton of up to 40% of the principal
amount of the PIK Notes. On May 21, 1996, the Partnership assigned the Option to
Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings") a Delaware
limited partnership and a subsidiary of Trump Hotels & Casino Resorts, Inc.
("THCR"), which, on that same date, exercised the Option and acquired
approximately 90% of the PIK Notes for approximately $38.7 million (the
"Purchase Price"), in exchange for which THCR Holdings received an aggregate of
approximately $59.3 million of PIK Notes. Concurrently with the exercise of the
Option, THCR Holdings entered into an agreement with the Partnership and Donald
J. Trump ("Trump"), which granted THCR Holdings a six-month exclusive right to
negotiate with Trump and the Partnership with respect to the acquisition of the
Partnership (the "Transaction") (see Note 3). If an agreement with respect to
the Transaction had not been entered into within six months, the Partnership
would then have had the right to repurchase from THCR Holdings, for a period of
90 days (the "Castle Repurchase Date"), the acquired PIK Notes for an amount in
cash equal to the Purchase Price plus 16% interest thereon (the "Repurchase
Price"). In the event that the Partnership would have not repurchased the
acquired PIK Notes, Trump would then have had the right to purchase from THCR
Holdings, for a period of 90 days following the Castle Repurchase Date, the
acquired PIK Notes for an amount in cash equal to the Repurchase Price
calculated to the date of such purchase.
On May 15, 1996, the semi-annual interest payment of $4,292,000 was paid by
issuance of additional PIK Notes.
F-6
<PAGE>
(3) Proposed Acquisition of the Partnership
In consideration for the Partnership's assignment of the PIK Note Option to
THCR Holdings, an agreement was reached which gives THCR Holdings exclusive
rights to negotiate the acquisition of the Partnership (See Note 2).
Pursuant to an Agreement (the "Agreement"), dated as of June 24, 1996, by
and among THCR, THCR Holdings, TC/GP, Inc. ("TC/GP"), a Delaware corporation
wholly owned by Trump, Trump's Castle Hotel & Casino, Inc. ("TCHI"), a New
Jersey corporation wholly owned by Trump, and Trump, THCR Holdings agreed to
acquire all of the outstanding equity interests of the Partnership for an
aggregate consideration of $176.9 million. The Agreement contemplates the
following transactions will take place:
(i) Trump will contribute to THCR Holdings his 61.5% equity interest in the
Partnership, in consideration of which he will receive a 9.52854% limited
partnership interest in THCR Holdings, exchangeable into 3,626,450 shares of
THCR common stock (valuing each share at $30.00 (the "THCR Stock Contribution
Value");
(ii) TC/GP will contribute to THCR Holdings its 37.5% equity interest in
the Partnership, in consideration of which it will receive a 5.81009% limited
partnership in THCR Holdings, exchangeable into 2,211,250 shares of THCR common
stock valuing each share at the THCR Stock Contribution Value; and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and wholly owned
subsidiary of THCR Holdings ("Merger Sub"), will merge (the "THCI Merger") with
and into THCI (holder of a 1.0% equity interest in the Partnership), whereupon
each share of common stock of TCHI ("TCHI Common Stock"), outstanding
immediately prior to the TCHI Merger will be converted into the right to receive
one share of common stock of the surviving corporation of the TCHI Merger and
each holder of the outstanding warrants ("Castle Warrants") issued under the
Warrant Agreement, dated as of December 30, 1993, will be entitled to receive
for each former share of TCHI Common Stock for which each Castle Warrant was
exercisable an amount in cash equal to the TCHI Consideration.
The acquisition will be accounted for as a purchase.
The acquisition is subject to satisfaction of a number of conditions,
including the affirmative vote of a majority of the outstanding shares of THCR
common stock (excluding the shares held by Trump and the other officers and
directors of THCR and their affiliates) and the receipt of various third party
approvals and consents.
(4) Financial Information of Funding
Financial information relating to Funding is as follows (in thousands):
June 30, December 31,
1996 1995
-------- --------
Total Assets (including Mortgage
Notes Receivable $242,141, net of
unamortized discount of $34,368 and
$35,572 at June 30, 1996 and
December 31, 1995, PIK Notes
Receivable of $66,151, net of
unamortized discount of $7,637 at
June 30, 1996 and $61,860, net of
unamortized discount of $7,750 at
December 31, 1995, and Senior Notes
Receivable of $27,000 at June 30,
1996 and December 31, 1995.) .......... $293,287 $287,679
======== ========
Total Liabilities and Capital
(including Mortgage Notes Payable
of $242,141, net of unamortized
discount of $34,368 and $35,572 at
June 30, 1996 and December 31,
1995, PIK Notes Payable of $66,151,
net of unamortized discount of
$7,637, at June 30, 1996 and $7,750
at December 31, 1995 and Senior
Notes Payable of $27,000 at June
30, 1996 and December 31, 1995.) ...... $293,287 $287,679
======== ========
For the Six Months
Ended June 30,
-------------------------
1996 1995
-------- --------
Interest Income $ 21,395 $ 20,692
Interest Expense 21,395 20,692
-------- --------
Net Income $ -- $ --
======== ========
F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates and Subsidiary:
We have audited the accompanying consolidated balance sheets of Trump's
Castle Associates (a New Jersey general partnership) and Subsidiary as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, partners' capital and cash flows for each of the three years in the
period ended December 31, 1995. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated 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 ofmaterial
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's Castle Associates
and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ending
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 16, 1996
F-8
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents ................... $ 21,038,000 $ 19,122,000
Trade receivables, less allowance
for doubtful accounts
of $1,969,000 and
$3,704,000 respectively (Note 3) ........... 9,007,000 7,395,000
Accounts receivable, other .................. 1,252,000 1,463,000
Due from affiliates, net (Note 6) ........... 1,146,000 434,000
Inventories (Note 3) ........................ 1,567,000 1,790,000
Prepaid expenses and other
current assets (Note 4) ................... 4,961,000 2,880,000
------------- -------------
Total current assets ......................... 38,971,000 33,084,000
------------- -------------
PROPERTY AND EQUIPMENT (Notes 3, 4, and 5):
Land and land improvements .................. 62,706,000 62,706,000
Buildings and building improvements ......... 327,487,000 327,487,000
Furniture, fixtures and equipment ........... 114,253,000 108,308,000
Construction in progress .................... 5,436,000 3,196,000
------------- -------------
509,882,000 501,697,000
Less--Accumulated depreciation .............. 187,767,000 173,523,000
------------- -------------
322,115,000 328,174,000
------------- -------------
OTHER ASSETS ................................. 9,495,000 7,539,000
------------- -------------
Total assets ............................. $ 370,581,000 $ 368,797,000
============= =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities--other borrowings (Note 5) $ 2,903,000 $ 1,108,000
Trade accounts payable ...................... 9,413,000 6,191,000
Accrued payroll and related expenses ........ 7,358,000 8,625,000
Accrued interest payable (Note 2) ........... 4,391,000 3,994,000
Gaming liabilities (Note 3) ................. 2,988,000 3,126,000
Self insurance reserves ..................... 4,141,000 4,660,000
Other ....................................... 7,208,000 6,380,000
------------- -------------
Total current liabilities .................... 38,402,000 34,084,000
MORTGAGE NOTES, due 2003 (Notes 4 and 10) .... 206,569,000 204,412,000
(Net of discount of $ 35,572,000 and
$ 37,729,000, respectively)
PIK NOTES, due 2005 (Notes 4 and 10) ......... 54,110,000 46,129,000
(Net of discount of $ 7,750,000 and
$ 7,965,000, respectively)
OTHER BORROWINGS (Note 5) .................... 62,336,000 63,892,000
OTHER LONG TERM LIABILITIES .................. 3,351,000 3,315,000
------------- -------------
Total liabilities ............................ 364,768,000 351,832,000
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (Notes 2 and 6):
Contributed capital ......................... 73,395,000 73,395,000
Accumulated deficit ......................... (67,582,000) (56,430,000)
------------- -------------
Total partners' capital ...................... 5,813,000 16,965,000
------------- -------------
Total liabilities and capital ............ $ 370,581,000 $ 368,797,000
============= =============
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-9
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
------------- ------------- -------------
REVENUES:
Gaming (Note 3) ............. $ 280,124,000 $ 258,455,000 $ 246,370,000
Rooms ....................... 20,052,000 19,514,000 19,647,000
Food and beverage ........... 30,804,000 28,447,000 30,608,000
Other ....................... 9,130,000 8,969,000 8,201,000
------------- ------------- -------------
Gross Revenues ........... 340,110,000 315,385,000 304,826,000
Less--Promotional allowances
(Note 3) .................. 34,547,000 31,572,000 31,599,000
------------- ------------- -------------
Net Revenues ............. 305,563,000 283,813,000 273,227,000
------------- ------------- -------------
COSTS AND EXPENSES
(Notes 2, 6 and 7)
Gaming ...................... 165,679,000 151,036,000 145,717,000
Rooms ....................... 2,534,000 2,533,000 2,980,000
Food and beverage ........... 13,516,000 12,396,000 14,595,000
General and administrative .. 61,431,000 61,974,000 54,558,000
Depreciation and amortization 14,639,000 14,437,000 16,425,000
Other ....................... 13,403,000 12,613,000 11,086,000
------------- ------------- -------------
271,202,000 254,989,000 245,361,000
------------- ------------- -------------
Income from operations ... 34,361,000 28,824,000 27,866,000
INTEREST INCOME .............. 504,000 636,000 675,000
INTEREST EXPENSE, including
approximately $9,000,000 in
transaction costs related to
the Recapitalization Plan
in 1993 (Note 2) ............ (46,017,000) (44,173,000) (56,926,000)
------------- ------------- -------------
Net Loss ................. ($ 11,152,000) ($ 14,713,000) ($ 28,385,000)
============= ============= =============
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-10
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Contributed Accumulated
Capital Deficit Total
----------- ------------ ------------
Balance at December 31, 1992 ..... $73,395,000 ($12,596,000) $ 60,799,000
Net loss ........................ -- (28,385,000) (28,385,000)
Partnership distribution (Note 6) -- (736,000) (736,000)
----------- ------------ ------------
Balance at December 31, 1993 ..... 73,395,000 (41,717,000) 31,678,000
Net loss ........................ -- (14,713,000) (14,713,000)
----------- ------------ -----------
Balance at December 31, 1994 ..... 73,395,000 (56,430,000) 16,965,000
Net loss ........................ -- (11,152,000) (11,152,000)
----------- ------------ -----------
Balance at December 31, 1995 ..... $73,395,000 ($67,582,000) $ 5,813,000
================================== =========== ============ ============
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-11
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .......................................... ($11,152,000) ($14,713,000) ($28,385,000)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash flows
provided by (used in) operating activities--
Noncash charges--
Depreciation and amortization ................... 14,639,000 14,437,000 16,425,000
Accretion of bond discount ...................... 2,372,000 2,148,000 10,395,000
Provision for losses on receivables ............. 1,370,000 3,438,000 755,000
Amortization of CRDA tax credits ................ 720,000 955,000 115,000
Valuation allowance--CRDA investments ........... 936,000 735,000 953,000
----------- ----------- -----------
8,885,000 7,000,000 258,000
Increase in receivables ......................... (3,486,000) (2,461,000) (3,461,000)
Decrease (increase) in inventories .............. 223,000 525,000 (155,000)
Increase in other current assets ................ (2,800,000) (320,000) (701,000)
Increase in other assets ........................ (86,000) (881,000) (42,000)
Increase (decrease) in current liabilities ...... 2,527,000 2,112,000 (4,980,000)
Increase in other liabilities ................... 7,802,000 3,315,000 --
----------- ----------- -----------
Net cash flows provided by (used in)
operating activities ......................... 13,065,000 9,290,000 (9,081,000)
----------- ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and equipment, net .......... (8,580,000) (8,257,000) (10,396,000)
Purchase of CRDA investments ...................... (2,805,000) (2,350,000) (2,958,000)
----------- ----------- -----------
Net cash flows used in investing activities ... (11,385,000) (10,607,000) (13,354,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Senior Notes .......................... -- -- 27,000,000
Repayment of other borrowings ..................... (1,470,000) -- (7,000,000)
Other borrowings .................................. 1,706,000 -- --
Distributions to TC/GP, Inc. ...................... -- -- (736,000)
----------- ----------- -----------
Net cash flows from financing activities ...... 236,000 -- 19,264,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents .................................. 1,916,000 (1,317,000) (3,171,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR .............................. 19,122,000 20,439,000 23,610,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR .................................... $ 21,038,000 $ 19,122,000 $ 20,439,000
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-12
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization And Operations
The accompanying consolidated financial statements include those of Trump's
Castle Associates, a New Jersey general partnership (the "Partnership") and its
wholly-owned subsidiary, Trump's Castle Funding, Inc., a New Jersey corporation
("Funding"). All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
The Partnership was formed as a limited partnership in 1985 for the sole
purpose of acquiring and operating Trump's Castle Casino Resort ("Trump's
Castle"). The Partnership converted to a general partnership in February 1992.
Trump's Castle is a luxury casino hotel located in the Marina District of
Atlantic City, New Jersey. A substantial portion of Trump's Castle's revenues
are derived from its gaming operations. Competition in the Atlantic City gaming
market is intense and the Partnership believes that the competition will
continue as new entrants to the gaming industry become operational.
The partners in the Partnership are TC/GP, Inc. ("TC/GP"), which has a
37.5% interest in the Partnership, Donald J. Trump ("Trump"), who has a 61.5%
interest in the Partnership, and Trump's Castle Hotel & Casino, Inc. ("TCHI"),
which has a 1% interest in the Partnership. Trump, by virtue of his ownership of
TC/GP and TCHI, is the beneficial owner of 100% of the common equity interest in
the Partnership, subject to the right of holders of warrants for 50% of the
common stock of TCHI (the "TCHI Warrants") to acquire an indirect beneficial
interest in 0.5% of the common equity interest in the Partnership. Trump has
pledged his direct and indirect ownership interest in the Partnership as
collateral under various personal debt agreements.
Funding was incorporated on May 28, 1985 solely to serve as a financing
company to raise funds through the issuance of bonds to the public (Note 4).
Since Funding has no business operations, its ability to repay the principal and
interest on the 11 1/2% Senior Secured Notes due 2000 (the "Senior Notes"), the
11 3/4% Mortgage Notes due 2003 (the "Mortgage Notes"), and its Increasing Rate
Subordinated Pay-in-Kind Notes due 2005 (the "PIK Notes") is completely
dependent upon the operations of the Partnership.
(2) Plan Of Recapitalization
On December 28, 1993, the Partnership, Funding, and TC/GP consummated a
recapitalization plan (the "Recapitalization Plan") whereby each $1,000 of
principal of the 9.5% Mortgage Bonds issued as part of an earlier plan of
reorganization was exchanged for $750 principal amount of Funding's Mortgage
Notes, $120 principal amount of Funding's PIK Notes, and a cash payment of $6.19
plus all accrued and unpaid interest. Those bondholders who did not elect to
exchange their Mortgage Bonds received a cash payment in redemption of their
Mortgage Bonds of $750 for each $1,000 of principal amount of bonds plus accrued
and unpaid interest. In addition, each share of TC/GP common stock was exchanged
for $35 principal amount of PIK Notes.
As a result of the Recapitalization Plan, approximately 96% of the
principal amount of the previously issued Mortgage Bonds were exchanged for
Mortgage Notes and PIK Notes and the TC/GP common stock was redeemed. Those
Bonds that were redeemed for cash were purchased at an amount which approximated
their net book value at the date of purchase. The net book value of the
exchanged Bonds has been carried forward and allocated to the Mortgage Notes and
PIK Notes in proportion to the principal amount of Mortgage Notes and PIK Notes
issued. The difference between the principal amount and net book value of these
Mortgage Notes and PIK Notes is being accreted as a charge to interest expense
over the life of the Mortgage Notes and PIK Notes using the effective interest
method.
In addition to the Mortgage Notes and PIK Notes, Funding issued $27,000,000
of the Senior Notes. A portion of the proceeds from the Senior Notes were used
to repay $7,000,000 of outstanding indebtedness.
Transaction costs related to the Recapitalization Plan of approximately
$9,000,000 were included in interest expense. Included in these costs was a
$1,500,000 bonus to Trump for the services he provided in connection with the
Recapitalization Plan.
F-13
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) Accounting Policies
Pervasiveness of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principals requires the Partnership to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
Revenue Recognition
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues from hotel and other
services are recognized at the time the related services are performed.
The Partnership provides an allowance for doubtful accounts arising from
casino, hotel, and other services, which is based upon a specific review of
certain outstanding receivables and historical collection performance. In
determining the amount of the allowance, the Partnership is required to make
certain estimates and assumptions and actual results may differ from these
estimates and assumptions.
Promotional Allowances
Gross revenues include the retail value of the complimentary food,
beverage, and hotel services provided to patrons. The retail value of these
promotional allowances is deducted from gross revenues to arrive at net
revenues. The cost of such complimentaries have been included in gaming costs
and expenses in the accompanying consolidated statements of operations. The
estimated departmental costs of providing such promotional allowances are
included in gaming costs and expenses and are as follows:
1995 1994 1993
---- ---- ----
Rooms ....................... $ 6,261,000 $ 6,554,000 $ 5,834,000
Food and Beverage ........... 18,240,000 17,342,000 17,332,000
Other ....................... 2,483,000 2,693,000 2,073,000
----------- ----------- -----------
$26,984,000 $26,589,000 $25,239,000
=========== =========== ===========
Income Taxes
The accompanying consolidated financial statements do not include a
provision for Federal income taxes of the Partnership, since any income or
losses allocated to the partners are reportable for Federal income tax purposes
bythe Partners.
Under the Casino Control Act (the "Act") and the regulations promulgated
thereunder, the Partnership and Funding are required to file a consolidated New
Jersey corporation business tax return.
As of December 31, 1995, the Partnership had New Jersey State net operating
losses of approximately $162,000,000, which are available to offset taxable
income through the year 2002. The net operating loss carryforwards result in a
deferred tax asset of $15,200,000, which has been offset by a valuation
allowance of $15,200,000, as utilization of such carryforwards is not considered
to be more likely than not.
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(first-in, first-out basis) or market.
Property and Equipment
Property and equipment is recorded at cost and is depreciated on the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives for furniture, fixtures, and equipment and buildings are from three
to eight years and forty years, respectively.
F-14
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) Accounting Policies--(Continued)
Long Lived Assets
During 1995, the Partnership adopted the provisions of Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long
Lived Assets" ("SFAS 121"). SFAS 121 requires, among other things, that an
entity review its long lived assets and certain related intangibles for
impairment whenever changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. As a result of its review, the
Partnership does not believe that any impairment exists in the recoverability of
its long lived assets.
Statements of Cash Flows
For purposes of the statements of cash flows, Funding and the Partnership
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:
1995 1994 1993
---- ---- ----
Cash paid during the year for interest
(net of amounts capitalized) ........ $35,338,000 $31,255,000 $44,857,000
=========== =========== ===========
Issuance of debt in exchange for
accrued interest ................... $ 7,766,000 $ 3,559,000 $ --
=========== =========== ===========
Reclassification
Certain reclassifications have been made to the 1994 and 1993 financial
statements in order to conform to the classifications used in 1995.
(4) Mortgage Notes and Pik Notes
As discussed in Note 2, on December 28, 1993 all of the outstanding
Mortgage Bonds and TC/GP common stock were either redeemed or exchanged for
Mortgage Notes and PIK Notes by Funding. The Mortgage Notes bear interest,
payable in cash, semi-annually, at 11 3/4% and mature on November 15, 2003. As
discussed in Note 2, the net book value of the exchanged bonds has been carried
forward and allocated to the Mortgage Notes and PIK Notes in proportion to the
principal amount of Mortgage Notes and PIK Notes issued. In the event the PIK
Notes are redeemed prior to November 15, 1998, the interest rate on the Mortgage
Notes will be reduced to 11 1/2%. The Mortgage Notes may be redeemed at
Funding's option at a specified percentage of the principal amount commencing in
1998.
The PIK Notes bear interest payable, at Funding's option in whole or in
part in cash and through the issuance of additional PIK Notes, semi-annually at
the rate of 7% through September 30, 1994 and 13 7/8% through November 15,
2003. After November 15, 2003, interest on the Notes is payable in cash at the
rate of 13 7/8%. The PIK Notes mature on November 15, 2005. The PIK Notes may
be redeemed at Funding's option at 100% of the principal amount under certain
conditions, as defined in the PIK Note Indenture, and are required to be
redeemed from a specified percentage of any equity offering which includes the
Partnership. Interest has been accrued using the effective interest method. On
May 15, 1995 and November 15, 1995, the semi-annual interest payments of
$3,753,000 and $4,013,000, respectively, were paid by the issuance of additional
PIK Notes.
On June 23, 1995, the Partnership entered into an Option Agreement with
Hamilton Partners, L.P. ("Hamilton") which grants the Partnership an option (the
"Option") to acquire the PIK Notes owned by Hamilton. Hamilton has represented
to the Partnership that it is the owner of at least 92% of the outstanding
principal amount of the PIK Notes. The Option was granted to the Partnership in
consideration of $1,900,000 of aggregate payments to Hamilton, which is included
in prepaid expenses and other current assets.
The Option is exercisable at a price equal to 60% of the aggregate
principal amount and accrued interest of the PIK Notes delivered by Hamilton.
Pursuant to the terms of the Option Agreement, upon the occurrence of certain
F-15
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Mortgage Notes and PIK Notes--(Continued)
events within 18 months of the time the Option is exercised, the Partnership is
required to make an additional payment to Hamilton of up to 40% of the principal
amount of the PIK Notes. The option expires on March 19, 1996 and may be
extended to June 21, 1996.
The terms of both the Mortgage Notes and PIK Notes include limitations on
the amount of additional indebtedness the Partnership may incur, distributions
of Partnership capital, investments, and other business activities.
The Mortgage Notes are secured by a promissory note of the Partnership to
Funding (the "Partnership Note") in an amount and with payment terms necessary
to service the Mortgage Notes. The Partnership Note is secured by a mortgage on
Trump's Castle and substantially all of the other assets of the Partnership. The
Partnership Note has been assigned by Funding to the Trustee to secure the
repayment of the Mortgage Notes. In addition, the Partnership has guaranteed
(the "Guaranty") the payment of the Mortgage Notes, which Guaranty is secured by
a mortgage on Trump's Castle. The Partnership Note and the Guaranty are
expressly subordinated to the indebtedness described in Note 5 (the "Senior
Indebtedness") and the liens of the mortgages securing the Partnership Note and
the Guaranty are subordinate to the liens securing the Senior Indebtedness.
The PIK Notes are secured by a subordinated promissory note of the
Partnership to Funding (the "Subordinated Partnership Note"), which has been
assigned to the Trustee for the PIK Notes, and the Partnership has issued a
subordinated guaranty (the "Subordinated Guaranty") of the PIK Notes. The
Subordinated Partnership Note and the Subordinated Guaranty are expressly
subordinated to the Senior Indebtedness, the Partnership Note, andthe Guaranty.
The ability of Funding and the Partnership to pay their indebtedness when
due, will depend on their ability to either generate cash from operations
sufficient for such purposes or to refinance such indebtedness on or before the
date on which it becomes due. The Partnership does not currently anticipate
being able to generate sufficient cash flow from operations to repay a
substantial portion of the principal amounts of the Mortgage Notes and the PIK
Notes when due. Thus, the repayment of the principal amount of this indebtedness
will likely depend primarily upon the ability of Funding and the Partnership to
refinance this debt when due. The future operating performance of the
Partnership and the ability to refinance this debt 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
Funding or the Partnership. There can be no assurance that the future operating
performance of the Partnership will be sufficient to meet these repayment
obligations or that the general state of the economy, the status of the capital
markets generally, or the receptiveness of the capital markets to the gaming
industry will be conducive to refinancing this debt or other attempts to raise
capital.
(5) Other Borrowings
Bank Borrowings
The Partnership has a term loan with Midlantic National Bank (the "Term
Loan") in the amount of $38,000,000. The Term Loan had an initial maturity date
of May 29, 1995 and under its terms, the Partnership had the option, subject to
certain conditions, to extend the Term Loan an additional five years. The
Partnership exercised its option to extend the Term Loan on May 28, 1995. The
interest rate was revised to be a fluctuating rate of 3% above the bank's prime
rate, which was 8.5% at December 31, 1995, but in no event less than 9% per
annum. In addition, the outstanding principal amount of the Term Loan will be
amortized over the five-year extension period on a twenty year amortization
schedule requiring principal payments of approximately $158,000 per month over
the period. At December 31, 1995, $36,892,000 was outstanding on this Term Loan.
The Term Loan is secured by a mortgage lien on Trump's Castle that is prior
to the lien securing the Mortgage Notes (Note 4) and the Senior Notes described
below.
F-16
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) Other Borrowings--(Continued)
Senior Notes
On December 28, 1993, Funding issued the Senior Notes. Similar to the
Mortgage Notes, the Senior Notes are secured by an assignment of a promissory
note of the Partnership (the "Senior Partnership Note") which is in turn secured
by a mortgage on Trump's Castle and substantially all of the other assets of the
Partnership. In addition, the Partnership has guaranteed (the "Senior Guaranty")
the payment of the Senior Notes, which Senior Guaranty is secured by a mortgage
on Trump's Castle. The Senior Partnership Note and the Senior Guaranty are
subordinated to the Term Loan described above.
Interest on the Senior Notes is payable semiannually at the rate of 111/2%;
however in the event that the PIK Notes are redeemed prior to November 15,
1998, the interest rate will be reduced to 11 1/4%. The Senior Notes are subject
to a required partial redemption, as defined, commencing on June 1, 1998 at 100%
of the principal amount of the amount redeemed.
(6) Related Party Transactions
Trump Management Fee
The Partnership had a management agreement (the "Management Agreement")
with Trump's Castle Management Corp. ("TCMC"), a corporation wholly-owned by
Trump. The Management Agreement provided that the day-to-day operation of
Trump's Castle and all ancillary properties and businesses of the Partnership
was to be under the exclusive management and supervision of TCMC.
Pursuant to the Management Agreement, the Partnership was required to pay
an annual fee in the amount of $1,500,000 to TCMC for each year in which
Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), as
defined, exceeds certain levels. In addition, TCMC, beginning with the fiscal
year ended December 31, 1994, was to receive an incentive fee equal to 10% of
the excess EBITDA over $45,000,000 for such fiscal year. During the year ended
December 31, 1993, the Partnership incurred fees and expenses of $1,647,000
under the Management Agreement.
As a result of the Recapitalization Plan described in Note 2, on December
28, 1993, the Partnership terminated the Management Agreement with TCMC and
entered into a services agreement (the "Services Agreement") with TC/GP.
Pursuant to the terms of the Services Agreement, TC/GP is obligated to provide
the Partnership, from time to time, when reasonably requested, consulting
services on a non-exclusive basis, relating to marketing, advertising,
promotional, and other similar and related services with respect to the business
and operations of the Partnership, including such other services as the Managing
Partner may reasonably request.
In consideration for the services to be rendered, the Partnership will pay
TC/GP an annual fee on the same basis as that of the previous Management
Agreement, discussed above. During the years ended December 31, 1995 and 1994,
the Partnership incurred fees and expenses of $2,087,000 and $2,111,000,
respectively, under the Services Agreement. The Services Agreement expires on
December 31, 2005.
Other Payments To Trump
During 1994, the Board of Partner Representatives approved a $1,000,000
bonus to be paid to Trump, based upon 1994 operating results. The amount was
paid in two equal installments in June and August 1995. No such bonus was
approved for 1995.
Due From Affiliates
Amounts due from affiliates were $1,146,000 and $434,000 as of December 31,
1995 and 1994, respectively. The Partnership has engaged in limited intercompany
transactions with Trump Plaza Associates, Trump Taj Mahal Associates, and the
Trump Organization, which are affiliates of Trump. These transactions include
certain shared payroll costs as well as complimentary services offered to
customers, for which the Partnership makes initial payments and is then
reimbursed by the affiliates.
F-17
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) Related Party Transactions--(Continued)
During 1995, 1994, and 1993, the Partnership incurred expenses of
approximately $1,673,000, $1,631,000, and $1,332,000, respectively, in corporate
salaries and $1,109,000, $1,047,000, and $952,000, respectively, of other
transactions on behalf of these related entities. In addition, the Partnership
received payments totaling $1,401,000, $2,438,000, and $2,004,000, respectively,
for services rendered and had $580,000, $441,000, and $407,000, respectively, of
charges for similar costs incurred by these related entities on behalf of the
Partnership.
Partnership Agreement
Under the terms of the Partnership Agreement, the Partnership was required
to pay all costs incurred by TC/GP. For the years ended December 31, 1995, 1994,
and 1993, the Partnership paid $1,248,000, $1,188,000, and $736,000,
respectively, of expenses on behalf of TC/GP. For the years ended December 31,
1995 and 1994 these costs were charged to general and administrative expense in
the accompanying consolidated financial statements. For the year ended December
31, 1993 these costs were expenses of TC/GP and recorded as a capital
contribution.
(7) Commitments and Contingencies
Casino License Renewal
The Partnership is subject to regulation and licensing by the CCC. The
Partnership's casino license must be renewed periodically, is not transferable,
is dependent upon the financial stability of the Partnership, and can be revoked
at any time. Due to the uncertainty of any license renewal application, there
can be no assurance that the license will be renewed. Upon revocation,
suspension for more than 120 days, or failure to renew the casino license due to
the Partnership's financial condition or for any other reason, the Casino
Control Act (the "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 the casino license of the Partnership
through 1999 subject to certain continuing reporting and compliance conditions.
Self Insurance Reserves
Self insurance reserves represent the estimated amounts of uninsured claims
settlements related to employee health medical costs, workers compensation, and
other legal proceedings in the normal course of business. These reserves are
established by the Partnership based upon a specific review of open claims as of
the balance sheet date as well as historical claims settlement experience.
Actual results may differ from these reserve amounts.
Employment Agreements
The Partnership has entered into employment agreements with certain key
employees which expire at various dates through July 30, 1998. Total minimum
commitments on these agreements at December 31, 1995 were approximately
$4,061,000.
Legal Proceedings
The Partnership is involved in legal proceedings incurred in the normal
course of business. In the opinion of management and its counsel, if adversely
decided, none of these proceedings would have a material effect on the
consolidated financial position of the Partnership.
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Act, the Partnership, must either obtain
investment tax credits, as defined in the Act, in an amount equivalent to 1.25%
of its gross casino revenues, as defined in the Act, or pay an alternative tax
of 2.5% of its gross casino revenues. Investment tax credits may be obtained by
making qualified investments, as defined, or by depositing funds which may be
converted to bonds by the Casino Reinvestment Development Authority (the
"CRDA"), both of which bear interest at below market interest rates. The
Partnership is required to make quarterly deposits with the CRDA to satisfy its
investment obligations.
F-18
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Commitments and Contingencies--(Continued)
From time-to-time the Partnership has elected to donate funds that it has
on deposit with the CRDA in return for tax credits to satisfy substantial
portions of the Partnership's future investment alternative tax obligations.
Donations in the amount of $375,000, $6,440,000, and $568,000 were made in 1995,
1994, and 1993, respectively. These donations, net of the tax credits received,
were charged against operations in the year in which they were made and resulted
in CRDA tax credits of $191,000, $1,474,000, and $290,000 to be applied to the
years ending December 31, 1995, 1994, and 1993, respectively. For the years
ended December 31, 1995, 1994, and 1993 the Partnership charged to operations
$720,000, $955,000, and $115,000, respectively, which represents amortization of
a portion of the tax credits discussed above.
In addition, for the years ended December 31, 1995, 1994, and 1993, the
Partnership charged to operations $936,000, $735,000, and $953,000,
respectively, to give effect to the below market interest rates associated with
purchased CRDA bonds.
(8) Employee Benefit Plans
The Partnership has a retirement savings 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 up to the maximum amount
permitted by law, and the Partnership will match 50% of an eligible employee's
contributions up to a maximum of 5% of the employee's earnings. The Partnership
recorded charges of approximately $1,013,000, $899,000, and $864,000 for
matching contributions for the years ended December 31, 1995, 1994, and 1993,
respectively.
The Partnership makes payments to various trusteed pension plans under
industry-wide union agreements. The payments are based on the hours worked by or
gross wages paid to covered employees. It is not practical to determine the
amount of payments ultimately used to fund pension benefit plans or the current
financial condition of the plans. Under the Employee Retirement Income Security
Act, the Partnership may be liable for its share of the plans' unfunded
liabilities, if any, if the plans are terminated. Pension expense for the years
ended December 31, 1995, 1994, and 1993 were $497,000, $455,000, and $407,000,
respectively.
The Partnership provides no other material post employment benefits.
(9) Financial Information of Funding
Financial information relating to Funding as of and for the years ended
December 31, 1995 and 1994 isas follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable of $242,141,000, net of
unamortized discount of $35,572,000 and $37,729,000 at December 31, 1995 and
1994 respectively; PIK Notes Receivable of $61,860,000, net of unamortized
discount of $7,750,000 at December 31, 1995 and $54,094,000, net of
unamortized discount of $7,965,000 at December 31, 1994, and Senior Notes
Receivable of $27,000,000 at December 31, 1995 and 1994.) .................. $287,679,000 $277,541,000
============ ============
Total Liabilities and Capital (including Mortgage Notes Payable of
$242,141,000, net of unamortized discount of $35,572,000 and $37,729,000 at
December 31, 1995 and 1994 respectively; PIK Notes Payable of $61,860,000,
net of unamortized discount of $7,750,000 at December 31, 1995 and
$54,094,000, net of unamortized discount of $7,965,000, at December 31, 1994
and Senior Notes Payable of $27,000,000 at December 31, 1995 and 1994.) s.... $287,679,000 $277,541,000
============ ============
Interest Income ............................................................. $ 41,768,000 $ 40,600,000
Interest Expense ............................................................ $ 41,768,000 $ 40,600,000
------------ ------------
NET INCOME .................................................................. $ -- $ --
============ ============
</TABLE>
F-19
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) Fair Value of Financial Instruments
The carrying amount of the following financial instruments of the
Partnership and Funding approximate fair value, as follows: (a) cash and cash
equivalents and accrued interest receivables and payables based on the
short-term nature of the financial instruments, (b) CRDA bonds and deposits
based on the allowances to give effect to the below market interest rates.
The fair values of the Mortgage Notes and PIK Notes are based on quoted
market prices. The fair value of the Mortgage Bonds was based on quoted market
prices obtained by the Partnership from its investment advisoras follows:
December 31, 1995
----------------------------------
Carrying Amount Fair Value
--------------- ------------
11 3/4% Mortgage Notes ............... $206,569,000 $212,479,000
PIK Notes ............................ $ 54,110,000 $ 48,096,000
December 31, 1994
----------------------------------
Carrying Amount Fair Value
--------------- ------------
11 3/4% Mortgage Notes ............... $204,412,000 $131,967,000
PIK Notes ............................ $ 46,129,000 $ 43,546,000
There are no quoted market prices for the Partnership Term Loan and Senior
Notes. A reasonable estimate of their value could not be made without incurring
excessive costs.
F-20
<PAGE>
================================================================================
AGREEMENT
BY AND AMONG
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
TC/GP, INC.
TRUMP'S CASTLE HOTEL & CASINO, INC.
AND
DONALD J. TRUMP
-------------------------
Dated as of June 24, 1996
-------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS *
Page
----
ARTICLE I DEFINITIONS ................................................ A-4
Section 1.01. Definitions. .......................................... A-4
ARTICLE II THE CONTRIBUTION ........................................... A-8
Section 2.01. The Contribution; Consideration ....................... A-8
Section 2.02. Closing ............................................... A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TRUMP AND THE CASTLE
ENTITIES ............................................................. A-9
Section 3.01. Corporate Organization ................................ A-9
Section 3.02. Capitalization; Title ................................. A-9
Section 3.03. Subsidiaries .......................................... A-10
Section 3.04. SEC Reports; Financial Statements ..................... A-10
Section 3.05. Absence of Certain Changes or Events .................. A-10
Section 3.06. Authorization ......................................... A-10
Section 3.07. No Conflict or Violation .............................. A-10
Section 3.08. Consents and Approvals ................................ A-11
Section 3.09. Litigation ............................................ A-11
Section 3.10. Taxes ................................................. A-11
Section 3.11. Contracts and Leases .................................. A-11
Section 3.12. Compliance with Laws .................................. A-11
Section 3.13. Absence of Undisclosed Liabilities .................... A-12
Section 3.14. THCR Proxy Statement .................................. A-12
Section 3.15. Takeover Provisions Inapplicable ...................... A-12
Section 3.16. Brokerage/Finder's Fees ............................... A-12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE THCR ENTITIES ........ A-12
Section 4.01. Corporate Organization ................................ A-12
Section 4.02. Capitalization ........................................ A-12
Section 4.03. Subsidiaries .......................................... A-13
Section 4.04. SEC Reports; Financial Statements ..................... A-13
Section 4.05. Absence of Certain Changes or Events .................. A-13
Section 4.06. Authorization ......................................... A-14
Section 4.07. No Conflict or Violation .............................. A-14
Section 4.08. Consents and Approvals ................................ A-14
Section 4.09. Litigation ............................................ A-14
Section 4.10. Taxes ................................................. A-15
Section 4.11. Contracts and Leases .................................. A-15
Section 4.12. Compliance with Laws .................................. A-15
Section 4.13. Absence of Undisclosed Liabilities .................... A-15
Section 4.14. THCR Proxy Statement .................................. A-15
Section 4.15. Takeover Provisions Inapplicable ...................... A-15
Section 4.16. Brokerage/Finder's Fees ............................... A-16
ARTICLE V COVENANTS OF TRUMP AND THE CASTLE ENTITIES .................. A-16
Section 5.01. Conduct Pending the Contribution ...................... A-16
Section 5.02. No Solicitation ....................................... A-16
Section 5.03. Letters of Accountants ................................ A-17
- ------------
* The Table of Contents is not part of this Agreement.
A-2
<PAGE>
Page
----
ARTICLE VI COVENANTS OF THE THCR ENTITIES ............................. A-17
Section 6.01. Conduct Pending the Contribution ...................... A-17
Section 6.02. THCR Proxy Statement .................................. A-17
Section 6.03. Stockholders Meeting .................................. A-18
ARTICLE VII OTHER AGREEMENTS .......................................... A-18
Section 7.01. Registration Rights; Partnership Agreement ............ A-18
Section 7.02. Additional Agreements; Consents ....................... A-18
Section 7.03. Access to Information; Confidentiality ................ A-18
Section 7.04. Notification of Certain Matters ....................... A-19
Section 7.05. HSR Act ............................................... A-19
Section 7.06. Merger Agreement ...................................... A-19
Section 7.07. Indemnification ....................................... A-19
Section 7.08. Voting Agreement ...................................... A-20
ARTICLE VIII CONDITIONS TO THE CONTRIBUTION ........................... A-20
Section 8.01. Conditions of Each Party .............................. A-20
Section 8.02. Conditions of Trump ................................... A-20
Section 8.03. Conditions of the THCR Entities ....................... A-21
ARTICLE IX TERMINATION ................................................ A-21
Section 9.01. Termination ........................................... A-21
Section 9.02. Effect of Termination ................................. A-22
ARTICLE X MISCELLANEOUS ............................................... A-22
Section 10.01. Notices .............................................. A-22
Section 10.02. Survival ............................................. A-22
Section 10.03. Amendment ............................................ A-22
Section 10.04. Waiver ............................................... A-23
Section 10.05. Successors and Assigns ............................... A-23
Section 10.06. Governing Law ........................................ A-23
Section 10.07. Gaming Laws .......................................... A-23
Section 10.08. Integration .......................................... A-23
Section 10.09. Third Party Beneficiaries ............................ A-23
Section 10.10. Specific Performance ................................. A-23
Section 10.11. Remedies Cumulative .................................. A-23
Section 10.12. Publicity ............................................ A-23
Section 10.13. Fees and Expenses .................................... A-23
Section 10.14. Headings; Counterparts; Effectiveness ................ A-23
A-3
<PAGE>
AGREEMENT
AGREEMENT, dated as of June 24, 1996 (the "Agreement"), by and among TRUMP
HOTELS & CASINO RESORTS, INC., a Delaware corporation ("THCR"), TRUMP HOTELS &
CASINO RESORTS HOLDINGS, L.P., a Delaware limited partnership ("THCR Holdings"
and, collectively with THCR, the "THCR Entities"), TC/GP, INC., a Delaware
corporation ("TC/GP"), TRUMP'S CASTLE HOTEL & CASINO, INC., a New Jersey
corporation ("TCHI" and, together with TC/GP, the "Castle Entities"), and Donald
J. Trump ("Trump"). All foregoing parties to this Agreement are collectively
referred to as the "Parties" and individually as a "Party."
WHEREAS, Trump owns beneficially all of the outstanding equity interest of
Trump's Castle Associates ("Castle Associates"), a New Jersey general
partnership and the owner and operator of Trump's Castle Casino Resort,
directly, as well as indirectly through TCHI and TC/GP, each wholly owned by
Trump (the "Castle Equity");
WHEREAS, Trump and TC/GP each desire to contribute Trump's and TC/GP's
respective equity interests of Castle Associates to THCR Holdings in exchange
for limited partnership interests in THCR Holdings and THCR Holdings desires to
accept such consideration;
WHEREAS, Trump, TCHI and the THCR Entities desire to effect a merger of a
subsidiary of THCR Holdings with and into TCHI;
WHEREAS, as a result of the contributions and merger described in the
immediately preceding recitals (the "Contribution"), the THCR Entities will own
all the Castle Equity;
WHEREAS, simultaneously with the Contribution, Castle Associates shall be
converted from a general partnership to a limited partnership pursuant to an
amendment to the Second Amended and Restated Partnership Agreement of Castle
Associates, dated as of December30, 1993 (the "Castle Associates Partnership
Agreement");
WHEREAS, prior to or simultaneously with the Contribution, THCR Holdings
Contributions LLC, a Delaware limited liability company and a wholly owned
subsidiary of THCR Holdings ("Contribution Sub"), THCR-TCHI Merger Corp., a
Delaware corporation and a wholly owned subsidiary of THCR Holdings ("Merger Sub
1.0"), TCHI, Castle Associates and Trump's Castle Funding, Inc., a New Jersey
corporation wholly owned by Castle Associates ("Castle Funding"), each shall
have been designated "unrestricted subsidiaries" under the indenture (as
supplemented and amended, the "Senior Note Indenture") pursuant to which the
$155 million aggregate principal amount of 15 1/2% Senior Secured Notes due 2005
of THCR Holdings and Trump Hotels & Casino Resorts Funding, Inc., a Delaware
corporation ("THCR Funding"), were issued;
WHEREAS, the Special Committee (the "THCR Special Committee") of the Board
of Directors of THCR (the "THCR Board") has received a fairness opinion from
Salomon Brothers Inc ("Salomon") with respect to the fairness, from a financial
point of view to THCR, of the consideration to be paid by the THCR Entities in
the Contribution (the "Salomon Fairness Opinion");
WHEREAS, the THCR Special Committee and the THCR Board have determined that
the Contribution is consistent with and in furtherance of the long-term business
strategy of the THCR Entities;
WHEREAS, the THCR Special Committee and the THCR Board have determined that
the Contribution is fair to, and in the best interests of, THCR and the holders
of THCR's Common Stock, par value $.01 per share (the "THCR Common Stock"); and
WHEREAS, the THCR Special Committee and the THCR Board have approved the
Contribution and this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement the following terms
shall have the respective meanings set forth below (terms defined in the
singular shall have the same meanings when used in the plural and vice versa):
"Acquisition Proposal" with respect to any Person shall mean any proposed
(i) merger, consolidation, share exchange or similar transaction involving such
Person or a Subsidiary of such Person, as a result of which the
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consolidated assets of such Person and its Subsidiaries, taken as a whole,
increase or decrease by 25% or more, (ii) sale, lease or other disposition
directly or indirectly (other than by merger, consolidation, share exchange or
similar transaction) of assets of such Person or its Subsidiaries representing
25% or more of the consolidated assets of such Person and its Subsidiaries,
(iii) issue, sale, or other disposition (other than by merger, consolidation,
share exchange or similar transaction) of securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 25% or more of the voting power of such Person or (iv) transaction
in which any Person shall acquire beneficial ownership, or the right to acquire
beneficial ownership, or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership, of 25% or more of the outstanding common stock of such
Person (other than Persons or groups having such beneficial ownership as of the
date hereof).
"Agreement" shall have the meaning set forth in the Preamble.
"Castle Associates" shall have the meaning set forth in the Recitals.
"Castle Associates Partnership Agreement" shall have the meaning set forth
in the Recitals.
"Castle Entities" shall have the meaning set forth in the Preamble.
"Castle Equity" shall have the meaning set forth in the Recitals.
"Castle Equity Consideration" shall have the meaning set forth in Section
2.01.
"Castle Funding" shall have the meaning set forth in the Recitals.
"Castle Material Adverse Effect" shall mean a material adverse effect with
respect to the business, results of operations, properties, operations or
financial condition of Castle Associates and Castle Funding, taken as a whole.
"Castle Mortgage Notes" shall mean the 11 3/4% Mortgage Notes due 2003 of
Castle Funding guaranteed by Castle Associates.
"Castle PIK Notes" shall mean the Increasing Rate Subordinated Pay-in-Kind
Notes due 2005 of Castle Funding guaranteed by Castle Associates.
"Castle SEC Reports" shall have the meaning set forth in Section 3.04.
"Castle Senior Notes" shall mean the 11 1/2% Senior Secured Notes due 2000
of Castle Funding guaranteed by Castle Associates.
"Castle Warrant Agent" shall mean First Bank National Association, as
Warrant Agent under the Castle Warrant Agreement.
"Castle Warrant Agreement" shall mean the Warrant Agreement, dated as of
December 30, 1993, between TCHI and the Castle Warrant Agent.
"Castle Warrantholders" shall mean the holders of the Castle Warrants.
"Castle Warrants" shall mean the warrants issued under the Castle Warrant
Agreement.
"Castle Warrant Consideration" shall have the meaning set forth in Section
2.01.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Date" shall have the meaning set forth in Section 2.02.
"Confidential Information" shall mean all information about a Party,
whether furnished before or after the date hereof, and regardless of the manner
in which it is furnished, together with all analyses, compilations, studies,
summaries, extracts or other documents, which contain or otherwise reflect such
information. Confidential Information shall not include information which the
recipient can clearly demonstrate falls within any of the following categories:
(i) information which has come within the public domain through no fault or
action of the recipient or its affiliates (including, without limitation, all
information contained in publicly available documents filed with the SEC); (ii)
information which was known to the recipient on a non-confidential basis prior
to its disclosure by a Party; or (iii) information which becomes available to
the recipient on a non-confidential basis from any third party, the disclosure
of which to, or the receipt of which by, the recipient, to the knowledge of the
recipient after due inquiry, does not violate any contractual or legal
obligation said third party has to the disclosing party or any other Person with
respect to such information.
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"Contribution" shall have the meaning set forth in the Recitals.
"Contribution Sub" shall have the meaning set forth in the Recitals.
"DGCL" shall mean the Delaware General Corporation Law.
"Disclosing Party" shall mean any Party that discloses or provides
Confidential Information to any other Party to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder.
"Exchange Rights Agreement" shall mean the Amended and Restated Exchange
and Registration Rights Agreement, dated as of April 17, 1996, among THCR, Trump
and Trump Casinos.
"Gaming Authority" shall mean the New Jersey Casino Control Commission, the
New Jersey Division of Gaming Enforcement, the Indiana Gaming Commission or any
other governmental agency which regulates gaming in a jurisdiction in which
either THCR or its Subsidiaries or Castle Associates or its Subsidiary, as the
case may be, conduct gaming activities.
"Gaming Laws" shall mean any laws, rules, regulations or ordinances
governing gaming activities and any administrative rules or regulations
promulgated thereunder, and any other corresponding statutes, rules and
regulations.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" shall have the meaning set forth in Section 7.07.
"Indemnifying Party" shall have the meaning set forth in Section 7.07.
"Liabilities" shall have the meaning set forth in Section 7.07.
"Lien" shall mean 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.
"Merger Sub 1.0" shall have the meaning set forth in the Recitals.
"Midlantic Credit Agreement" shall mean the Amended and Restated Credit
Agreement, dated as of December 28, 1993, among Castle Associates, Castle
Funding and Midlantic National Bank.
"NJBCA" shall mean the New Jersey Business Corporation Act.
"NYSE" shall mean the New York Stock Exchange.
"Party" shall have the meaning set forth in the Preamble.
"Person" shall mean any individual, partnership, corporation, trust,
association, limited liability company, governmental agency or any other entity.
"Receiving Party" shall mean any Party that receives or obtains
Confidential Information from a Disclosing Party.
"Salomon" shall have the meaning set forth in the Recitals.
"Salomon Fairness Opinion" shall have the meaning set forth in the
Recitals.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Note Indenture" shall have the meaning set forth in the Recitals.
"Stock Incentive Plan" shall mean the 1995 Stock Incentive Plan of THCR.
"Subsidiary" shall mean, with respect to any Person, any other Person in
which such first Person, directly or indirectly, owns, controls or has the power
to vote a majority of the outstanding securities generally entitled to vote
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upon the election of directors. For the purposes of this Agreement, the term
"Subsidiary" shall also include, with respect to THCR, THCR Holdings, Trump
Atlantic City Associates and Trump Plaza Associates.
"TC/GP" shall have the meaning set forth in the Preamble.
"TC/GP Common Stock" shall mean the Common Stock, par value $.01 per share,
of TC/GP.
"TC/GP Consideration" shall have the meaning set forth in Section 2.01.
"TCHI" shall have the meaning set forth in the Preamble.
"TCHI Common Stock" shall mean the Common Stock, without par value, of
TCHI.
"TCHI Consideration" shall have the meaning set forth in Section 2.01.
"TCHI Merger" shall have the meaning set forth in Section 2.01.
"THCR" shall have the meaning set forth in the Preamble.
"THCR Board" shall have the meaning set forth in the Recitals.
"THCR Class B Common Stock" shall mean the Class B Common Stock, par value
$.01 per share, of THCR.
"THCR Common Stock" shall have the meaning set forth in the Recitals.
"THCR Entities" shall have the meaning set forth in the Preamble.
"THCR Funding" shall have the meaning set forth in the Recitals.
"THCR Holdings" shall have the meaning set forth in the Preamble.
"THCR Holdings Limited Partnership Interest" shall mean a limited
partnership interest of THCR Holdings issued pursuant to the THCR Holdings
Partnership Agreement and which is exchangeable into shares of THCR Common Stock
pursuant to the Exchange Rights Agreement.
"THCR Holdings Partnership Agreement" shall mean the Second Amended and
Restated Partnership Agreement, dated as of April 17, 1996, of THCR Holdings.
"THCR Indemnified Party" shall have the meaning set forth in Section 7.07.
"THCR/LP" shall mean THCR/LP Corporation, a New Jersey corporation wholly
owned by THCR.
"THCR Material Adverse Effect" shall mean a material adverse effect with
respect to the business, results of operations, properties, operations or
financial condition of THCR and its Subsidiaries, taken as a whole.
"THCR Meeting" shall have the meaning set forth in Section 6.03.
"THCR Proxy Statement" shall mean the proxy statement of THCR with respect
to the THCR Meeting.
"THCR SEC Reports" shall have the meaning set forth in Section 4.04.
"THCR Special Committee" shall have the meaning set forth in the Recitals.
"THCR Stock Contribution Value" shall have the meaning set forth in Section
2.01.
"THCR Stock Market Value" shall mean the average of the closing sale prices
on the NYSE of a share of THCR Common Stock for the twenty day trading period
ending three trading days immediately preceding the Closing Date, or any other
meaning as the Parties shall mutually agree.
"Trump" shall have the meaning set forth in the Preamble.
"Trump Casinos" shall mean Trump Casinos, Inc., a New Jersey corporation
wholly owned by Trump.
"Trump Consideration" shall have the meaning set forth in Section 2.01.
"Trump Indemnified Party" shall have the meaning set forth in Section 7.07.
"Trump Warrants" shall mean the warrants to purchase 1,800,000 shares of
THCR Common Stock held by Trump of which (i) 600,000 shares may be purchased on
or before April 17, 1999 at $30.00 per share, (ii) 600,000 shares may be
purchased on or before April 17, 2000 at $35.00 per share and (iii) 600,000
shares may be purchased on or before April 17, 2001 at $40.00 per share.
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ARTICLE II
THE CONTRIBUTION
Section 2.01. The Contribution; Consideration. (a) The aggregate
consideration payable hereunder for the Castle Equity shall be $176.9 million
(the "Castle Equity Consideration"), which amount represents: (A) $525.0 million
(a value for the business and operations of Castle Associates agreed by the
Parties as of the date hereof for purposes of the specific transactions
contemplated by this Agreement) minus (B) $314.0 million (the sum of all the
aggregate principal amounts of (i) Castle capital lease obligations and
indebtedness outstanding under the Midlantic Credit Agreement, (ii) Castle PIK
Notes not held by THCR Holdings, (iii) Castle Senior Notes and (iv) Castle
Mortgage Notes outstanding as of the date hereof) minus (C) $40.8 million (the
aggregate principal amount of all Castle PIK Notes held by THCR Holdings
estimated to be outstanding as of the Closing Date less the aggregate discount
at which Trump may repurchase the Castle PIK Notes held by THCR Holdings
pursuant to agreements entered into prior to the date hereof) plus (D) $6.7
million (the estimated amount of excess cash over the operating needs of Castle
Associates as of the Closing Date). On the terms and subject to the conditions
set forth in this Agreement, including, without limitation, paragraph (b) below,
and in reliance upon the Parties' representations set forth below, the
Contribution shall take place, and the Castle Equity Consideration shall be
payable, on the Closing Date (as defined below) as follows:
(i) Trump shall, on the Closing Date, contribute to THCR Holdings and
THCR Holdings shall accept as a contribution from Trump, the 61.5% limited
partnership interest in Castle Associates owned beneficially and of record
by Trump, in consideration of which Trump shall receive at the Closing a
9.52854% THCR Holdings Limited Partnership Interest (the "Trump
Consideration"), exchangeable into 3,626,450 shares of THCR Common Stock
(valuing each such share at $30.00 per share (the "THCR Stock Contribution
Value"));
(ii) TC/GP shall, on the Closing Date, contribute to THCR Holdings,
and THCR Holdings shall accept as a contribution from TC/GP, the 37.5%
limited partnership interest in Castle Associates owned beneficially and of
record by TC/GP, in consideration of which TC/GP shall receive at the
Closing a 5.81009% THCR Holdings Limited Partnership Interest (the "TC/GP
Consideration"), exchangeable into 2,211,250 shares of THCR Common Stock
(valuing each such share at the THCR Stock Contribution Value);
(iii) the THCR Entities, Trump and TCHI shall, on the Closing Date,
cause Merger Sub 1.0 to be merged with and into TCHI in accordance with the
NJBCA and the DGCL, whereupon (x) the separate existence of Merger Sub 1.0
shall cease and TCHI shall be the surviving corporation (the "TCHI
Merger"), (y) at the effective time of the TCHI Merger, (A) each share of
TCHI Common Stock outstanding immediately prior to the TCHI Merger shall be
converted into the right to receive $.8845 in cash (the "TCHI
Consideration") and (B) each share of common stock of Merger Sub1.0 shall
be converted into the right to receive one share of common stock of the
surviving corporation of the TCHI Merger and (z) a provision shall be made
for the Castle Warrantholders to receive, in accordance with the terms of
the Castle Warrant Agreement, for each former share of TCHI Common Stock
for which each Castle Warrant was exercisable immediately prior to the
effective time of the TCHI Merger, an amount in cash equal to the TCHI
Consideration (the "Castle Warrant Consideration"), to be delivered to the
Castle Warrant Agent on behalf of the Castle Warrantholders pursuant to the
terms of the Castle Warrant Agreement, representing the consideration that
the Castle Warrantholders are entitled to receive, as a result of the TCHI
Merger, pursuant to Section 7.2 of the Castle Warrant Agreement;
(iv) Trump, TC/GP and TCHI shall, simultaneously with the
Contribution, enter into an amendment to the Castle Associates Partnership
Agreement, in order to, among other things, convert Castle Associates from
a general partnership to a limited partnership, with TCHI as the sole
general partner and Trump and TC/GP as the limited partners; and
(v) THCR Holdings shall, immediately upon receipt of the 61.5% and
37.5% limited partnership interests in Castle Associates from Trump and
TC/GP, respectively, contribute such limited partnership interests to
Contribution Sub, whereupon Contribution Sub will own a 99% limited
partnership interest in Castle Associates and the surviving corporation of
the TCHI Merger will own a 1% general partnership interest in Castle
Associates.
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(b) The Parties agree that if the THCR Stock Market Value is higher than
$38.00, then each of the Trump Consideration (and the number of shares of THCR
Common Stock into which it is exchangeable) and TC/GP Consideration (and the
number of shares of THCR Common Stock into which it is exchangeable) shall be
reduced appropriately as of the Closing Date so that no value will be received
by Trump or TC/GP in respect of any appreciation of the THCR Common Stock above
$38.00 per share.
Section 2.02. Closing. (a) Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 9.01, the closing of the Contribution (the "Closing") shall take place
as promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VIII (the "Closing
Date"), at the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New
York, New York, or at such other date, time and location as the Parties shall
mutually agree.
(b) The Contribution shall be effected on the Closing Date by execution and
delivery by the appropriate Parties of duly executed stock certificates,
partnership certificates or certificates of interest or assignment, as the case
may be, and by the delivery by the THCR Entities of the TCHI Consideration and
the Castle Warrant Consideration by wire transfer of immediately available funds
to such account as Trump and the Castle Entities, and the Castle Warrant Agent,
respectively, shall designate, or by any other method of payment as the Parties,
or the THCR Entities and the Castle Warrant Agent (in the case of the Castle
Warrant Consideration), shall mutually agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
TRUMP AND THE CASTLE ENTITIES
Trump and each of the Castle Entities represents and warrants to the THCR
Entities that:
Section 3.01. Corporate Organization. (a) TCHI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted. TCHI is
duly qualified and in good standing in each jurisdiction in which the property
owned, leased or operated by it makes such qualification necessary.
(b) TC/GP is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own its properties and assets and to conduct
its businesses as now conducted. TC/GP is duly qualified and in good standing in
each jurisdiction in which the property owned, leased or operated by it makes
such qualification necessary.
(c) Castle Associates is a general partnership validly existing under the
laws of the State of New Jersey, and has all requisite partnership power and
authority to own its properties and assets and to conduct its businesses as now
conducted.
Section 3.02. Capitalization; Title. (a) The authorized capital stock of
TCHI consists of 2,500,000 shares of TCHI Common Stock. An aggregate of
1,000,000 shares of TCHI Common Stock are issued and outstanding. The
outstanding shares of TCHI Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights. The
outstanding shares of TCHI Common Stock are the sole outstanding capital stock
of TCHI. There are no options, warrants or other rights to purchase debt or
equity securities of TCHI outstanding, other than the Castle Warrants. Trump
owns all outstanding shares of TCHI Common Stock free and clear of any Liens,
except for Liens granted to certain of Trump's personal creditors as set forth
on a schedule previously delivered to the THCR Entities.
(b) Trump, TC/GP and TCHI own a 61.5%, 37.5% and 1% general partnership
interest, respectively, in Castle Associates, free and clear of any Liens,
except for Liens granted to certain of Trump's personal creditors as set forth
on a schedule previously delivered to the THCR Entities. Trump, TC/GP and TCHI
are the only partners of Castle Associates.
(c) Pursuant to the terms of the Castle Warrant Agreement, the Castle
Warrants entitle the Castle Warrantholders to purchase up to an aggregate of
1,000,000 shares of TCHI Common Stock, representing, in the aggregate, an
indirect interest in one-half of one percent (.5%) of the Castle Equity.
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Section 3.03. Subsidiaries. TCHI and TC/GP have no Subsidiaries. Castle
Associates has no Subsidiaries other than Castle Funding. Castle Funding (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey and has all requisite corporate power and
authority to own its properties and conduct its business and operations as
currently conducted and (ii) is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to be so qualified does not have and would not be reasonably
expected to have a Castle Material Adverse Effect.
Section 3.04. SEC Reports; Financial Statements. Trump has previously
furnished the THCR Entities with true and complete copies of the Castle
Associates and Castle Funding (i) Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as filed with the SEC, (ii) Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, as filed with the SEC, and (iii) all
other reports or registration statements filed with the SEC since January 1,
1996 through the date hereof (clauses (i) through (iii) being referred to herein
collectively as the "Castle SEC Reports"). As of their respective filing dates,
the Castle SEC Reports complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be. As of their
respective dates, the Castle SEC Reports, including, without limitation, any
financial statements included therein, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements included in the Castle SEC
Reports comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods (except
as may be indicated therein or in the notes thereto), present fairly the
financial position of the entities to which they relate as of the dates thereof
and the results of their operations and cash flows for the periods presented
therein subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments, any other adjustments described therein and
the fact that certain information and notes have been condensed or omitted in
accordance with the Securities Act or the Exchange Act, as the case may be, and
are, in all material respects, in accordance with the books of account and
records of Castle Associates and Castle Funding.
Section 3.05. Absence of Certain Changes or Events. Except as described in
the Castle SEC Reports, during the period since March 31, 1996, (i) the business
of Castle Associates and Castle Funding has been conducted only in the ordinary
course, consistent with past practice, (ii) neither Castle Associates nor Castle
Funding has entered into any material transaction other than in the ordinary
course, consistent with past practice, and (iii) there has not been any event or
change that has had a Castle Material Adverse Effect.
Section 3.06. Authorization. (a) Trump has the capacity to carry out his
obligations hereunder and each of TC/GP and TCHI has the corporate power to
consummate the Contribution and the transactions contemplated thereby. The
execution and delivery of this Agreement, the performance of each of the
obligations hereunder and the consummation of the Contribution and the other
transactions contemplated thereby have been duly authorized and approved by all
necessary corporate action by each of the Board of Directors of TC/GP and TCHI.
Trump, as sole shareholder of TC/GP and TCHI, has approved the terms of the
Contribution and the other transactions contemplated thereby. This Agreement has
been duly executed and delivered by Trump and the Castle Entities and
constitutes the valid and binding obligation of Trump and the Castle Entities,
enforceable against them in accordance with its terms, except (i) to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(b) No other corporate proceedings on the part of TC/GP and TCHI are
necessary to authorize the Contribution and the transactions contemplated
thereby.
Section 3.07. No Conflict or Violation. Assuming receipt of the consents
and approvals set forth in Section 3.08 of this Agreement, the execution,
delivery and performance by Trump and the Castle Entities of this Agreement and
the consummation of the Contribution and the transactions contemplated thereby
do not and will not violate or conflict with any provision of the charter
documents or by-laws of TC/GP, TCHI or Castle Funding or the Castle Associates
Partnership Agreement and do not and will not violate any provision of law, or
any order, judgment or
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decree of any court or other governmental or regulatory authority, nor violate
or result in a breach of or constitute (with due notice or lapse of time or
both) a default under any contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which either
Trump, TC/GP, TCHI, Castle Associates or Castle Funding is a party or by which
each is bound or to which each of their respective properties or assets are
subject, nor result in the creation or imposition of any lien, charge or
encumbrance of any kind whatsoever upon any of their properties or assets, nor
adversely affect or result in the cancellation, modification, revocation or
suspension of any of their licenses, franchises, permits, authorizations or
approvals issued or granted to them by the United States, any state or local
government, any foreign national or local government, or any department, agency,
board, commission, bureau or instrumentality of any of the foregoing, except as
would not be reasonably expected to have a Castle Material Adverse Effect or as
would not prevent consummation of the transactions contemplated by the
Contribution.
Section 3.08. Consents and Approvals. The execution, delivery and
performance of this Agreement by Trump, and the performance of the transactions
contemplated hereby by Trump and the Castle Entities, do not and will not
require any material consent, waiver, authorization or approval of any
governmental or regulatory authority, domestic or foreign, or of any other
Person (other than certain of Trump's personal creditors), and no material
declaration or notification to, or filing or registration with, or permit of,
any governmental or regulatory authority, except as it (i) may be required in
connection or compliance with applicable provisions of the DGCL, the NJBCA, the
Exchange Act, the Securities Act, the HSR Act, blue sky or other state
securities laws or Gaming Laws, (ii) may be required from certain creditors of
Castle Associates and Castle Funding in connection with the Contribution and the
transactions contemplated thereby, including, without limitation, the
modification of certain terms of the agreements to which such creditors are
parties, (iii) would not be reasonably expected to have a Castle Material
Adverse Effect, (iv) would not prevent consummation of the transactions
contemplated by the Contribution or (v) is otherwise contemplated in this
Agreement.
Section 3.09. Litigation. Except as disclosed in the Castle SEC Reports,
there are no actions, suits, investigations or proceedings (adjudicatory,
rulemaking or otherwise) pending or, to the knowledge of Trump, threatened
against either TC/GP, TCHI, Castle Associates or Castle Funding, or any property
of theirs in any court or before any arbitrator of any kind or before or by any
governmental or regulatory authority, domestic or foreign, except actions,
suits, investigations or proceedings which, individually or in the aggregate, do
not have and would not be reasonably expected to result in a Castle Material
Adverse Effect.
Section 3.10. Taxes. TC/GP, TCHI, Castle Associates and Castle Funding have
filed all federal, state, county, local and foreign tax returns required to be
filed by them, and have paid all taxes shown to be due thereon, other than taxes
for which appropriate reserves have been made in their respective financial
statements (and, to the extent material, such reserves have been accurately
described to the THCR Entities). There are no assessments or adjustments that
have been asserted in writing against TC/GP, TCHI, Castle Associates or Castle
Funding for any period for which they have not made appropriate reserves in
their financial statements.
Section 3.11. Contracts and Leases. The Castle SEC Reports contain a
complete listing of all material contracts, leases, agreements or
understandings, whether written or oral, required to be described therein or
filed as exhibits thereto pursuant to the Securities Act or the Exchange Act, as
the case may be. Each of such contracts, leases, agreements and understandings
is in full force and effect and (i) none of Castle Associates or Castle Funding
or, to the best knowledge of Trump, any other party thereto, has breached or is
in default thereunder, (ii) no event has occurred which, with the passage of
time or the giving of notice would constitute such a breach or default, (iii) no
claim of material default thereunder has, to the best knowledge of Trump, been
asserted or threatened and (iv) none of Castle Associates or Castle Funding or,
to the best knowledge of Trump, any other party thereto is seeking the
renegotiation thereof or substitute performance thereunder, except where such
breach or default, or attempted renegotiation or substitute performance,
individually or in the aggregate, does not have and would not be reasonably
expected to have a Castle Material Adverse Effect.
Section 3.12. Compliance with Laws. (a) Castle Associates is not in
material violation of any laws, ordinances, governmental rules or regulations to
which it is subject, including, without limitation, Gaming Laws and laws or
regulations relating to the environment or to occupational health and safety,
and no material expenditures are or will be required in order to cause its
current operations or properties to comply with any such laws, ordinances,
governmental rules or regulations.
(b) Castle Associates has all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property or to the
conduct of its businesses, which if not obtained or, if the terms of which are
violated,
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might have a Castle Material Adverse Effect. Castle Associates has not finally
been denied any application for any such licenses, permits, franchises or other
governmental authorizations necessary to its business.
Section 3.13. Absence of Undisclosed Liabilities. Except as disclosed in
the Castle SEC Reports, neither Castle Associates nor Castle Funding has any
debt, obligation or liability (whether accrued, absolute, contingent, liquidated
or otherwise, whether due or to become due, whether or not known to Trump)
arising out of any transaction entered into at or prior to the Closing, or any
act or omission at or prior to the Closing, or any state of facts existing at or
prior to the Closing, including taxes with respect to or based upon the
transactions or events occurring at or prior to the Closing, and including,
without limitation, unfunded past service liabilities under any pension, profit
sharing or similar plan, except current liabilities incurred and obligations
under agreements entered into, in the usual and ordinary course of business,
none of which (individually or in the aggregate) could have a Castle Material
Adverse Effect.
Section 3.14. THCR Proxy Statement. None of the information supplied or to
be supplied by either Trump, TC/GP, TCHI, Castle Associates or Castle Funding
with respect to each of them for inclusion or incorporation by reference in the
THCR Proxy Statement will, at the time it is mailed, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Closing any event with respect to either Trump, TC/GP, TCHI, Castle
Associates or Castle Funding, or their officers and directors, should occur
which is required to be described in an amendment of, or a supplement to, such
proxy statement, Trump shall promptly notify THCR thereof.
Section 3.15. Takeover Provisions Inapplicable. As of the date hereof and
at all times on or prior to the Closing, Section 203 of the DGCL is, and shall
be, inapplicable to the Castle Entities in connection with the Contribution and
the transactions contemplated thereby.
Section 3.16. Brokerage/Finder's Fees. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Contribution based upon arrangements made by or on behalf of
either Trump or TC/GP, TCHI, Castle Associates or Castle Funding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE THCR ENTITIES
Each of the THCR Entities represents and warrants to Trump and the Castle
Entities that:
Section 4.01. Corporate Organization. (a) THCR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted. THCR is
duly qualified and in good standing in each jurisdiction in which the property
owned, leased or operated by it makes such qualification necessary, except where
the failure to be so qualified and in good standing would not be reasonably
expected to have a THCR Material Adverse Effect.
(b) THCR Holdings is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite partnership power and authority to own its properties and assets and
to conduct its businesses as now conducted. THCR Holdings is duly qualified and
in good standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not be reasonably expected to have a
THCR Material Adverse Effect.
Section 4.02. Capitalization. (a) The authorized capital stock of THCR
consists of 50,000,000 shares of THCR Common Stock, 1,000 shares of THCR Class B
Common Stock and 1,000,000 shares of Preferred Stock, par value $1.00 per share.
An aggregate of 24,140,090 and 1,000 shares of THCR Common Stock and THCR Class
B Common Stock, respectively, are issued and outstanding. All outstanding shares
of THCR Class B Common Stock are beneficially owned by Trump. The outstanding
shares of THCR Common Stock and THCR Class B Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. The outstanding shares of THCR Common Stock and THCR Class B
Common Stock are the sole outstanding capital stock of THCR.
(b) THCR is the sole general partner of THCR Holdings. Trump, Trump Casinos
and THCR/LP are the only limited partners of THCR Holdings. THCR holds an
approximately 71% general partnership interest in THCR
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Holdings. Trump and Trump Casinos hold in the aggregate an approximately 25%
limited partnership interest in THCR Holdings, which is exchangeable, at their
option, into 8,081,023 shares of THCR Common Stock (subject to certain
adjustments set forth in the Exchange Rights Agreement). THCR/LP holds an
approximately 4% limited partnership interest in THCR Holdings. Assuming no
further equity issuances by THCR Holdings and no adjustments pursuant to Section
2.01(b) hereof, immediately after the Closing, (i) THCR shall hold an
approximately 60.0% general partnership interest in THCR Holdings, (ii) Trump,
Trump Casinos and TC/GP shall hold in the aggregate an approximately 36.6%
limited partnership interest in THCR Holdings, which shall be exchangeable, at
their option, into 13,918,723 shares of THCR Common Stock (subject to certain
adjustments set forth in the Exchange Rights Agreement) and (iii) THCR/LP shall
hold an approximately 3.4% limited partnership interest in THCR Holdings. Upon
the exchange of limited partnership interests for THCR Common Stock by Trump,
Trump Casinos or TC/GP, the interests in THCR Holdings held by THCR and any
subsidiary that is also a partner of THCR Holdings will effectively be increased
in the aggregate by an amount equal to such exchanged interests.
(c) THCR has authorized and reserved for issuance that number of shares of
THCR Common Stock (i) into which the THCR Holdings Limited Partnership Interests
held by Trump and Trump Casinos immediately prior to the consummation of the
Contribution are convertible, (ii) that underlie the Trump Warrants, (iii) that
are issuable pursuant to the Stock Incentive Plan and (iv) into which the THCR
Holdings Limited Partnership Interests to be issued to Trump and TC/GP pursuant
to Section 2.01 hereof are exchangeable. Upon conversion into THCR Common Stock
of the THCR Holdings Limited Partnership Interests to be issued to Trump and
TC/GP pursuant to Section 2.01 hereof, such shares of THCR Common Stock will be
validly issued, fully paid and non-assessable and their issuance will not be
subject to any preemptive or similar rights.
Section 4.03. Subsidiaries. Each Subsidiary of the THCR Entities (i) is a
corporation or other legal entity duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its
organization and has the full power and authority to own its properties and
conduct its business and operations as currently conducted, except where the
failure to be duly organized, validly existing or in good standing does not
have, and would not be reasonably expected to have, a THCR Material Adverse
Effect, and (ii) is duly qualified and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified does not have and would not be reasonably expected to have a
THCR Material Adverse Effect.
Section 4.04. SEC Reports; Financial Statements. The THCR Entities have
previously furnished Trump with true and complete copies of their respective (i)
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as filed
with the SEC, (ii) Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, as filed with the SEC, (iii) proxy statements relating to all meetings of
stockholders (whether annual or special) since January 1, 1996 and prior to the
date hereof and (iv) all other reports or registration statements filed with the
SEC since January 1, 1996 through the date hereof (clauses (i) through (iv)
being referred to herein collectively as the "THCR SEC Reports"). As of their
respective filing dates, the THCR SEC Reports complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be. As of their respective filing dates, the THCR SEC Reports, including,
without limitation, any financial statements included therein, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements included in the THCR SEC Reports comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods (except as may be indicated therein or in the
notes thereto), present fairly the financial position of the entities to which
they relate as of the dates thereof and the results of their operations and cash
flows for the periods presented therein subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments, any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Securities Act or the
Exchange Act, as the case may be, and are, in all material respects, in
accordance with the books of account and records of the THCR Entities.
Section 4.05. Absence of Certain Changes or Events. Except as described in
the THCR SEC Reports, during the period since March 31, 1996, (i) the business
of THCR and its Subsidiaries has been conducted only in the ordinary course,
consistent with past practice, (ii) neither THCR nor any of its Subsidiaries has
entered into any
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material transaction other than in the ordinary course, consistent with past
practice, and (iii) there has not been any change or event that has had a THCR
Material Adverse Effect.
Section 4.06. Authorization. (a) THCR and THCR Holdings have the corporate
and partnership power, respectively, to enter into this Agreement and to carry
out their obligations hereunder and, subject to the approval by the affirmative
vote of a majority of the outstanding shares of THCR Common Stock and THCR Class
B Common Stock, voting as a single class, have the power to consummate the
Contribution and the other transactions contemplated thereby. The execution and
delivery of this Agreement, the performance of THCR's obligations hereunder and
the consummation of the Contribution have been duly authorized by all necessary
corporate action by the THCR Special Committee and the THCR Board. Salomon has
delivered to the THCR Special Committee the Salomon Fairness Opinion, dated June
24, 1996, that the consideration to be paid by the THCR Entities in the
Contribution, is fair, from a financial point of view, to THCR. The THCR Special
Committee and the THCR Board have unanimously approved the terms of the
Contribution and this Agreement on behalf of THCR, in its own capacity and as
the sole general partner of THCR Holdings. This Agreement has been duly executed
and delivered by the THCR Entities and constitutes the valid and binding
obligation of the THCR Entities enforceable against them in accordance with its
terms, except (i) to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and (ii) that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
(b) Except for the approval of the Contribution by the holders of THCR
Common Stock and THCR Class B Common Stock, no other corporate proceedings on
the part of the THCR Entities or their Subsidiaries are necessary to authorize
this Agreement and the transactions contemplated hereby.
Section 4.07. No Conflict or Violation. Assuming receipt of the consents
and approvals set forth in Section 4.08 of this Agreement, the execution,
delivery and performance by the THCR Entities of this Agreement, the
consummation of the Contribution and the transactions contemplated thereby, do
not and will not violate or conflict with any provision of the charter documents
or by-laws or partnership agreements, as the case may be, of the THCR Entities
or their Subsidiaries and do not and will not violate any provision of law, or
any order, judgment or decree of any court or other governmental or regulatory
authority, nor violate or result in a breach of or constitute (with due notice
or lapse of time or both) a default under any contract, lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which the THCR Entities or their Subsidiaries are a party or by which they
are bound or to which their respective properties or assets are subject, nor
result in the creation or imposition of any lien, charge or encumbrance of any
kind whatsoever upon any of the properties or assets of the THCR Entities or
their Subsidiaries, nor adversely affect or result in the cancellation,
modification, revocation or suspension of any of the licenses, franchises,
permits, authorizations or approvals issued or granted to the THCR Entities or
their Subsidiaries by the United States, any state or local government, any
foreign national or local government, or any department, agency, board,
commission, bureau or instrumentality of any of the foregoing, except as would
not be reasonably expected to have a THCR Material Adverse Effect or as would
not prevent consummation of the transactions contemplated by the Contribution.
Section 4.08. Consents and Approvals. The execution, delivery and
performance of this Agreement by the THCR Entities do not and will not require
any material consent, waiver, authorization or approval of any governmental or
regulatory authority, domestic or foreign, or of any other Person (other than
the approval of the Contribution by the holders of the THCR Common Stock and
THCR Class B Common Stock), and no material declaration or notification to, or
filing or registration with, or permit of, any governmental or regulatory
authority, except as it (i) may be required in connection or compliance with
applicable provisions of the DGCL, the Exchange Act, the Securities Act, the HSR
Act, blue sky or other state securities laws or Gaming Laws, (ii) would not be
reasonably expected to have a THCR Material Adverse Effect, (iii) would not
prevent consummation of the transactions contemplated by the Contribution or
(iv) is otherwise contemplated in this Agreement.
Section 4.09. Litigation. Except as disclosed in the THCR SEC Reports,
there are no actions, suits, investigations or proceedings (adjudicatory,
rulemaking or otherwise) pending or, to the knowledge of the THCR Entities,
threatened against the THCR Entities or any of their Subsidiaries, or any
property of the THCR Entities or any such Subsidiary in any court or before any
arbitrator of any kind or before or by any governmental or regulatory authority,
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domestic or foreign, except actions, suits, investigations or proceedings which,
individually or in the aggregate, do not have and would not be reasonably
expected to result in a THCR Material Adverse Effect.
Section 4.10. Taxes. The THCR Entities and their Subsidiaries have filed
all federal, state, county, local and foreign tax returns required to be filed
by them, and have paid all taxes shown to be due thereon, other than taxes for
which appropriate reserves have been made in the financial statements of the
THCR Entities and their Subsidiaries (and, to the extent material, such reserves
have been accurately described to Trump). There are no assessments or
adjustments that have been asserted in writing against the THCR Entities or
their Subsidiaries for any period for which the THCR Entities or their
Subsidiaries have not made appropriate reserves in their financial statements.
Section 4.11. Contracts and Leases. The THCR SEC Reports contain a complete
listing of all material contracts, leases, agreements or understandings, whether
written or oral, required to be described therein or filed as exhibits thereto
pursuant to the Securities Act or the Exchange Act, as the case may be. Each of
such contracts, leases, agreements and understandings is in full force and
effect and (i) none of the THCR Entities or their Subsidiaries or, to the best
knowledge of the THCR Entities, any other party thereto, has breached or is in
default thereunder, (ii) no event has occurred which, with the passage of time
or the giving of notice would constitute such a breach or default, (iii) no
claim of material default thereunder has, to the best knowledge of the THCR
Entities, been asserted or threatened and (iv) none of the THCR Entities or
their Subsidiaries or, to the best knowledge of the THCR Entities, any other
party thereto is seeking the renegotiation thereof or substitute performance
thereunder, except where such breach or default, or attempted renegotiation or
substitute performance, individually or in the aggregate, does not have and
would not be reasonably expected to have a THCR Material Adverse Effect.
Section 4.12. Compliance with Laws. (a) Neither the THCR Entities nor their
Subsidiaries are in material violation of any laws, ordinances, governmental
rules or regulations to which they are subject, including, without limitation,
Gaming Laws and laws or regulations relating to the environment or to
occupational health and safety, and no material expenditures are or will be
required in order to cause their current operations or properties to comply with
any such laws, ordinances, governmental rules or regulations.
(b) The THCR Entities and their Subsidiaries have all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
their property or to the conduct of their businesses, which if not obtained or,
if the terms of which are violated, might have a THCR Material Adverse Effect.
Neither the THCR Entities nor their Subsidiaries have finally been denied any
application for any such licenses, permits, franchises or other governmental
authorizations necessary to their business.
Section 4.13. Absence of Undisclosed Liabilities. Except as disclosed in
the THCR SEC Reports, none of the THCR Entities has any debt, obligation or
liability (whether accrued, absolute, contingent, liquidated or otherwise,
whether due or to become due, whether or not known to the THCR Entities) arising
out of any transaction entered into at or prior to the Closing, or any act or
omission at or prior to the Closing, or any state of facts existing at or prior
to the Closing, including taxes with respect to or based upon the transactions
or events occurring at or prior to the Closing, and including, without
limitation, unfunded past service liabilities under any pension, profit sharing
or similar plan, except current liabilities incurred and obligations under
agreements entered into, in the usual and ordinary course of business, none of
which (individually or in the aggregate) could have a THCR Material Adverse
Effect.
Section 4.14. THCR Proxy Statement. None of the information supplied or to
be supplied by the THCR Entities with respect to the THCR Entities and their
Subsidiaries for inclusion or incorporation by reference in the THCR Proxy
Statement will, at the time it is mailed, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Closing any event with respect to the THCR Entities or any of their
Subsidiaries, or their officers and directors, should occur which is required to
be described in an amendment of, or a supplement to, such proxy statement, the
THCR Entities shall notify Trump thereof.
Section 4.15. Takeover Provisions Inapplicable. As of the date hereof and
at all times on or prior to the Closing, Section 203 of the DGCL, is, and shall
be, inapplicable to the THCR Entities in connection with the Contribution and
the transactions contemplated thereby.
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Section 4.16. Brokerage/Finder's Fees. Except for Salomon, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Contribution based upon arrangements made
by or on behalf of the THCR Entities or their Subsidiaries, and the fees and
commissions payable to Salomon, as contemplated by this Section, will be paid in
full by the THCR Entities.
ARTICLE V
COVENANTS OF TRUMP
AND THE CASTLE ENTITIES
Section 5.01. Conduct Pending the Contribution. From and after the date of
this Agreement and until the Closing, Trump and the Castle Entities shall, and
shall cause Castle Associates and Castle Funding to, conduct their business
solely in the ordinary course consistent with past practice and Trump and the
Castle Entities shall, and shall cause Castle Associates and Castle Funding not
to, except with the prior written consent of the THCR Entities or as required or
permitted pursuant to the terms hereof or as contemplated in the Castle SEC
Reports filed through the date hereof or by the terms of the Contribution:
(i) make any material change in the conduct of their businesses and
operations or enter into any transaction, other than in the ordinary course
of business consistent with past practice;
(ii) make any change in their certificate of incorporation or by-laws
or partnership agreement, as the case may be, issue any additional shares
of capital stock or equity securities, grant any option, warrant or right
to acquire any capital stock or equity securities, issue any security
convertible into or exchangeable for their capital stock, alter in any
material respect the terms of any of their outstanding securities, or make
any change in their outstanding shares of capital stock or in their
capitalization, whether by reason of a reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, stock
dividend or otherwise;
(iii) incur, assume or guarantee any indebtedness for borrowed money,
issue any notes, bonds, debentures or other corporate securities or grant
any option, warrant or right to purchase any thereof, other than in the
ordinary course of business consistent with past practice;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of their assets or any part thereof, except in the
ordinary course of business consistent with past practices;
(v) subject any of their assets, or any part thereof, to any lien or
suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practice or by operation
of law;
(vi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of their capital stock or declare, set aside or pay
any dividends or make any other distribution in respect of such shares or
make any other distributions in respect of equity interests;
(vii) increase the compensation payable or to become payable to their
executive officers or employees, except for increases in the ordinary
course of business in accordance with past practices, or grant any
severance or termination pay to, or enter into any employment or severance
agreement (other than in the ordinary course of business) with, any
director or executive officer, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any rights or benefits
under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust fund, policy or arrangement for the benefit of any director,
executive officer or employee;
(viii) take any other action that would cause any of the
representations and warranties made in this Agreement not to remain true
and correct; or
(ix) commit themselves to do any of the foregoing.
Section 5.02. No Solicitation. Neither Trump nor the Castle Entities shall,
directly or indirectly, take (nor shall any of them authorize or permit Castle
Associates or Castle Funding, or their officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to take) any action (i) to knowingly encourage, solicit or initiate
the submission of any Acquisition Proposal, (ii) to enter into any agreement
with respect to any Acquisition Proposal or (iii) to participate in any way in
discussions or negotiations with, or
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furnish any information to, any Person in connection with, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
Notwithstanding the foregoing, the Parties agree that in the event Trump or TCHI
receives an unsolicited Acquisition Proposal by any other Person relating to a
transaction involving the sale of the TCHI Common Stock or any merger,
consolidation or other business combination or acquisition of all or
substantially all of the assets or securities of TCHI, Trump or TCHI, as the
case may be, may review and act upon such unsolicited Acquisition Proposal
solely as it relates to such transaction only in the event that Trump and/or
TCHI, as the case may be, determines in good faith, after consultation with and
based upon the advice of his and/or its financial and legal advisors, that
failing to review and act upon such proposal would constitute a breach of
fiduciary duty. Trump will promptly communicate to the THCR Entities any
solicitation by or of TC/GP, TCHI, Castle Associates or Castle Funding and the
terms of any proposal or inquiry, including the identity of the Person and its
affiliates making the same, that it may receive in respect of any such
transaction, or of any such information requested from it or of any such
negotiations or discussions being sought to be initiated with it. Prior to the
date hereof, Trump and the Castle Entities shall have delivered to the THCR
Entities all written materials relating to all Acquisition Proposals received by
Trump and the Castle Entities from January 1, 1995 through the date hereof, if
any.
Section 5.03. Letters of Accountants. Trump shall use his reasonable best
efforts to cause to be delivered to the THCR Entities "comfort letters" of
Arthur Andersen LLP, the Castle Associates' independent public accountants,
dated and delivered the date on which the THCR Proxy Statement is mailed and as
of the Closing Date, and addressed to the THCR Special Committee and the THCR
Board, in form and substance reasonably satisfactory to the THCR Entities and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
ARTICLE VI
COVENANTS OF THE THCR ENTITIES
Section 6.01. Conduct Pending the Contribution. From and after the date of
this Agreement and until the Closing, the THCR Entities shall, and shall cause
each of their Subsidiaries to, conduct their business solely in the ordinary
course consistent with past practice and, without the prior written consent of
Trump and the Castle Entities, the THCR Entities shall not, and shall cause each
of their Subsidiaries not to, except as required or permitted pursuant to the
terms hereof or as contemplated in the THCR SEC Reports filed through the date
hereof or by the terms of the Contribution:
(i) make any material change in the conduct of their businesses and
operations or enter into any transaction other than in the ordinary course
of business consistent with past practice;
(ii) make any change in its certificate of incorporation or by-laws or
partnership agreement, as the case may be, or make any material change in
their outstanding shares of capital stock or in their capitalization,
whether by reason of a reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of their capital stock or declare, set aside or pay
any dividends or make any other distribution in respect of such shares or
make any other distributions in respect of equity interests;
(iv) take any other action that would cause any of the representations
and warranties made in this Agreement not to remain true and correct; or
(v) commit themselves to do any of the foregoing.
Section 6.02. THCR Proxy Statement. (a) As promptly as reasonably
practicable after the execution of this Agreement, THCR shall prepare and file
with the SEC the preliminary THCR Proxy Statement. As promptly as reasonably
practicable after comments are received from the SEC with respect to the THCR
Proxy Statement and after the satisfactory response thereto by THCR, THCR shall
file with the SEC the definitive THCR Proxy Statement. Thereafter, THCR shall
distribute the definitive THCR Proxy Statement and related proxy card to its
stockholders. THCR shall cause the THCR Proxy Statement to comply as to form in
all material respects with the provisions of the Exchange Act.
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Section 6.03. Stockholders Meeting. THCR shall take all action necessary,
in accordance with applicable law and its certificate of incorporation and
by-laws, to convene a special meeting of the holders of the THCR Common Stock
and the THCR Class B Common Stock (the "THCR Meeting") as promptly as
practicable for the purpose of approving the Contribution. Subject to its
fiduciary duties, as advised by outside counsel, the THCR Board will recommend
that holders of THCR Common Stock vote in favor of and approve the Contribution
at the THCR Meeting.
ARTICLE VII
OTHER AGREEMENTS
Section 7.01. Registration Rights; Partnership Agreement. (a) THCR and
Trump agree to amend the Exchange Rights Agreement to afford Trump the
registration rights and exchange privileges contained in the Exchange Rights
Agreement with respect to the THCR Holdings Limited Partnership Interests that
Trump and TC/GP shall receive pursuant to Section 2.01 hereof.
(b) THCR and Trump shall, and shall cause the other limited partners of
THCR Holdings to, amend the THCR Holdings Partnership Agreement or to waive any
provisions thereof as shall be necessary to effect the transactions contemplated
by this Agreement.
Section 7.02. Additional Agreements; Consents. Subject to the terms and
conditions herein provided, each of the Parties agrees, and Trump agrees to
cause each of TC/GP, TCHI, Castle Associates and Castle Funding to agree, to use
all reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by the Contribution, including using all reasonable efforts to
obtain all necessary waivers, consents and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings with all
applicable governmental agencies) and to lift any injunction or other legal bar
to the transactions contemplated by this Agreement (and, in such case, to
proceed with the transactions contemplated by this Agreement as expeditiously as
possible).
Section 7.03. Access to Information; Confidentiality. (a) Each of the
Parties shall, and Trump and the Castle Entities shall cause each of Castle
Associates and Castle Funding to, afford to the other Parties and to their
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the Parties may mutually agree)
throughout the period until the Closing to all of its properties, books,
contracts, commitments, records and personnel and, during such period, each
shall furnish promptly to the others (i) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
or state securities laws or Gaming Laws and (ii) all other information
concerning its business, properties and personnel, both past and present, as
such party may reasonably request.
(b) A Receiving Party shall (i) keep confidential and not disclose or
reveal to any Person, other than those employed by the Receiving Party or acting
on the Receiving Party's behalf and directly participating in the performance of
such party's obligations under this Agreement, all Confidential Information,
(ii) cause their respective affiliates and the directors, officers, employees,
agents, advisors and controlled or controlling Persons of such party and its
affiliates to observe the terms of this Section and to keep confidential and not
disclose or reveal to any Person all Confidential Information and (iii) not use
Confidential Information for any purpose other than in connection with the
transactions contemplated by this Agreement and in a manner approved by the
Disclosing Party.
(c) In the event that a Receiving Party is requested or required by
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process or required (as advised in writing by
its outside counsel) to disclose any of the Confidential Information, the
Receiving Party shall provide the Disclosing Party with prompt written notice so
that it may seek a protective order or other appropriate remedy. In the event
such protection or other remedy is not obtained, the Receiving Party may
disclose such Confidential Information pursuant to such interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process or other law; provided, however, that the Receiving Party shall
exercise best efforts to obtain assurance that confidential treatment will be
accorded to such Confidential Information.
(d) Without prejudice to the rights and remedies otherwise available to a
Disclosing Party, a Disclosing Party shall be entitled to equitable relief by
way of injunction if the Receiving Party or any of the Receiving Party's
affiliates
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and the directors, officers, employees, agents, advisors and controlled or
controlling Persons of such Receiving Party and its affiliates breach or
threaten to breach any of the provisions of this Section.
Section 7.04. Notification of Certain Matters. Trump and the THCR Entities
shall give prompt notice to each other of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) any action, suit, claim, investigation or proceeding commenced
or, to its knowledge, threatened against, relating to or involving or
otherwise affecting Trump, TC/GP, TCHI, Castle Associates or Castle Funding
and the THCR Entities or any of their Subsidiaries, which is reasonably
likely to have a Castle Material Adverse Effect (in the case of Trump,
TC/GP, TCHI, Castle Associates or Castle Funding) or a THCR Material
Adverse Effect (in the case of the THCR Entities or their Subsidiaries) or
prevent the consummation of the transactions contemplated by this Agreement
or cause any of such transactions to be rescinded following consummation;
(iv) the occurrence, or failure to occur, of any event or change in
circumstances where such occurrence or failure to occur would be likely to
cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date
hereof to the Closing Date; and
(v) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
Section 7.05. HSR Act. The Parties shall, and Trump and the Castle Entities
shall cause Castle Associates and Castle Funding to, use their respective best
efforts to file or cause to be filed as soon as practicable all the required
notifications under the HSR Act in connection with the Contribution, and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
Section 7.06. Merger Agreement. To the extent required under the DGCL,
NJBCA or any other applicable state law relating to mergers, TCHI shall, and
THCR and THCR Holdings shall cause Merger Sub 1.0 to, enter into a plan of
merger in order to effect the TCHI Merger on the terms set forth in Section 2.01
of this Agreement.
Section 7.07. Indemnification. (a) Trump and the Castle Entities hereby
agree, and agree to cause Castle Associates and Castle Funding to, indemnify the
THCR Entities and each of their officers, directors, partners, controlling
persons, affiliates, agents and employees (other than Trump), and their
respective heirs, successors and assigns (each a "THCR Indemnified Party"),
against any losses, claims, damages, expenses (including the reasonable fees and
expenses of their respective attorneys), liabilities, actions, proceedings,
investigations (formal or informal), inquiries or threats thereof (collectively,
the "Liabilities") to which a THCR Indemnified Party may become subject to and
arising in any matter out of or in connection with (i) any breach of any
representation or warranty made by Trump or the Castle Entities in this
Agreement and (ii) any breach of any covenant or agreement of Trump or the
Castle Entities in this Agreement.
(b) The THCR Entities hereby agree to indemnify Trump and his heirs,
successors and assigns (each a "Trump Indemnified Party" and collectively with a
THCR Indemnified Party, an "Indemnified Party") against any Liabilities to which
a Trump Indemnified Party may become subject to and arising in any matter out of
or in connection with (i) any breach of any representation or warranty made by
the THCR Entities in this Agreement and (ii) any breach of any covenant or
agreement of the THCR Entities in this Agreement.
(c) Each Indemnified Party shall give notice to the Party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not
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unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party);
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section, unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party (which consent shall
not unreasonably be withheld), consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a full and
unconditional release from all liability in respect to such claim or litigation.
Each Indemnified Party shall furnish such information regarding itself or the
claim in question as an Indemnifying Party may reasonably request in writing and
as shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
Section 7.08. Voting Agreement. Trump, the beneficial owner of all the
outstanding shares of THCR Class B Common Stock, hereby agrees to vote or cause
to be voted at the THCR Meeting all of such shares and any shares of THCR Common
Stock that he beneficially owns, for approval of the Contribution, which
approval will include the approval and adoption of this Agreement.
ARTICLE VIII
CONDITIONS TO THE CONTRIBUTION
Section 8.01. Conditions of Each Party. The respective obligations of the
THCR Entities and Trump and the Castle Entities to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or prior to
the Closing, of each of the following conditions, any or all of which may be
waived in whole or in part, to the extent permitted by applicable law:
(i) the Contribution shall have been duly approved and adopted by the
affirmative vote of a majority of the outstanding shares of THCR Common
Stock and THCR Class B Common Stock, voting as a single class, in
accordance with the DGCL and the certificate of incorporation of THCR;
(ii) the Contribution shall have been duly approved by the affirmative
vote of a majority of the outstanding shares of THCR Common Stock
(excluding shares held by officers and directors of THCR and their
affiliates);
(iii) the consent of certain of Trump's personal creditors necessary
to consummate the Contribution and the transactions contemplated thereby
shall have been obtained, and all Liens in favor of any such creditors on
the Castle Equity shall have been released;
(iv) all filings required to be made prior to the Closing with, and
all consents, approvals, permits and authorizations required to be obtained
prior to the Closing from any governmental and regulatory authorities
(including, without limitation, Gaming Authorities) in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained (as the
case may be) without restrictions, except where the failure to obtain such
consents, approvals, permits and authorizations could not be reasonably be
expected to have a Castle Material Adverse Effect or a THCR Material
Adverse Effect, as the case may be;
(v) no court or governmental or regulatory authority of competent
jurisdiction (including, without limitation, Gaming Authorities) shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) or taken any action that prohibits the
consummation of the transactions contemplated by this Agreement; provided,
however, that the parties invoking this condition shall use their best
efforts to have any such judgment, decree, injunction or order vacated; and
(vi) the waiting period applicable to the consummation of the
Contribution under the HSR Act shall have expired or been terminated.
Section 8.02. Conditions of Trump. The obligations of Trump and the Castle
Entities to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, at or prior to the Closing, of each of the
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following conditions, any or all of which may be waived in whole or in part by
Trump and the Castle Entities to the extent permitted by applicable law:
(i) each of the THCR Entities shall have performed in all material
respects all of its respective obligations hereunder required to be
performed by it at or prior to the Closing;
(ii) each of the representations and warranties of the THCR Entities
contained in this Agreement and in any certificate or other writing
delivered by the THCR Entities pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of
such time (except to the extent it relates to a particular date); and
(iii) Trump shall have received a certificate from THCR, in its own
capacity and as the sole general partner of THCR Holdings, signed by an
executive officer of THCR, to the effect set forth in clauses (i) and (ii)
of this Section.
Section 8.03. Conditions of the THCR Entities. The obligation of the THCR
Entities to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions, any or all of which may be waived in whole or in part by the THCR
Entities to the extent permitted by applicable law:
(i) Castle Associates shall have been converted into a limited
partnership and the Castle Associates Partnership Agreement shall have been
amended in form and substance satisfactory to the THCR Entities;
(ii) TCHI shall have complied with Section 7.2 of the Castle Warrant
Agreement and all other relevant provisions thereof and the Castle Warrants
shall have been canceled or appropriate provision shall have been made
therefor;
(iii) the consent of certain creditors of Castle Associates and Castle
Funding to modify certain terms of the agreements to which such creditors
are parties (in form and substance satisfactory to the THCR Entities) shall
have been obtained;
(iv) Trump and the Castle Entities shall have performed, and shall
have caused Castle Associates and Castle Funding to perform, in all
material respects all of their obligations hereunder required to be
performed by them at or prior to the Closing;
(v) each of the representations and warranties of Trump and the Castle
Entities contained in this Agreement and in any certificate or other
writing delivered by Trump and the Castle Entities pursuant hereto shall be
true in all material respects at and as of the Closing Date as if made at
and as of such time (except to the extent it relates to a particular date);
and
(vi) the THCR Entities shall have received a certificate signed by
Trump and the Castle Entities to the effect set forth in clauses (iv) and
(v) of this Section.
ARTICLE IX
TERMINATION
Section 9.01. Termination. This Agreement may be terminated and the
Contribution may be abandoned at any time prior to the Closing (whether before
or after approval of this Agreement by the stockholders of THCR):
(i) by joint written consent of Trump, the Castle Entities and the
THCR Entities;
(ii) by Trump and the Castle Entities if any of the conditions
specified in Sections 8.01 or 8.02 have not been satisfied or waived by
Trump or the Castle Entities at such time as such condition is no longer
capable of satisfaction;
(iii) by Trump or TCHI, as the case may be, to act upon an unsolicited
Acquisition Proposal as set forth in Section 5.02 hereof;
(iv) by the THCR Entities if any of the conditions specified in
Sections 8.01 or 8.03 have not been satisfied or waived by the THCR
Entities at such time as such condition is no longer capable of
satisfaction; or
(v) by any Party if the Contribution has not been consummated on or
before December 31, 1996; provided, however, that a party may not terminate
this Agreement pursuant to this clause if the failure of such party to
fulfill
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any of its obligations under this Agreement shall have been the reason that the
Contribution shall not have been consummated on or before said date.
Section 9.02. Effect of Termination. In the event of termination of this
Agreement pursuant to this Article, this Agreement shall forthwith terminate and
(except for the willful breach of this Agreement by any Party) there shall be no
liability on the part of any Party; provided, however, that Sections 3.16, 4.16,
7.03 (b), (c) and (d), 9.02, 10.01, 10.05, 10.06, 10.07, 10.09, 10.11 and 10.13
and the last sentence of Section 10.03 shall survive the termination of this
Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. All notices, requests and other communications to
any Party hereunder shall be in writing (including facsimile or similar writing)
and shall be given:
(i) if to Trump and the Castle Entities to:
Donald J. Trump
725 Fifth Avenue
New York, New York 10022
Facsimile: (212) 755-3230
with copies to:
Andrews & Kurth L.L.P.
425 Lexington Avenue
New York, New York 10017
Facsimile: (212) 850-2929
Attention: Emanuel S. Cherney, Esq.
(ii) if to the THCR Entities to:
Trump Hotels & Casino Resorts, Inc.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Facsimile: (609) 441-7926
Attention: Robert M. Pickus, Esq.
with copies to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 821-8111
Attention: Daniel D. Rubino, Esq.
or such other address or facsimile number as such Party may hereafter specify by
notice to the other Parties. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such facsimile is transmitted
to the facsimile number specified in this Section and the appropriate
confirmation is provided, (ii) if given via United States mail, three days after
such notice is deposited in the mail in a postage pre-paid envelope or (iii) if
given by any other means, when delivered at the address specified in this
Section.
Section 10.02. Survival. All the representations, warranties, agreements or
covenants contained herein shall survive the Closing Date for a period of two
years.
Section 10.03. Amendment. Any provision of this Agreement may be amended by
the Parties at any time prior to the Closing, provided that any such amendment
made after the approval of the Contribution by the stockholders of THCR shall
not, without further approval of such stockholders, (i) alter or change the
amount, kind or manner of payment of the consideration to be received or (ii)
change any other terms or conditions of this Agreement, if any of
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such changes, alone or in the aggregate, would materially and adversely affect
the stockholders of THCR. Any amendment to this Agreement shall be in writing
signed by all the Parties.
Section 10.04. Waiver. At any time prior to the Closing, the Parties may,
unless otherwise set forth in this Agreement, (i) extend the time for the
performance of any agreement of the other Party or Parties, (ii) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with any agreement
or condition of the other Party or Parties contained herein. Any agreement on
the part of any Party to any such extension or waiver shall be effective only if
set forth in a writing signed on behalf of such Party and delivered to the other
Party or Parties. No failure or delay by any Party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other right, power or privilege.
Section 10.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors and assigns; provided, however, that no Party may assign
or otherwise transfer any of its rights under this Agreement without the consent
of each of the other Parties.
Section 10.06. Governing Law. Except to the extent set forth in Section
10.07 or in the DGCL, this Agreement shall be construed in accordance with and
governed by the internal laws of the State of New York without regard to
principles of conflict of laws.
Section 10.07. Gaming Laws. Each of the provisions of this Agreement is
subject to and shall be enforced in compliance with the Gaming Laws.
Section 10.08. Integration. This Agreement embodies the entire agreement
and understanding among the Parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
Section 10.09. Third Party Beneficiaries. Except as otherwise provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any other Person any rights or remedies
hereunder.
Section 10.10. Specific Performance. The Parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 10.11. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement otherwise available at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of any thereof by
any Party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such Party.
Section 10.12. Publicity. So long as this Agreement is in effect, each of
the Parties agrees to consult with each other in issuing any press release or
otherwise making any public statement with respect to the Contribution, and none
of them shall issue any press release or make any public statement prior to such
consultation, except as may be required by law or by obligations pursuant to any
listing agreement with any national securities exchange. The commencement of
litigation relating to this Agreement or any proceedings in connection therewith
shall not be deemed a violation of this Section.
Section 10.13. Fees and Expenses. Whether or not the Contribution is
consummated, (i) any costs and expenses incurred by a Party in connection with
the Contribution and the transactions contemplated thereby shall be borne in
full by such Party and (ii) Trump and the Castle Entities shall cause each of
Castle Associates and Castle Funding to pay for their own costs and expenses
incurred in connection with the Contribution and the transactions contemplated
thereby.
Section 10.14. Headings; Counterparts; Effectiveness. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each Party shall have
received counterparts hereof signed by the other Parties.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
TRUMP HOTELS & CASINO RESORTS, INC.
/S/ Nicholas L. Ribis
---------------------
By: Nicholas L. Ribis
Title: President and Chief Executive Officer
TRUMP HOTELS & CASINO RESORTS
HOLDINGS, L.P.
By: Trump Hotels & Casino Resorts,
Inc., as general partner
/S/ Nicholas L. Ribis
---------------------
By: Nicholas L. Ribis
Title: President and Chief Executive Officer
TC/GP, INC.
/S/ Donald J. Trump
---------------------
By: Donald J. Trump
Title: President
TRUMP'S CASTLE HOTEL & CASINO, INC.
/S/ Nicholas L. Ribis
---------------------
By: Nicholas L. Ribis
Title: Vice President and Assistant Secretary
/S/ Donald J. Trump
---------------------
Donald J. Trump
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<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
2500 Boardwalk
Atlantic City, New Jersey 08401
August 27, 1996
TC/GP, Inc.
One Castle Boulevard
Atlantic City, New Jersey 08401
Trump's Castle Hotel & Casino, Inc.
One Castle Boulevard
Atlantic City, New Jersey 08401
Donald J. Trump
725 Fifth Avenue
New York, New York 10022
Dear Sirs:
This letter will confirm our agreement to modify the terms of that certain
Agreement, dated June 24, 1996, by and among Trump Hotels & Casino Resorts,
Inc., Trump Hotels & Casino Resorts Holdings, L.P., TC/GP, Inc., Trump's Castle
Hotel & Casino, Inc. and Donald J. Trump (the "Agreement"). Capitalized terms
not otherwise defined herein shall have the same meanings as ascribed to them in
the Agreement.
Notwithstanding anything to the contrary in the Agreement, the Agreement is
hereby modified as follows:
1. The Castle Associates Partnership Agreement shall be amended, on or
prior to the date of the Contribution, to convert Castle Associates into a
limited partnership in which (i) Trump, TC/GP and TCHI will remain as general
partners each with a 1% partnership interest in Castle Associates and (ii) Trump
and TC/GP shall become limited partners with a 60.5% and a 36.5% partnership
interest in Castle Associates, respectively.
2. The Castle Associates Partnership Agreement shall be again amended to
reflect that, simultaneously with the Contribution, Trump and TC/GP shall have
converted each of their 1% general partnership interests into limited
partnership interests and shall have assigned a 61.5% and a 37.5% limited
partnership interest, respectively, to THCR Holdings.
3. Upon consummation of the Contribution, Castle Associates shall be a
limited partnership with THCR Holdings as a 99% limited partner and TCHI (as the
surviving corporation of the TCHI Merger) as a 1% general partner.
Except to the extent necessary to implement the changes set forth herein,
the Agreement shall remain unmodified and in full force and effect. This letter
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
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<PAGE>
If the foregoing correctly sets forth the understanding and agreement
between the Parties, please sign below and return one original executed copy of
this letter.
Very truly yours,
TRUMP HOTELS & CASINO RESORTS, INC.
By:/S/ Nicholas L. Ribis
-----------------------------------
Name: Nicholas L. Ribis
Title: President and Chief Executive Officer
TRUMP HOTELS & CASINO RESORTS
HOLDINGS, L.P.
By: Trump Hotels & Casino Resorts,
Inc., as general partner
By:/S/ Nicholas L. Ribis
-----------------------------------
Name: Nicholas L. Ribis
Title: President and Chief Executive Officer
Confirmed and Agreed as of
the date first written above:
TC/GP, INC.
By:/S/ Donald. J. Trump
-------------------------------
Name: Donald. J. Trump
Title: President
TRUMP'S CASTLE HOTEL & CASINO, INC.
By:/S/ Nicholas L. Ribis
-------------------------------
Name: Nicholas L. Ribis
Title: Vice President and Assistant
Secretary
/S/ Donald J. Trump
- ----------------------------------
Donald J. Trump
<PAGE>
Annex B
[SALOMON BROTHERS INC LETTERHEAD]
June 24, 1996
Special Committee of the Board of Directors
Trump Hotels & Casino Resorts, Inc.
725 Fifth Avenue
New York, New York 10022
Dear Sirs:
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, to Trump Hotels & Casino Resorts, Inc. (the
"Company") and Trump Hotels & Casino Resorts Holdings, L.P., a Delaware limited
partnership controlled by the Company ("THCR Holdings"), of the consideration to
be paid by the Company and THCR Holdings (THCR Holdings and the Company, taken
as a whole, the "THCR Entities") pursuant to the Agreement dated as of June 24,
1996 (the "Agreement"), among the Company, THCR Holdings, TC/GP, Inc. ("TC/GP"),
Trump's Castle Hotel & Casino, Inc. ("TCHI") and Donald J. Trump ("Trump"),
which provides for a series of transactions which, taken together, will result
in THCR Holdings owning all of the outstanding equity interest of Trump's Castle
Associates ("Castle Associates"). You have informed us that pursuant to clauses
(i), (ii) and (iii) of Section 2.01 of the Agreement, (a) Trump will contribute
to THCR Holdings his 61.5% limited partnership interest in Castle Associates, in
consideration of which Trump will receive a THCR Holdings limited partnership
interest (as determined pursuant to Section 2.01(i) of the Agreement (but not in
excess of 9.52854%) exchangeable for a number of shares of common stock, par
value $.01 per share ("Company Common Stock"), of the Company (determined
pursuant to Section 2.01(i) of the Agreement (but not in excess of 3,626,450
shares)); (b) TC/GP will contribute to THCR Holdings its 37.5% limited
partnership interest in Castle Associates, in consideration of which TC/GP will
receive a THCR Holdings limited partnership interest (as determined pursuant to
Section 2.01(ii) of the Agreement (but not in excess of 5.81009%)) exchangeable
for a number of shares of Company Common Stock (determined pursuant to Section
2.01(ii) of the Agreement (but not in excess of 2,211,250 shares)); and (c)
there will occur a merger of a subsidiary of THCR Holdings with and into TCHI,
pursuant to which (A) each share of common stock, without par value ("TCHI
Common Stock"), of TCHI issued and outstanding immediately prior to the
effective time of the merger (the "TCHI Merger") will be cancelled and
extinguished and be converted into the right to receive $.8845 in cash (the
"TCHI Consideration") and (B)a provision will be made for the holders of the
warrants to acquire TCHI Common Stock (the "Castle Warrants") to receive for
each former share of TCHI Common Stock for which each Castle Warrant was
exercisable immediately prior to the effective time of the TCHI Merger, an
amount in cash equal to the TCHI Consideration (the aggregate maximum cash being
paid pursuant to the foregoing in respect of all of the shares or warrants of
TCHI being no more than $1.77 million). The series of transactions described in
clauses (a), (b) and (c) above, taken together, are hereinafter referred to as
the "Contribution," and the THCR Holdings limited partnership interests, the
shares of Company Common Stock and cash to be issued or paid, as the case may
be, by the THCR Entities pursuant to clauses (a), (b) and (c) above, taken
together, are hereinafter referred to
<PAGE>
as the "Consideration." You have informed us that Castle Associates will not
have more than $348.1 million of net indebtedness (as reflected and as defined
in clauses (B), (C) and (D) of Section 2.01(a) of the Agreement) on its balance
sheet immediately prior to the consummation of the transactions contemplated by
the Agreement. You have also informed us that the Contribution is expected to be
tax-free to each of the THCR Entities and their respective equity holders and to
Castle Associates and, other than to the extent of cash actually received, its
equity holders.
In arriving at our opinion, we have reviewed a draft of the Agreement in
the form provided to us and have assumed that the final form of such agreement
will not vary in any regard that is material to our analysis. We have also
reviewed and analyzed certain publicly available business and financial
information relating to the Company and Castle Associates, as well as certain
other information, including financial projections, provided to or reviewed for
us by the Company and Castle Associates. We have reviewed and analyzed certain
information concerning cost savings and combination benefits expected to result
from the Contribution that was provided by the management of the Company and
Castle Associates. We have reviewed and analyzed certain publicly available and
other information concerning the trading of, and the trading market for, the
Company Common Stock, the nature and terms of certain recent transactions which
we believe to be reasonably comparable to the Contribution or otherwise relevant
to our inquiry, and certain publicly available information with respect to other
companies that we believe to be relevant or comparable in certain respects to
Castle Associates and the Company, and the trading markets for such other
companies' securities. We have also met with certain officers and employees of
the Company and Castle Associates to discuss the foregoing, including the past
and current business operations and financial condition and prospects of the
Company and Castle Associates, respectively, and the cost savings and
combination benefits expected to result from the Contribution, as well as other
matters we believe relevant to our inquiry. We have also considered such other
information, financial studies, analyses, investigations and financial,
economic, market and trading criteria which we deemed relevant to our inquiry.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information provided to us,
reviewed by or for us, or discussed with us or publicly available, and we have
not assumed any responsibility for any independent verification of such
information or for any independent evaluation or appraisal of the assets of the
Company or Castle Associates. With respect to the Company's and Castle
Associates' financial projections and the estimates of cost savings and
combination benefits expected to result from the Contribution, we have assumed
that they have been reasonably determined on bases reflecting the best currently
available estimates and judgments of the Company's or Castle Associates', as the
case may be, management as to the future financial performance of the Company or
Castle Associates, as the case may be, and such expected cost savings and
combination benefits, and we express no opinion with respect to such forecasts
or expected savings or benefits or the assumptions on which they are based. Our
opinion is necessarily based upon business, market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this letter
and does not address the underlying business decision of either of the THCR
Entities to effect the Contribution or constitute a recommendation to any holder
of Company Common Stock as to how such holder should vote with respect to the
Contribution. Our opinion as expressed below does not imply any conclusion as to
the likely trading range for the Company Common Stock following the consummation
of the Contribution, which may vary depending on, among other factors, changes
in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
We have relied as to all legal matters on advice of counsel to the Company.
For purposes of rendering our opinion we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Agreement are true and correct, that each party will perform
all of the covenants and agreements required to be performed by it under the
Agreement and that all conditions to the consummation of the Contribution will
be satisfied without waiver thereof. We have also assumed that all material
governmental, regulatory or other consents and approvals will be obtained and
that in the course of obtaining any necessary governmental, regulatory or other
consents and approvals, as contemplated by the Agreement, no restrictions will
be imposed or waivers made that would have any material adverse effect on the
contemplated benefits to either of the THCR Entities of the Contribution.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with the Contribution and will receive a
fee for our services, a substantial portion of which is payable in connection
with the submission of this opinion. We have from time to time provided
investment banking and related services to the Company, for which we have
received customary fees. We continue to maintain a relationship with the
Company, Trump and other companies affiliated with Trump and may in the future
provide investment banking and
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<PAGE>
other related services to the Company, Trump or other companies affiliated with
Trump, for which we expect to receive customary fees or compensation. In the
ordinary course of our business, we may actively trade the debt and equity
securities of the Company and the debt securities of Castle Associates for our
own account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be paid by the THCR Entities in the
Contribution is fair, from a financial point of view, to the Company and THCR
Holdings.
Very truly yours,
SALOMON BROTHERS INC
by /S/SALOMON BROTHERS INC
B-3
<PAGE>
- --------------------------------------------------------------------------------
TRUMP HOTELS & CASINO RESORTS, INC.
2500 Boardwalk
Atlantic City, New Jersey 08401
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
to be held at The Plaza Hotel, 768 Fifth Avenue, New York, New York 10019
at 2:00 p.m., local time, on September 30, 1996
The undersigned hereby appoints Nicholas L. Ribis and Robert M. Pickus, and
each of them, with full power of substitution, as proxies of the undersigned to
vote all shares of stock which the undersigned is entitled in any capacity to
vote at the above-stated special meeting, and at any and all adjournments or
postponements thereof (the "Special Meeting"), on the matters set forth on the
reverse side of this Proxy Card, and, in their discretion, upon all matters
incident to the conduct of the Special Meeting and upon such other matters as
may properly be brought before the Special Meeting. This proxy revokes all prior
proxies given by the undersigned.
All properly executed proxies will be voted as directed. If no instructions
are indicated on a properly executed proxy, such proxy will be voted "FOR"
approval of Proposals 1 and 2. All ABSTAIN votes will be counted in determining
the existence of a quorum at the Special Meeting, but will have the same effect
as a vote AGAINST Proposals 1 and 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TRUMP HOTELS
& CASINO RESORTS, INC.
Receipt of the Notice of Meeting and the Proxy Statement, dated August 29,
1996 (the "Proxy Statement"), is hereby acknowledged.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND
MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on reverse side)
<PAGE>
(Continued from reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TRUMP HOTELS &
CASINO RESORTS, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
Please mark boxes in blue or black ink.
1. Approval of the Acquisition, which approval will constitute approval and
adoption of the Agreement (as such terms are defined in the Proxy
Statement): FOR|| AGAINST | | ABSTAIN | |
2. Approval and adoption of the Amendment to increase the number of authorized
shares of THCR Common Stock (as such terms are defined in the Proxy
Statement): FOR | | AGAINST | | ABSTAIN | |
3. In the discretion of the proxies with respect to any other matters that may
properly come before the Special Meeting.
Dated: ___________, 1996
______________________________________
(Title or Authority)
______________________________________
(Signature)
______________________________________
(Signature)
(Joint owners should EACH sign. Please
sign EXACTLY as your name(s) appears on
this card. When signing as attorney,
trustee, executor, administrator,
guardian or corporate officer, please
give your FULL title below.)
YOUR VOTE IS IMPORTANT. PLEASE SIGN,
DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
